After posting significant pretax operating losses in 2015-16, U.S. oil-weighted exploration and production companies returned to profitability in the first quarter of 2017. The 180-degree turnaround in peer group results was driven not only by higher oil prices, but by major strategic and operational shifts. Most of the 21 E&Ps we’ve been tracking responded to the plunge in revenue that started nearly three years ago by optimizing their portfolios, shedding properties with higher breakeven costs to focus on core unconventional plays and implementing operational efficiencies that led to sharply lower drilling and completion costs. Today we discuss how, with higher cash flows and profits, crude oil producers are ramping up their 2017 capital spending to generate long-term production growth.
We analyzed in depth the ongoing transformation of the U.S. E&P sector in Piranha!, a new 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 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. Now, we analyze the first-quarter financial results of the 21 companies that make up our Oil-Weighted U.S. E&P peer group.
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Recovering from nearly $60 billion in pretax operating losses in 2015 and 2016, these oil-focused companies posted $2.6 billion (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 $9.2 billion in cash flow (blue rectangle). Higher realized prices for crude oil and natural gas — and dramatically lower impairment charges — primarily drove the return to profitability. While only three of the 21 companies generated positive results in 2015 and only four did in 2016, 19 E&Ps in the Oil-Weighted peer group posted first-quarter 2017 pretax profits; only two companies reported pretax losses.
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About the song
"Feelin' Stronger Every Day" was written by Peter Cetera and James Pankow. It appears as the fifth cut on side two of Chicago's fifth studio album, Chicago VI. (Roman numerals are confusing on Chicago albums due to the fact that their actual fourth album — the four-record box set, Chicago at Carnegie Hall — had no numerals assigned to it.) "Feelin' Stronger Every Day" was released as a single in June 1973, and went to #1 on the Billboard Hot 100 Singles chart. Personnel on the record were: Peter Cetera (lead vocals, bass), Robert Lamm (keyboards, backing vocals), Terry Kath (guitar, backing vocals), Danny Seraphine (drums), James Pankow (trombone), Lee Loughnane (trumpet), and Walter Parazaider (tenor sax).
Chicago VI was the first album the band recorded at producer James Guercio's newly completed Caribou Studios in Nederland, CO; it would be the band's recording base for the next four years. Recorded during February 1973, the LP was released in June 1973. It went to #1 on the Billboard Top 200 Albums chart, and has been certified 2X Platinum by the Recording Industry Association of America.
Chicago is an American rock band formed in Chicago in 1967. The band was originally called The Big Thing, but changed its name to Chicago Transit Authority in 1968 and shortened it to Chicago the following year. They have released 24 studio albums, seven live albums, 11 compilation albums, and 64 singles. They have won two American Music Awards, five Grammy Awards, three Billboard Awards, and a Grammy Lifetime Achievement Award, and are members of the Rock and Roll Hall of Fame, Songwriters Hall of Fame, and Grammy Hall of Fame. Thirty-two members have passed through the band’s ranks since its formation. Original members Robert Lamm, Lee Loughnane, and James Pankow, along with eight other band members, still record and tour as Chicago.
