Despite a decline in natural gas prices, the nine gas-focused U.S. E&Ps we’ve been tracking fared better from a financial perspective in the second quarter of 2017 than E&Ps that concentrate on crude oil or have a diversified mix of oil and gas production. All nine companies in the Gas-Weighted Peer Group stayed in the black — no small feat — but with lower commodity prices the peer group’s profits fell 28% from the first quarter to just under $1.4 billion. Will 2017 be the gas group’s first profitable year since 2014? Today, we analyze the results for our gas-focused peer group as a whole and for individual companies within the group.
This is Part 4 of our update of the 43 U.S. E&Ps we have been tracking based on second-quarter results. In Roller Coaster, we reviewed the changes in second-quarter profitability for our entire 43-company universe, then followed with detailed analysis of the 21 companies in our Oil-Weighted Peer Group (Down Bound Train) and the 13 companies in our Diversified Peer Group (Written Off). Now, we analyze the profitability data of the Gas-Weighted E&Ps compared with their reported first-quarter 2017 results.
The Gas-Weighted E&Ps generated $5.37/barrel of oil equivalent (boe; green rectangle in Figure 2) in pre-tax operating profit (profit before income taxes, overhead and interest and excluding non-upstream business segments) in the second quarter of 2017 — the largest per-unit profit of our three peer groups, and just ahead of the $5.18/boe posted by the Oil-Weighted group. Our 13-member Diversified Peer Group generated a second-quarter loss of $4.02/boe, mostly because of $6.3 billion in write-downs by the group’s biggest company, ConocoPhillips; when we excluded outlier ConocoPhillips, the dozen remaining Diversified E&Ps posted a $4.94/boe profit. (Note: We use the standard 6-MMBtu-to-1-barrel-of-oil ratio to calculate per-boe financial results. In our discussion of the results of individual gas-focused companies, we’ll use cubic feet of gas equivalent per day, or cfe/d, when that makes sense.)