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www.eia.govU.S. Energy Information Administration Independent Statistics & Analysis
Financial Review of the Global Oil and Natural Gas Industry: First-quarter 2016
Markets and Financial Analysis Team
July 2016
Key findings for first-quarter 2016• Brent crude oil prices averaged at the lowest level since 2004, significantly
reducing profits and cash flow for energy companies.
• Production increased from year-ago levels, but growth is decelerating as companies reduced capital expenditure.
• Many companies were able to balance their capital expenditure with cash from operations.
Markets and Financial Analysis Team | Financial Review First-quarter 2016 July 2016 2
number of companies
Markets and Financial Analysis Team | Financial Review First-quarter 2016 July 2016
Geographic distribution of global oil and natural gas companies, first-quarter 2016
Source: U.S. Energy Information Administration, Evaluate Energy
3
0
10
20
30
40
50
60
70
United States Canada Europe Emerging market countries
number of companies
Markets and Financial Analysis Team | Financial Review First-quarter 2016 July 2016
Distribution of companies by production of petroleum liquids, first-quarter 2016
Source: U.S. Energy Information Administration, Evaluate Energy
4
05
101520253035404550
less than 50 50-99 100-499 500-1,000 greater than 1,000thousand barrels per day
oil and natural gas productionmillion barrels of oil equivalent per day
Markets and Financial Analysis Team | Financial Review First-quarter 2016 July 2016
Production from the oil and natural gas companies
Source: U.S. Energy Information Administration, Evaluate Energy
5
0
5
10
15
20
25
30
35
40
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2011 2012 2013 2014 2015 2016
liquids
natural gas
oil and natural gas productionyear-over-year change
Markets and Financial Analysis Team | Financial Review First-quarter 2016 July 2016
Liquids production increased 1% and natural gas production increased 0.3% in first-quarter 2016
Source: U.S. Energy Information Administration, Evaluate Energy
6
-2%-1%0%1%2%3%4%5%6%7%8%9%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2012 2013 2014 2015 2016
liquids
natural gas
cash from operationsbillion 2016$
Markets and Financial Analysis Team | Financial Review First-quarter 2016 July 2016
Operating cash flow declined to $44 billion in first-quarter 2016
Source: U.S. Energy Information Administration, Evaluate Energy
7
0
20
40
60
80
100
120
140
160
180
Q1 Q2 Q3 Q4
2012 2013 2014 2015 2016
capital expenditurebillion 2016$
Markets and Financial Analysis Team | Financial Review First-quarter 2016 July 2016
Capital expenditure in first-quarter 2016 totaled $68 billion, 36% lower than the first quarter of 2015
Source: U.S. Energy Information Administration, Evaluate Energy
8
0
20
40
60
80
100
120
140
160
180
Q1 Q2 Q3 Q4
2012 2013 2014 2015 2016
cash flow items and Brent pricebillion 2016$; Brent in 2016 $/b
Markets and Financial Analysis Team | Financial Review First-quarter 2016 July 2016
Investment and cash flow continued to decline amid falling oil prices
Source: U.S. Energy Information Administration, Evaluate Energy, BloombergNote: b=barrel
9
0
20
40
60
80
100
120
140
160
180
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2011 2012 2013 2014 2015 20162016
cash from operations
capital expenditure
Brent crude oil price
annualized cash flow itemsbillion 2016$
Markets and Financial Analysis Team | Financial Review First-quarter 2016 July 2016
Cash flow and capital expenditures in first-quarter 2016 were the same for the first time since 2014
Source: U.S. Energy Information Administration, Evaluate Energy
10
300
350
400
450
500
550
600
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2012 2013 2014 2015 2016
annualized cash from operations
annualized capital expenditure
=
annualized cash flow itemsbillion 2016$
Markets and Financial Analysis Team | Financial Review First-quarter 2016 July 2016
Higher free cash flow in first-quarter 2016 required the lowest amount of funding from asset sales, equity, or debt since 2012
Source: U.S. Energy Information Administration, Evaluate EnergyNote: free cash flow=cash from operations minus capital expenditure
11
-50
0
50
100
150
200
250
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2012 2013 2014 2015 2016
annualized free cash flow
annualized net proceeds from asset sales, net debt, and net equity issuance
Annualized debt repayments to cash flowratio
Markets and Financial Analysis Team | Financial Review First-quarter 2016 July 2016
Debt servicing payments as a share of operating cash flow increased as cash flow declined and companies refinanced
Source: U.S. Energy Information Administration, Evaluate Energy
12
0.00
0.10
0.20
0.30
0.40
0.50
0.60
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2012 2013 2014 2015 2016
net hedging assetsbillion 2016$
Brent price2016 $/b
Markets and Financial Analysis Team | Financial Review First-quarter 2016 July 2016
Net hedging assets, which tend to increase in value when oil prices decline, increased $11.6 billion since fourth-quarter 2015
Source: U.S. Energy Information Administration, Evaluate Energy, BloombergNote: b=barrel
13
-20
0
20
40
60
80
100
120
140
-5
0
5
10
15
20
25
30
35
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2011 2012 2013 2014 2015 20162016
net hedging assets
Brent crude oil price
asset write-downs (impairment charges)billion 2016$
Markets and Financial Analysis Team | Financial Review First-quarter 2016 July 2016
Asset write-downs fell to $15.6 billion in first-quarter 2016, $22 billion below first-quarter 2015
Source: U.S. Energy Information Administration, Evaluate Energy
14
0
20
40
60
80
100
120
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2011 2012 2013 2014 2015 202016
profitability and production
Markets and Financial Analysis Team | Financial Review First-quarter 2016 July 2016
Falling profits may result in production declines
Source: U.S. Energy Information Administration, Evaluate Energy
15
-15%
-10%
-5%
0%
5%
10%
15%
20%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2012 2013 2014 2015 2016
four-quarter return on equity
liquids and natural gas production year-over-year change
upstream capital expenditure per barrel of oil produced2016 $/boe four-quarter moving average
Markets and Financial Analysis Team | Financial Review First-quarter 2016 July 2016
Upstream investment on a per-barrel basis is the lowest since at least 2012
Source: U.S. Energy Information Administration, Evaluate EnergyNote: boe=barrel of oil equivalent
16
0
5
10
15
20
25
30
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2012 2013 2014 2015 2016
ratio of upstream capital expenditure/boe to Brent price
Markets and Financial Analysis Team | Financial Review First-quarter 2016 July 2016
A return to the 25% ratio of upstream capital expenditure to Brent prices would require further spending cuts or an increase in prices
Source: U.S. Energy Information Administration, Evaluate Energy
17
0%
5%
10%
15%
20%
25%
30%
35%
40%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2011 2012 2013 2014 2015 2016
four-quarter return on equity
Markets and Financial Analysis Team | Financial Review First-quarter 2016 July 2016
Profits for energy companies and U.S. manufacturing companies continued to decline
Source: U.S. Energy Information Administration, Evaluate Energy, U.S. Census Bureau
18
-15%
-10%
-5%
0%
5%
10%
15%
20%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2012 2013 2014 2015 2016
energy companies
U.S. manufacturing companies
long-term debt-to-equity
Markets and Financial Analysis Team | Financial Review First-quarter 2016 July 2016
Leverage increased for U.S. manufacturing companies, but it was flat for energy companies since fourth-quarter 2015
Source: U.S. Energy Information Administration, Evaluate Energy, U.S. Census Bureau
19
0%
10%
20%
30%
40%
50%
60%
70%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2011 2012 2013 2014 2015 2016
energy companies
U.S. manufacturing companies
cash flow items and Brent pricesyear-over-year change
Markets and Financial Analysis Team | Financial Review First-quarter 2016 July 2016
Cash flow and capital expenditure may continue to decline if oil prices decline
Source: U.S. Energy Information Administration, Evaluate Energy, Bloomberg
20
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2012 2013 2014 2015 2012016
Brent crude oil price
cash from operations
capital expenditure
Markets and Financial Analysis Team | Financial Review First-quarter 2016 July 2016
Appendix: List of companies
Source: U.S. Energy Information Administration, Evaluate EnergyNote: Some companies merged or split before 2016. A total of 98 companies existed in first-quarter 2016.
21
Anadarko Petroleum Corp. Chesapeake Energy Corp. EP Energy Corporation Magnum Hunter Resources Petrominerales Ltd. Swift Energy CoApache Corporation Chevron Corporation EPL Oil & Gas Inc Marathon Oil Corp. PetroQuest Energy, Inc Synergy Resources CorporationApproach Resources Inc Cimarex Energy Co. ExxonMobil Matador Resources Company Pioneer Natural Resources Company Thunderbird Resources Equity Inc.Athlon Energy Inc. Clayton Williams Energy Forest Oil Corporation Memorial Production Partners LP QEP Resources Inc TNK-BP International LtdATP Oil & Gas Corp. Comstock Resources Gazprom Neft Murphy Oil Corporation Range Resources Corp TotalBankers Petroleum Ltd Concho Resources Inc Goodrich Petroleum Corp Newfield Exploration Company Repsol TransAtlantic Petroleum Ltd.Baytex Energy Corp. ConocoPhillips Gran Tierra Energy Inc. Noble Energy Repsol Oil & Gas Canada Inc. TransGlobe Energy CorporationBerry Petroleum Co. Continental Resources Gulfport Energy Corporation Northern Oil & Gas, Inc Resolute Energy Corporation Triangle Petroleum CorporationBG Group Denbury Resources Inc. Halcon Resources Corporation Novatek Rosetta Resources Inc. Unit CorpBill Barrett Corporation Det Norske Hess Corp Oasis Petroleum Inc. Rosneft Vaalco Energy IncBP Plc. Devon Energy Corporation Husky Energy Inc. Occidental Petroleum Corporation Royal Dutch Shell Vermilion Energy Inc.BPZ Resources Inc Diamondback Energy Inc. Imperial Oil Limited OMV RSP Permian Inc W & T OffshoreBreitburn Energy Partners Ecopetrol Ithaca Energy Inc. Pacific Exploration and Production Corporation Sabine Oil & Gas Corporation Whiting Petroleum CorporationBrigham Exploration Company Encana Corporation Jones Energy, Inc. Parsley Energy Inc. Sanchez Energy Corp WPX EnergyCalifornia Resources Corporation Endeavour International Corp Kodiak Oil & Gas Corp. PDC Energy, Inc. SandRidge Energy YPF Sociedad AnonimaCallon Petroleum Energen Corp Kosmos Energy Penn Virginia SM Energy CompanyCanacol Energy Ltd. Energy XXI Laredo Petroleum Penn West Petroleum Ltd. Sonde Resources Corp.Canadian Natural Resources Limited Enerplus Corporation Linn Energy Petrobras (IFRS US$ Current) Statoil ASACarrizo Oil & Gas, Inc ENI Lukoil (IFRS) PetroChina Stone EnergyCenovus Energy Inc. EOG Resources Lundin Petroleum PetroMagdalena Energy Corp. Suncor Energy Inc.
Background• This analysis focuses on the financial and operating trends of 98 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 2011 were kept in the prior year data.
22Markets and Financial Analysis Team | Financial Review First-quarter 2016 July 2016
Brief description of terms• 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.
23Markets and Financial Analysis Team | Financial Review First-quarter 2016 July 2016
Brief description of terms• 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.
• Several charts show comparisons between these upstream companies and the U.S. manufacturing industry, collected from U.S. Census Bureau’s Quarterly Financial Report.
24Markets and Financial Analysis Team | Financial Review First-quarter 2016 July 2016