Of the 43 major U.S. exploration and production companies we have been tracking, the 13 diversified companies — the ones with a balanced mix of crude oil and natural gas reserves — engineered the most dramatic financial reversal in the first quarter of 2017, generating $4.6 billion, or $11.46 per barrel of oil equivalent (boe), in pretax operating profit after almost $65 billion in pretax losses in 2015-16. These producers, like their oil-weighted and gas-weighted counterparts, benefited from higher prices and sharply lower drilling and completion costs and lease operating costs. The magnitude of the turnaround was driven by exceptional results from giant ConocoPhillips, which generated more than one-third of the total first quarter 2017 pretax operating profits for our 43-company universe and nearly one-quarter of the total cash flow. The remaining 12 diversified companies reported $1.3 billion in first-quarter pretax profit after $54 billion in losses over the past two years. Today we look at how the turnaround efforts of 13 diversified oil-and-gas E&Ps have been paying off.
Canadian crude output is rising, requiring new export routes. As traditional pathways face constraints, the U.S. Rockies—especially the Guernsey, WY hub—are emerging as key corridors for moving Canadian heavy crude to downstream markets, including the Gulf Coast.
We analyzed in depth the ongoing transformation of the entire U.S. E&P sector in Piranha!, our market study of 43 U.S. E&Ps. Of that universe of companies, 21 focus on oil (60%+ liquids reserves), nine are gas-weighted producers (60%+ natural gas reserves) and 13 are diversified producers. All major U.S. shale/unconventional plays are represented in the combined portfolios of these firms. After examining the 2017 capital spending plans of our three peer groups in a series of blogs, we reviewed the turnaround in first-quarter 2017 financial results we saw across our 43-company universe in Recovery - U.S. E&Ps Return to Profitability After Posting Massive Losses in 2015-16. Then we zeroed in on the 21 companies that make up the Oil-Weighted U.S. E&P peer group in Feelin’ Stronger Every Day - Oil-Weighted E&Ps Profit From Higher Prices, Shifts in Strategy. Today, we analyze the first-quarter results of the 13 companies that make up the Diversified U.S. E&P peer group.
Recovering from nearly $65 billion in pretax operating losses in 2015 and 2016, the Diversified E&Ps posted $4.6 billion (see red rectangle in Figure 1) in operating income (profits before income taxes, overhead and interest and excluding nonupstream business segments) in the first quarter of 2017 and generated $11.8 billion in cash flow (blue rectangle), the highest among our three peer groups. While only one of the 13 diversified companies generated positive results in 2015 and none did in 2016, 11 of the 13 posted pretax profits in the first quarter of 2017, while only two companies reported pretax losses.
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About the song
“Back in Black” was written by Brian Johnson, Angus Young, and Malcom Young and appears as the first song on side two of AC/DC's seventh studio album of the same name. Released as the first single from the LP in July 1980, the song went to #37 on the Billboard Hot 100 Singles chart. It has been certified 3X Platinum by the Recording Industry Association of America (RIAA). Known for its powerful opening guitar riff, the song is a tribute to AC/DC's former lead singer Bon Scott, who died in February 1980 and was replaced by Brian Johnson. Personnel on the record were: Brian Johnson (lead vocals), Angus Young (lead guitar), Malcom Young (rhythm guitar, backing vocals), Cliff Williams (bass, backing vocals), and Phil Rudd (drums).
Back in Black was recorded in April and May1980. Produced by Mutt Lange at Compass Point Studios in Nassau, Bahamas, during tropical storms and hurricane warnings, the LP was released in July 1980. It went to #4 on the Billboard Top 200 Albums chart, and has been certified 25X Platinum by the RIAA. It has sold more than 50 million copies worldwide, making it the second-best selling album in history. (Michael Jackson's Thriller is #1.) Four singles were released from the album. Recording studios still use Back in Black to tune the acoustics of a room.
AC/DC is an Australian rock and roll band formed in Sydney in 1973 by brothers Malcom and Angus Young. They have released 17 studio albums, three live albums, two soundtrack albums, one EP, and 47 singles. Twenty one members have passed through the band since its formation. Bon Scott died in 1980 and Malcom Young in 2017. The band continues to record and tour.
