Financial Review: Third-quarter 2015...Financial Review: Third-quarter 2015 Markets and Financial...

www.eia.gov U.S. Energy Information Administration Independent Statistics & Analysis

Financial Review: Third-quarter 2015

Markets and Financial Analysis Team

December 8, 2015

Key findings for third-quarter 2015

2

• Crude oil prices decreased 19% from the second

quarter, 51% lower than third-quarter 2014.

• Impairment charges increased, contributing to

continued declines in profits.

• Capital expenditure per barrel produced was the lowest

for this set of companies since at least 2010.

• Fourth-quarter crude oil prices remain low compared to

year-ago levels, which could continue to pressure

profits, cash flow, and investment.

Geographic distribution of global oil and natural gas companies,

third-quarter 2015

3

number of companies

Source: U.S. Energy Information Administration, Evaluate Energy

66

18

11

4

0

10

20

30

40

50

60

70

United States Canada Europe Emerging marketcountries

Distribution of global companies by production of petroleum

liquids, third-quarter 2015

4

number of companies


48

14

22

7 8

0

10

20

30

40

50

60

less than 50 50-99 100-499 500-999 greater than 1,000

thousand barrels per day

Oil and natural gas production for the combined companies

5

million barrels of oil equivalent per day


Note: liquids include crude oil and hydrocarbon gas liquids

0

5

10

15

20

25

30

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

2010 2011 2012 2013 2014 2015

petroleum liquids production

natural gas production

Third-quarter 2015 production levels of petroleum and natural

gas were 7% and 2%, respectively, above third-quarter 2014

6

year-over-year change


Note: liquids include crude oil and hydrocarbon gas liquids.

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

2011 2012 2013 2014 2015

petroleum liquids production year-over-year change

natural gas production year-over-year change

Operating cash flow in third-quarter 2015 increased $7 billion

since the second quarter, totaling $93 billion

7

cash from operations

billion 2015$


0

20

40

60

80

100

120

140

160

Q1 Q2 Q3 Q4

2011 2012 2013 2014 2015

Capital expenditure decreased $11 billion since second-quarter

2015, totaling $80 billion

8

capital expenditure

billion 2015$


0

20

40

60

80

100

120

140

160

Q1 Q2 Q3 Q4

2011 2012 2013 2014 2015

Cash from operations was larger than capital spending for the

first time in a year

9

billion 2015$; Brent in 2015$/barrel

Source: U.S. Energy Information Administration, Evaluate Energy, Bloomberg

0

20

40

60

80

100

120

140

160

180


2010 2011 2012 2013 2014 2015

cash from operations

capital expenditure

Brent crude oil price

The difference between cash flow and capital expenditure was

the largest since at least 2010

10

billion 2015$


300

325

350

375

400

425

450

475

500

525

550


2011 2012 2013 2014 2015

=

annualized cash from operations

annualized capital expenditure

Rolling a four-quarter sum eliminates the seasonality

in the measures on the previous slide. So while third-

quarter cash flow was higher than capital expenditure,

it remains considerably lower on an annualized basis.

Sources of cash from asset sales, debt, and equity markets over

the past four quarters was the lowest since 2012

11

billion 2015$


Note: free cash flow=cash from operations minus capital expenditure

-75

-50

-25

0

25

50

75

100

125

150

175

200


2011 2012 2013 2014 2015

annualized net proceeds from asset sales, net

debt, and net equity issuance

annualized free cash flow

Negative free cash flow means operating cash flow

was less than capital expenditure. A company

must draw on cash balances or raise sources of

cash from elsewhere, such as selling assets,

raising equity, or increasing debt.

Cash balances declined more than $8 billion for the four

quarters ending September 30, 2015

12

billion 2015$


-40

-20

0

20

40

60

80


2011 2012 2013 2014 2015

annualized change in cash balance

Net hedging assets, which tend to increase in value when prices

decline, increased $4.5 billion since second-quarter 2015

13

billion 2015$ 2015$/barrel


-20

0

20

40

60

80

100

120

140

-5

0

5

10

15

20

25

30

35


2010 2011 2012 2013 2014 2015

net hedging assets (left axis)

Brent crude oil price (right axis)

The total value of asset write-downs increased to $57 billion,

almost twice the amount in second-quarter 2015

14

billion 2015$


0

10

20

30

40

50

60

70

80


2010 2011 2012 2013 2014 2015

quarterly asset write-downs (impairment charges)

Asset impairments occur when a company lowers the

estimated value of a property to reflect current market value,

which may result from loss of production potential or

declining oil prices.

Past investment contributed to increased current production,

while low prices contributed to negative profitability

15


-10%

-5%

0%

5%

10%

15%

20%


2011 2012 2013 2014 2015

petroleum liquids and natural gas production year-over-year change

four-quarter return on equity

Higher production and falling capital expenditure led to the

lowest average spending per barrel since at least 2010

16

2015$/barrel of oil equivalent


0

5

10

15

20

25

30

35


2011 2012 2013 2014 2015

upstream capital expenditure per barrel of oil equivalent

produced, four-quarter moving average

Crude oil prices remain low compared to year-ago levels, which

could continue to pressure cash flow and investment

17

year-over-year change


-60%

-40%

-20%

0%

20%

40%

60%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2011 2012 2013 2014 2015

cash from operations year-

over-year change

capital expenditure year-over-

year change

Brent crude oil price year-over-year change

through December 7, 2015

Appendix: List of companies

18

.


Note: Some companies listed merged or split before 2015. A total of 99 companies existed in third-quarter 2015

Anadarko Petroleum Corp. California Resources Corporation Det Norske Forest Oil Corporation Lundin Petroleum Parsley Energy Inc. Rosetta Resources Inc. Thunderbird Resources Equity Inc.

Apache Corporation Callon Petroleum Devon Energy Corporation Gazprom Neft Magnum Hunter Resources PDC Energy Royal Dutch Shell Total

Approach Resources Inc Canacol Energy Ltd. Diamondback Energy Inc. Goodrich Petroleum Corp Marathon Oil Corp. Penn Virginia RSP Permian Inc TransAtlantic Petroleum Ltd.

Athlon Energy Inc. Canadian Natural Resources Limited Dong Energy Gran Tierra Energy Inc. Mariner Energy Penn West Petroleum Ltd. Sabine Oil & Gas Corporation TransGlobe Energy Corporation

ATP Oil & Gas Corp. Carrizo Oil & Gas, Inc Ecopetrol Gulfport Energy Corporation Matador Resources Company Petrobras (IFRS US$ Current) Sanchez Energy Corp Triangle Petroleum Corporation

Bankers Petroleum Ltd Cenovus Energy Inc. Encana Corporation Halcon Resources Corporation MDU Resources Group PetroChina SandRidge Energy Unit Corp

Baytex Energy Corp. Chesapeake Energy Corp. Endeavour International Corp Hess Corp Memorial Production Partners LP Petrolifera Petroleum Ltd. Sherritt International Corp Vaalco Energy Inc

Berry Petroleum Co. Chevron Corporation Energen Corp Husky Energy Inc. Murphy Oil Corporation PetroMagdalena Energy Corp. SM Energy Company Vermilion Energy Inc.

BG Group Cimarex Energy Co. Energy XXI Imperial Oil Limited Newfield Exploration Company Petrominerales Ltd. Sonde Resources Corp. W & T Offshore

Bill Barrett Corporation Clayton Williams Energy Enerplus Corporation Ithaca Energy Inc. Noble Energy PetroQuest Energy, Inc Statoil ASA Whiting Petroleum Corporation

Black Hills Corp Comstock Resources ENI Jones Energy, Inc. Northern Oil & Gas, Inc Pioneer Natural Resources Company Stone Energy WPX Energy

BP Plc. Concho Resources Inc EOG Resources Kodiak Oil & Gas Corp. Oasis Petroleum Inc. QEP Resources Inc Suncor Energy Inc. XTO

BPZ Resources Inc ConocoPhillips EP Energy Corporation Kosmos Energy Occidental Petroleum Corporation Range Resources Corp Swift Energy Co

Breitburn Energy Partners Continental Resources EPL Oil & Gas Inc Laredo Petroleum OMV Repsol Synergy Resources Corporation

Brigham Exploration Company Denbury Resources Inc. ExxonMobil Linn Energy Pacific Exploration and Production Corporation Resolute Energy Corporation Talisman Energy Inc.

Background

19

• This analysis focuses on the financial and operating

trends of 99 global oil and natural gas companies

(called the energy companies).

• The data come from the public financial statements

each company submits to the U.S. Securities and

Exchange Commission, which a data service (Evaluate

Energy) aggregates for ease of data analysis.

• For consistency, a company’s assets that were acquired

by another company in the group after first-quarter 2010

were kept in the prior year data.

Brief description of terms

20

• Cash from operations is a measure of income.

• Capital expenditure represents cash used for property,

plant, and equipment.

• Financing activities measure inflows/outflows in debt or

equity markets including dividends, share issuance or

repurchases, and debt issuance or repayments.

• Return on equity is a measure of the profit a company

earns on money shareholders have invested.

• Market capitalization is the total value of all of a

company’s publicly traded shares outstanding.

Brief description of terms

21

• Net income (earnings) represents profit after taxes and

depreciation.

• Asset impairments occur when a company lowers the

estimated value of a property to reflect current market

value, which may result from loss of production potential

or declining oil prices.

• The term upstream refers to crude oil exploration,

production, and other operations prior to refining. The

term downstream refers to refinery operations, product

sales, and marketing at the wholesale and retail level.

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