Overview
|
Fourth Quarter 2008 Key Findings |
|
|
Net Income |
$4.2 billion |
|
Revenues |
$37.5 billion |
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Highlights |
Independent energy companies reported a 23-percent decrease in
net income relative to the record high set in the fourth quarter of 2007, driven
by large earnings decreases for producers.
However, net income was still 9 percent above the 4th quarter average
over the last 5 years. Lower earnings for producers resulted from the sharp fall in oil
prices. |
Earnings for the 31 independent
energy companies included in this report fell 23 percent in the fourth quarter
of 2008 (Q408) over earnings in the fourth quarter of 2007 (Q407) (Table 1)
when they were a record high. This was driven by the performance of the
producers, who suffered large earnings decreases due
to the sharp fall in oil prices. Oil field service company earnings dropped
slightly in Q407 and again in Q408 compared to the year-ago quarter, after
reaching a fourth-quarter high in 2006. Refiner/marketer earnings were down sharply
from the high reached in Q407, but were still above all previous Q4 earnings
since at least 2002.
For 2008 as a whole, producers and
oil field companies had earnings increases over 2007, while refiners had
decreased earnings.
The imported average crude oil price for Q408 dropped almost $30
per barrel (36 percent) relative to a year earlier (Table 2). (See the current and recent issues of
the Short-Term Energy Outlook for an explanation of these price changes and
those discussed below.) This is the third time in the past twenty-six quarters
(i.e., six and one-half years) that the price of crude oil was lower relative
to the year-earlier quarter. (The first and second quarters of 2007 were the
only other exceptions since the second quarter of 2002.)
The average
The gross refining margin (the per-barrel
composite wholesale product price less the composite refiner acquisition cost
of crude oil) was 52 percent higher in Q408 than in Q407 (Table 2). The average price for petroleum products declined by
almost $23 per-barrel, but was exceeded by the almost $30 per-barrel decrease
in the price of crude oil and resulted in a much larger margin.
For the entire year of 2008, crude oil and
natural gas prices increased relative to 2007 (Table 2). Meanwhile, refining margins fell as the increase in average
product prices was exceeded by the increase in crude oil prices. The average
price for petroleum products increased by more than $23 per-barrel, but the
price of crude oil increased by more than $25 per-barrel and resulted in a
smaller margin.
Independent Energy Company Earnings
Independent producers' earnings dropped 116 percent from Q407 to Q408 due to the sharp drop in oil prices. The 36 percent drop in oil prices and 5 percent drop in natural gas prices resulted in negative earnings for the producers included in this report (Table 1). This does not mean that cash flow was negative, as a significant portion of the losses were from accounting adjustments, called impairments, for the decreased value of reserves from the sharply lower prices. Revenues dropped 17 percent from Q407 to Q408. For 2008 as a whole, income increased 20 percent and revenue increased 31 percent for the producers included in this report.
Oil field companies' earnings
decreased 2 percent from Q407 to Q408. Net income of
The
The worldwide rig count grew 7 percent
from Q407 to Q408. Overall rig counts grew 14 percent in
Inventory valuation losses reduce refiner earnings despite higher margins. Earnings of the independent refiners included in this report dropped 48 percent, from $496 million in Q407 to $259 million in Q408 (see Table 1) despite a 52-percent increase in refining margins (see Table 2). (The gross refining margin is the difference between the composite wholesale refined petroleum product price and the composite refiner acquisition cost of crude oil.) Only one of the four refiners included in this report had lower earnings, but that company’s earnings drop was large and dominated the overall result. A significant portion of the earnings of that company’s earnings drop was due to a loss in value of inventory from lower prices and its use of the First-in First-out accounting method. At least one other refining company included in this report had its earnings increase dampened by inventory valuation loss.
For the year as a whole, refiner income dropped 51 percent from $822 million in 2007 to $401 million in 2008, as refining margins for 2008 dropped 11 percent from 2007. Revenue increased 39 percent from $33.7 billion in 2007 to $46.7 billion in 2008.
The "Financial News
for Independent Energy Companies" is issued several weeks after the close
of each quarter to report recent trends in the financial performance of independent
energy companies, which are typically smaller than the majors and do not have
integrated production/refining operations. The information is compiled from
companies' quarterly reports and press releases.
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Contact:
Bob Schmitt
robert.schmitt@eia.doe.gov
Fax: (202) 586-9753