Global E&Ps Score Financial Home Runs in 3Q, But Output Down from Pre-Covid Levels, Says EIA

by Carolyn Davis*

Stronger commodity prices and rising natural gas and oil production improved the bottom line for global producers during the third quarter, the Energy Information Administration (EIA) said

The EIA’s Petroleum and Liquid Fuels Markets Team on Wednesday published a compilation of 3Q2021 data gleaned from 87 exploration and production (E&P) companies in the United States and abroad.

The publicly available data, aggregated by Evaluate Energy, compiled returns for 51 E&Ps headquartered in the United States and 16 in Canada. Ten companies were headquartered in Europe, and 10, classified as “other,” were based in Argentina, Brazil, Chile, China, Colombia and Russia.

“The combined petroleum liquids production level increased 1% year/year in 3Q2021,” researchers noted. “Natural gas production increased 4% during the same period.”

U.S.-based E&Ps reviewed by the EIA team included Chesapeake Energy Corp., Chevron Corp., ConocoPhillips, EOG Resources Inc. and ExxonMobil. European-based E&Ps studied included BP plc, Royal Dutch Shell plc and TotalEnergies SE.

Covid-Related Slump?

While output was up, researchers noted that production in 3Q2021 “remained lower than any quarter in 2019,” which preceded the Covid-19 pandemic. Production was down even though “crude oil prices were 69% higher than 3Q2020, and natural gas prices more than doubled during the same period.”

To compare and contrast, U.S. manufacturing industry data also was reviewed using the U.S. Census Bureau’s Quarterly Financial Report.

“Cash from operations in 3Q2021 totaled $157 billion, up 25% year/year and the highest for any quarter in the 2017-2021 period, primarily as a result of higher oil prices,” researchers noted. “About 86% of companies had positive free cash flow, and 89% of companies reported positive upstream earnings in 3Q2021.”

With commodity prices swinging, net losses from hedging derivatives were $11 billion in 3Q2021, and totaled almost $30 billion in the first three quarters of the year, the analysis showed.

There were bonuses for shareholders during the period, with dividends or stock repurchases amounting to 24% of cash from operations. Companies overall also reduced debt in 3Q2021 by $37 billion, with long-term debt-to-equity ratio remaining at 50%.

By comparison, the long-term debt-to-equity ratio in 3Q2021 was 61% for U.S. manufacturing companies, researchers noted.

The E&P companies’ return on equity averaged 9% in 3Q2021. By comparison, U.S. manufacturing companies saw a return of around 17%, the data indicated.

EIA also determined that overall upstream capital expenditures averaged $9/boe in 3Q2021. Upstream capital expenditures per boe were 11% of crude oil prices in the period.

*Carolyn Davis joined the editorial staff of Intelligence Press Inc. in Houston in May, 2000. Prior to that, she covered regulatory issues for environmental and occupational safety and health publications. She also has worked as a reporter for several daily newspapers in Texas, including the Waco Tribune-Herald, the Temple Daily Telegram and the Killeen Daily Herald. She attended Texas A&M University and received a Bachelor of Arts degree in journalism from the University of Houston.

(Natural Gas Intelligence, December 30, 2021)