High demand and tight supplies in petroleum markets helped boost the 1996 aggregate net income of two dozen major U.S. energy producers by 52 percent over 1995 levels, to a record $32 billion. The year marked the fourth increase in a row. Overall profitability (as return on equity) also rose, to 18 percent. The 24 companies are surveyed annually via the Energy Information Adminstration's Financial Reporting System (FRS) and the results published in Performance Profiles of Major Energy Producers.

Three sources contributed heavily to the FRS companies' 1996 rise in income:

• Net income from domestic and foreign oil and gas production operations rose $8 billion in 1996, driven mainly by higher prices. Income from U.S. crude oil and natural gas production doubled, while profitability tripled, reaching the highest level since 1985.

• Income from U.S. refining and marketing operations doubled to $2.5 billion, albeit from a historically low level in 1995.

• The FRS companies took advantage of 1996's record revenues to reduce their long-term debt to the lowest level in 13 years. Debt reduction accounted for nearly all of the $1 billion decline in interest expenditures in 1996.

Several forces, including higher oil and gas prices and such cost-reducing factors as 3-D seismic exploration, horizontal drilling, and new offshore production technologies, encouraged the FRS companies to increase their investment in oil and gas exploration and development by 24 percent in 1996. The companies spent $6.7 billion on offshore domestic exploration (mostly in the Gulf of Mexico), 42 percent more than in 1995. In contrast, investment in refining operations fell 41 percent, apparently due to the completion of projects related to compliance with environmental standards. Investment in other lines of business was also generally down.

In individual chapters, the report reviews key financial developments; oil and gas exploration, development, and production; downstream petroleum operations; coal and alternative energy; and foreign direct investment in U.S. energy. Appendices include a description of the structure of the Financial Reporting System and detailed statistical tables.

Contact:

Jon A. Rasmussen, Office of Energy Markets and End Use

jon.rasmussen@eia.doe.gov

Phone: (202) 586-1449

URL: http://www.eia.doe.gov/emeu/plugs/plfrs96.html