Thursday, May 29, 1997

Earnings reports show impact of higher prices

By WILLIAM GARLAND / Harte-Hanks Washington Bureau

WASHINGTON - Most independent and major oil and gas companies reporting earnings for the first quarter showed the impact of higher oil prices.

Wellhead prices for natural gas also were sharply higher for the first quarter, providing a solid boost for many independents with heavier concentrations of gas production.

The Energy Information Administration estimated that oil prices in the first quarter averaged $21.36 per barrel, up from $18.38 in the first quarter of 1996, based on the refiner purchase cost for imported oil. That price generally is a dollar or so below futures prices for West Texas Intermediate.

On the futures market, oil prices that temporarily broke through $26 per barrel were the highest since the Persian Gulf conflict with Iraq in 1990 and early 1991.

Natural gas wellhead prices averaged $2.74 per thousand cubic feet (mcf) in the first quarter, according to EIA's latest estimate, up from $2.00 per mcf in the first quarter of last year.

Industry trade publication The Oil Daily said those markets were strong enough to propel first quarter earnings for a sampling of large independents "often (to) record levels."

"Though nobody will say the word out loud, some believe the oil industry may be in for a boom year," said Oil Daily in a "Profit Profile Quarterly Supplement."

"While most analysts say results later this year are unlikely to match those in the first three months - since prices are expected to be lower and profits will be hurt by other seasonal factors - they believe the first quarter heralds an overall strong year for the industry."

A survey by the publication found that first-quarter earnings for the top nine independents surged by 86 percent compared to the same period last year. Among those setting records was Apache Corp., which "more than tripled its earnings to a record $52.9 million on the back of higher production ... and higher prices."

Apache reported that average gas prices received by the company were up 41 percent to $2.59 per mcf for the quarter, while oil prices were up 16 percent to an average of $21.47.

The trend was "almost as dramatic at Burlington Resources," which saw net income increase by 189 percent to $110 million.

Other top independents that broke earnings records for the quarter were Santa Fe Energy Resources Inc., with earnings up 121 percent to $29.9 million; Union Texas Petroleum Holdings Inc., up 33 percent to $64 million and Anadarko Petroleum Corp., with a rise of 68 percent to $34.4 million.

Among major oil companies in the survey, Oil Daily found that earnings were higher for each of the companies except Mobil Corp., which reported a 13 percent decline due to poor downstream profits tied to refinery maintenance. Quarterly earnings for all 15 of the majors rose an average of 7 percent.