Major U.S. energy companies collectively enjoyed higher net income in 1999 compared with 1998, although 1999 net income ($22.9 billion) was only average compared with the 1990s in general, and profitability was lower than that of other large U.S. corporations.
The cohort of energy companies described in the Energy Information Administration's (EIA's) Performance Profiles of Major Energy Producers 1999 is defined by EIA's Financial Reporting System (FRS). The FRS companies are those that were U.S.-based publicly owned companies, or U.S.-based subsidiaries of publicly owned companies, that had at least 1 percent of either production or reserves of oil and gas in the United States or 1 percent of either refining capacity or petroleum product sales. Thirty-two companies were included in the 1999 report.
| Consolidated Income Statement for FRS Companies, 1998 and 1999
(Billion Dollars) |
|||
|
Income Statement Items |
1998 |
1999 |
Percent Change
|
| Operating Revenues |
484.2 |
578.1 |
19.4 |
| Operating Expenses |
-468.8 |
-545.9 |
16.6 |
| Operating Income |
15.8 |
32.2 |
103.5 |
| Interest Expense |
-7.1 |
-8.5 |
18.6 |
| Other Revenue |
8.7 |
10.2 |
17.6 |
| Income Tax Expense |
-4.7 |
-10.8 |
130.2 |
| Net Income |
12.5 |
22.9 |
82.7 |
| Net Income Excluding Unusual Items |
19.5 |
23.7 |
21.4 |
| Note: Sum of components may not equal total due to independent rounding.
Percent changes were calculated from unrounded data. Source: Energy Information Administration. |
|||
Two factors figured prominently in the FRS companies' financial performance in 1999. Crude oil prices (expressed as U.S. refiners' acquisition cost for imported oil) jumped from a 25-year low of $10 per barrel in January to over $24 per barrel in December, the highest prices since the 1991 Persian Gulf War. Income from worldwide oil and gas operations more than doubled over 1998 levels, to $16.5 billion.
These results, however, were tempered by declining earnings in petroleum refining and marketing operations. Net 1999 worldwide income from those operations broke a 3-year trend by falling sharply, from $10.6 billion in 1998 to $6.3 billion, despite a general economic climate--strong U.S. economic growth, a colder winter than the previous year, and renewed growth in the Asia-Pacific region--favorable to continued earnings growth. The problem was global crude oil inventories, which had been building since 1997 and were historically large in early 1999. Refiners drew down the inventories throughout the year, thereby restraining the effects of rising crude oil prices on prices of refined products.
Despite higher oil prices and several other factors favorable to investment in exploration and development, the FRS companies cut such expenditures 38 percent worldwide ($19 billion) in 1999. These reductions were part of a larger pattern of expenditure cuts and related measures designed to address an income/spending gap incurred in 1998, when expenditures exceeded cash flow by 56 percent ($27 billion). Some business lines nevertheless benefited from higher capital spending, including "other energy," which is dominated by electric power production and supply, and "other non-energy," especially communications businesses.
The typical structure of the FRS energy companies has shifted over the years. In 1977, 92 percent were vertically integrated and those companies accounted for 97 percent of FRS companies' total assets. By 1999 a series of megamergers had reduced the number of vertically integrated companies to 10 (31 percent of the total), which accounted for only 70 percent of total assets. The most rapidly growing FRS companies were those that specialized in energy services. Those companies nearly tripled their assets from 1995 through 1999.
Performance Profiles of Major Energy Producers 1999, DOE/EIA-0206(99); 115 pages,
54 tables, 27 figures.
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File last modified: February 22, 2001