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Providing coverage of Alaska and northern Canada's oil and gas industry
December 2005

Vol. 10, No. 50 Week of December 11, 2005

Petroleum News: Platts: Big oil dominates global energy: "Royal Dutch/Shell, which ranked first in last year’s survey, “has had a tough time of it since,” Platts said, explaining that “a huge reserves overbooking scandal, the firing of very senior officers, regulatory authority investigations in three countries, criminal proceedings, and substantial fines combined to spur a previously unthinkable radical organizational shake-up.”: Saturday 10 December 2005

Platts survey shows dominance of big oil, with leaders amassing $1.9 trillion in 2004 revenues; Devon tops E&P independents

Ray Tyson

Petroleum News Contributing Writer

U.S.-based ExxonMobil, Chevron and ConocoPhillips and other large integrated oil and gas companies, feeding off the unprecedented rise in commodity prices, blew away the field in a Platts global survey of 250 leading energy companies, with combined revenue and profit of the integrateds soaring over the past few years.

Platts is a division of McGraw-Hill and a leading provider of energy information. This year’s report, released Dec. 2, measured the financial performance of the top 250 companies in the world by examining each company’s assets, revenues, profits and return on invested capital. All companies ranked in the survey had assets exceeding US$2 billion.

ExxonMobil, Chevron and ConocoPhillips were among the world’s best 10 performers. ExxonMobil was ranked number one in the survey with 2004 reported revenue of nearly $264 billion, profits of $25.3 billion and assets of $193 billion.

U.S.-based exploration and production independents also dominated their sector. Oklahoma’s Devon Energy was at the head of the pack in 2004 with $9.2 billion in revenues, $2.2 billion in profit and $29.7 billion in assets.

Devon ranked 38th overall, followed by Anadarko Petroleum (50), Apache (58), Burlington Resources (63), Nexen (97), Talisman Energy (102), EOG Resources (116), Kerr-McGee (128), XTO Energy (131), Newfield Exploration (156), Noble Energy (157), Pioneer Natural Resources (170) and Pogo Producing (172).

Growth in integrateds startling

The huge increase in revenues and profits among the integrated oil and gas companies was startling. Since last year’s report, combined revenues for the 31 integrateds in the survey nearly doubled to $1.9 trillion, while profits rocketed 165 percent to $5.3 billion on average. Integrateds also dominated the top dozen spots with average individual assets of just over $53 billion.

“No other energy industry segment can match those numbers,” said Theo Mullen, co-author of the analysis and managing editor of Platts Megawatt Daily.

The top 10 ranked companies in the survey were ExxonMobil, France’s Total, Chevron, UK’s BP, Netherlands’ Royal Dutch/Shell, Italy’s Eni, China’s Petrochina, UK’s Shell Tran & Trade, Norway’s Statoil and ConocoPhillips.

Royal Dutch/Shell, which ranked first in last year’s survey, “has had a tough time of it since,” Platts said, explaining that “a huge reserves overbooking scandal, the firing of very senior officers, regulatory authority investigations in three countries, criminal proceedings, and substantial fines combined to spur a previously unthinkable radical organizational shakeup.”

Other energy segments ranked in this year’s Platts survey were refining and marketing, diversified utilities, independent power producers, exploration and production, commodity storage and transfer, gas utilities, and coal and consumable fuels.

The survey used the latest data from Standard & Poor’s which, like Platts, is a division of McGraw-Hill. Because the survey was global and financial reports are not all filed simultaneously nor do they share a common financial reporting standard, the information used in the analysis was for full-year 2004, Platts said.

Platts noted that because this year’s rankings were based on 2004 data, before oil and natural gas prices exploded in 2005 and companies began reporting record quarterly revenue and profit, the financial gap between the integrateds and the rest of the energy industry “could well widen.”

Significant investment increase

On the investment front, there appear to be significant new higher levels of spending by companies searching for and producing oil and natural gas, Platts said, citing a Lehman Brothers’ spending survey indicating worldwide exploration and production expenditures could jump 13.5 percent this year to $192 billion, compared to a 5.7 percent increase reported by companies queried for Lehman’s 2004 survey.

In the United States alone, Lehman carved out the 2005 spending plans of 265 companies with a largely domestic focus. The survey found plans to boost U.S. exploration and production spending by 16.9 percent, up from a year-end 2004 estimate of a 7.8 percent.

Lehman said that 2006 is likely to see record E&P spending, with about 65 percent of the companies responding to its latest survey planning to spend more in 2006. And of those planning to spend more, 80 percent intend to increase spending by at least 10 percent and 38 percent plan to hike spending by 20 percent or more.

Oil prices haven’t hurt demand growth

Oil prices, which have more than doubled from an average $31 per barrel in 2003, have thus far done little to hurt economic or oil demand growth, according to an International Energy Agency report cited by Platts.

“The confluence of sharply higher commodity prices that show no sign of collapsing and higher spending should soon translate into more muscular cash flow for the companies involved in the segment,” Platts concluded.

In regard to commodity prices, the U.S. Energy Information Administration recently raised its price forecast for West Texas Intermediate crude to $59.17 per barrel and said monthly average WTI prices would remain above $55 per barrel for the rest of this year and next — “levels already surpassed,” Platts pointed out.

“Imbalances, real or perceived, in domestic markets could cause light crude prices to average above $60 per barrel,” according to EIA, the statistical arm of the U.S Department of Energy.

EIA said robust worldwide energy demand would contribute to higher oil prices through 2006, adding that demand is projected to grow at an annual average rate of about 2.1 million barrels per day to 85 million barrels in 2005 and to 87.1 million barrels per day in 2006.

In regard to global oil supply, Platts noted an International Energy Agency report saying that supply from Russia and other independent producers is rising more slowly than expected this year, putting strain on OPEC.

“That has helped prices reach a record high,” IEA said in its analysis, adding that Non-OPEC oil supply in 2005 would rise by 675,000 barrels per day to 50.8 million barrels per day.

Platts commented: “The outlook points to a greater reliance on supply from the 11-member OPEC, which is already pumping crude close to full capacity.”

Overall rankings are published in the December issue of Platts’ Insight-2006 Global Energy Outlook publication, and are available on the Platts web site at Regions covered in the survey were Asia-Pacific Rim, the Americas and Europe.

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