Quarter and Year-End Earnings

Once again, quarter and year-end earnings reported in the offshore market reflected a familiar trend: oil majors saw gains - sometimes significant; while oilfield service companies continued to struggle, compared to the year-earlier marks. Unocal Unocal Corporation reported fourth quarter 1999 preliminary unaudited net earnings of $97 million and adjusted net earnings (excluding special items) of $77 million. The fourth quarter results compare with a reported loss of $29 million for the same period a year ago. Adjusted net earnings for the fourth quarter 1998 were $28 million. The fourth quarter earnings reflect higher oil and gas prices, offset partially by lower net oil and gas sales volumes and a higher international tax rate. Unocal's fourth quarter 1999 worldwide average crude oil price rose $9.97 per barrel over the same period in 1998, while the average price for natural gas from Unocal's Spirit Energy 76 unit was up 36 cents per thousand cu. ft. Roger C. Beach, Unocal chairman and CEO, said Unocal is reversing its production declines in the Gulf of Mexico and Indonesia, strengthening the company's ability to benefit from the rise in commodity prices. "Spirit Energy's net production ramped up at the end of 1999, and we expect first quarter 2000 average daily production to be four to six percent above the average production for the fourth quarter," he said. "It's that kind of performance in our mature assets that will allow us to execute our strategy of generating near-term earnings while pursuing long-term growth from our excellent exploration portfolio." Chevron Chevron Corp. reported 1999 preliminary net income of $2.07 billion, up 55 percent from 1998 net income of $1.34 billion. Net income for 1999 included net charges of $216 million from special items, compared with net charges of $606 million in 1998. Earnings before special items for 1999 were $2.29 billion, up 18 percent from $1.95 billion in 1998. For the fourth quarter 1999, Chevron reported net income of $809 million compared with a fourth quarter 1998 net loss of $206 million. "The higher crude oil and natural gas prices increased 1999 operational earnings in our exploration and production business by 80 percent,"said Dave O'Reilly chairman and CEO. "Average U.S. crude oil sales realizations for the year rose 41 percent, while our U.S. natural gas realizations rose seven percent. Earnings were further bolstered by a two percent increase in oil and gas production worldwide, partly the result of our commitment to continue investment during the period of low oil prices in 1998 and the first half of 1999." O'Reilly also said the company added oil and gas reserves during the year totaling approximately 105 percent of 1999 production ? the seventh consecutive year that Chevron has added more than 100 percent of the year's production in reserves. U.S. exploration and production earnings rose for the year and fourth quarter on higher crude oil and natural gas sales realizations. Annual 1999 earnings also benefited from lower operating expenses. For 1999, the company's average crude oil realizations of $16.11 per barrel were up 41 percent from the prior year. In the fourth quarter, the average realizations were $21.64, more than double the realizations of the 1998 quarter. Average natural gas realizations increased seven percent for the year to $2.16 per thousand cu. ft. and 25 percent to $2.49 per thousand cu. ft. for the quarter. USX-Marathon USX-Marathon Group's net income adjusted for special items was $148 million in fourth quarter 1999, compared with adjusted net income of $13 million in fourth quarter 1998. The Marathon Group recorded fourth quarter 1999 net income of $171 million. A net loss of $86 million was recorded in fourth quarter 1998. The Marathon Group reported 1999 net income adjusted for special items of $434 million, which represents a $113 million or 35 percent improvement over 1998 adjusted net income of $321 million. For the year 1999, the Marathon Group recorded net income of $654 million. Worldwide exploration and production (upstream) segment income totaled $257 million in fourth quarter 1999 and $618 million for the year, compared with $21 million and $278 million in the same periods of 1998. USX Corporation Board Chairman Thomas J. Usher said, "For the remainder of the year, we expect to be more active in deepwater Gulf of Mexico drilling, with eight exploration wells planned in 2000 compared to three in 1999. Worldwide liquid hydrocarbon production is expected to average approximately 210,000 bpd in 2000, increasing to about 230,000 bpd in 2001. Worldwide natural gas production is projected to be approximately 1.3 billion cu. ft. per day (bcfpd) in 2000 and 1.4 bcfpd in 2001. MAP anticipates achieving greater efficiencies as it brings on and integrates recent projects and acquisitions." Conoco Conoco announced fourth quarter 1999 net income of $324 million compared to a loss of $263 million last year. Full year 1999 net income was $744 million, 65 percent above last year. Before special items, net income was $782 million, 18 percent above the $663 million earned in 1998 on a pro forma basis. Revenues for the year exceeded $27 billion ? a record ? and were 18 percent higher than in 1998. For the quarter, upstream earned $347 million, versus $68 million last year, as a result of higher prices and lower exploration costs. U.S. earnings were $135 million, up 229 percent, due to higher crude oil and natural gas prices, along with lower exploration costs, partly offset by lower U.S. natural gas volumes. International upstream earned $212 million, versus only $27 million last year, primarily as a result of higher crude oil prices, in addition to increased natural gas volumes and lower exploration costs. Worldwide net realized crude oil prices more than doubled to $23.48 per barrel. Worldwide natural gas prices of $2.49 per thousand cu. ft. were 16 percent higher, as the 41 percent increase in U.S prices was tempered by lower international prices. For the year, upstream earned a record $845 million, up 72 percent on higher crude oil prices, increased volumes and lower exploration expenses. These improvements were partly offset by higher production costs associated with the increased volumes and lower gains from asset dispositions this year. U.S. earnings were $311 million, up 33 percent due to higher crude oil and natural gas prices and lower exploration expenses, partly offset by lower volumes. International upstream earned $534 million, up 107 percent as a result of higher crude oil prices and increased crude oil and natural gas volumes. These improvements were tempered by lower realized natural gas prices and higher volume-related production costs. Worldwide net realized crude oil prices increased 42 percent for the year to $17.51 per barrel. Worldwide net realized natural gas prices of $2.12 per thousand cu. ft. were 5 percent below last year. The one-percent increase in U.S natural gas prices was more than offset by a 17 percent drop in international prices that were down largely due to contractual terms renegotiated in 1998, as well as weaker demand. Archie W. Dunham, Conoco chairman, president and CEO said constant attention to cost containment resulted in an overall decrease in operating costs of 20 cents per barrel during the year. "We will never stop looking for ways to reduce costs," he said. Exxon Mobil Exxon Mobil Corporation reported fourth quarter 1999 net income excluding merger expenses and special items of $2.7 billion. Net income was $2.3 billion after merger expenses of $425 million. Net income excluding merger expenses and special items increased $680 million (34 percent). Net income increased $906 million (66 percent). Revenue for the fourth quarter of 1999 totaled $56 billion compared to $43.1 billion in 1998. Capital and exploration expenditures totaled $3.404 billion in the fourth quarter of 1999 compared to $4.7 billion in the prior year's quarter. Full year capital and exploration expenditures totaled $13.3 billion compared to $15.5 billion in 1998. Fourth quarter exploration and production earnings benefited from rising crude oil prices, which averaged about $12 per barrel more than the fourth quarter of 1998. Natural gas prices were about 25 percent higher in North America. Excluding special items, earnings from U.S. exploration and production were $740 million, an increase of $492 million from the prior year. Net income for the full year was $7.9 billion for 1999, a decrease of two percent from the $8.1 billion earned in 1998. Excluding merger expenses and special items, net income for 1999 declined five percent to $8.4 billion compared to $8.8 billion in 1998. Exploration and production earnings increased substantially due to the improvement in crude prices. Crude oil realizations were up more than $5 per barrel versus 1998. Exploration and producing expenses were reduced from prior year levels. Excluding special items, earnings from U.S. exploration and production operations were $1.9 billion, an increase of $807 million from 1998. "ExxonMobil's full year 1999 capital and exploration expenditures were $13.3 million, reflecting a continuation of the corporation's active investment program. Expenditures were below 1998 levels, primarily due to the completion of several major upstream development projects," said Lee R. Raymond, Exxon Mobil chairman Texaco Texaco reported fourth quarter 1999 income before special items of $370 million. Net income for the period was $318 million. Texaco Chairman and CEO Peter I. Bijur said, "Our 1999 earnings benefited significantly from the dramatic rise in crude oil prices, but these increases could not be fully recovered in the marketplace. After starting the year at very low levels, crude oil prices jumped in March and continued to climb throughout the year. Benchmark WTI crude oil ended the year at nearly $26 per barrel and continues to climb in 2000. Much of the earnings benefit from higher crude oil prices was reduced by lower refining and marketing margins around the world. Excess refining capacity has created chronic refined product oversupply in all areas, limiting the amount of crude costs that can be recovered in the market. The oversupply situation was exacerbated by economic weakness in the Caltex areas and parts of Latin America which reduced product demand." U.S. Exploration and Production earnings for the year's fourth quarter and year were above last year's levels due to higher crude oil and natural gas prices. Crude oil prices continued to rise in the fourth quarter and more than doubled in 1999, in response to production cutbacks by OPEC and several non-OPEC countries which led to a decline in worldwide inventory levels. Average realized crude oil prices for the fourth quarter and year 1999 were $20.50 and $14.70 per barrel, 110 percent and 39 percent higher than last year. For the fourth quarter and year 1999, average natural gas prices were $2.43 and $2.18 per MCF, 27 percent and nine percent above last year. Operating expenses were 10 percent lower this year as a result of cost savings from the restructuring of the worldwide upstream organization. Exploratory expenses for the fourth quarter were $130 million before taxes, $68 million higher than last year. This year's quarter included a $100 million ($65 million after tax) write-off of investments in the Fuji and McKinley prospects in the Gulf of Mexico. These prospects were initially drilled between 1995 and 1998 and appraisal drilling in the fourth quarter determined them to be non-commercial. Exploratory expenses for the year 1999 were $234 million before taxes, $23 million below last year. Capital and exploratory expenditures were $3.9 billion for the year 1999, compared to $4.1 billion in 1998. In the U.S. upstream, expenditures decreased 39 percent compared to 1998. In the downstream, capital expenditures decreased due to depressed global industry conditions. Also, there were refinery project completions in 1998 and the slowing of re-imaging and branding initiatives in the U.S. and Caltex areas of operation. Phillips Phillips Petroleum Company reported fourth- quarter net income of $250 million compared with a loss of $210 million for the same period in 1998. Fourth-quarter 1998 results were negatively impacted by low oil and gas prices, which resulted in substantial property impairments. Total revenues for the fourth quarter of 1999 were $4.3 billion, versus $2.7 billion a year ago. The total net effect of special items in the quarter increased net income $35 million. These special items primarily included a net gain from asset sales, a favorable pricing adjustment and a favorable litigation settlement. Net operating income, which excludes special items, was $215 million compared with a net operating loss of $12 million for the fourth quarter of 1998. Exploration and production net operating income was $214 million in the fourth quarter, up from $42 million in the same quarter of 1998, mainly due to higher crude oil and natural gas prices, higher crude oil production and lower lifting costs. Worldwide oil production was up 17 percent and natural gas production increased slightly. "Phillips' average worldwide crude oil price was $24.03 per barrel, up from $10.80 in the same quarter of 1998. Our U.S. natural gas price was $2.30 per thousand cu. ft., up from $1.83. In the gas gathering, processing and marketing segment, natural gas liquids prices averaged $15.63 per barrel, up from $7.91 a year ago," said Jim Mulva, CEO. For 1999, net income was $609 million compared with $237 million for 1998. Total revenues were $13.9 billion, versus $11.8 billion a year ago. Exploration and production net operating income for 1999 was $526 million, up from $256 million in 1998, because of higher crude oil and natural gas prices, higher crude oil production and lower lifting costs. Operating earnings also benefited from foreign currency gains versus losses a year ago. Worldwide oil production was up four percent from 1998 levels, while gas production declined four percent. "In early 1999, the company announced it was taking steps to reduce its annual pre-tax costs an estimated $230 million from its original 1999 budget," said Mulva. "This cost reduction includes the elimination of approximately 1,700 jobs. At year-end 1999, these steps were essentially complete, resulting in the elimination of about 1,600 jobs and cost savings of approximately $300 million. The remainder of the job reductions are expected in the first half of 2000. Global Marine Global Marine Inc. reported net income for the year ended December 31, 1999, of $89.5 million on revenues of $791 million. This compares to net income of $223.3 million on revenues of $1.2 billion for the year ended Dec. 31, 1998. For the quarter ended December 31, 1999, the company reported net income of $10.7 million on revenues of $199 million as compared to net income of $34.5 million on revenues of $259 million for the same quarter of 1998. Global Marine Chairman, President and CEO Bob Rose, said, "Our industry experienced a difficult year in 1999, but as we enter 2000, we see key markets improving and a positive outlook developing. "In early 1999, world oil prices sank to new lows for the decade. Most oil and gas producers responded to lower oil prices by substantially reducing drilling budgets from 1998 levels. These reductions resulted in lower utilization and dayrates for offshore drilling rigs worldwide and significantly affected the company's 1999 results. Global Marine's 1999 revenues declined by $371 million, or 32 percent from the prior year." Commenting on the trends for 2000 and beyond, Rose said, "The outlook for our future is positive as higher commodity prices provide the capital for our customers to increase their drilling budgets. Oil company budget announcements and surveys of capital spending plans for 2000 suggest average increases of more than 10 percent over 1999 levels. We have already seen a significant recovery in dayrates for our premium jackup drilling rigs in the Gulf of Mexico and are seeing the early signs of recovery in West Africa." Progress is continuing on construction of the company's two state-of-the-art ultra-deepwater drillships. "Glomar C. R. Luigs is 98 percent complete and is expected to be delivered later this quarter," Rose said, "and Glomar Jack Ryan is scheduled for delivery in the third quarter of this year. Our total combined cost for the two drillships is estimated to be $730 million." ENSCO ENSCO International Inc. reported net income of $7.5 million on revenues of $80.2 million for the fourth quarter of 1999, compared to net income of $27.1 million on revenues of $153 million for the year earlier quarter. For the year ended December 31, 1999, ENSCO reported net income of $6.7 million on revenues of $363.7 million, compared to net income of $253.9 million on revenues of $813.2 million in 1998. A decline in day rates and utilization for the company's jackup fleet contributed to the reduction in net income for the 1999 fourth quarter and year when compared to the same 1998 periods. In the fourth quarter of 1999, the average day rate for ENSCO's jackup rig fleet was approximately $22,800, as compared to $38,400 in the fourth quarter of 1998. Utilization for the company's jackup rig fleet decreased to 74 percent in the most recent quarter from 89 percent in the year earlier quarter. In the company's marine transportation segment, average day rates for the company's marine fleet decreased to approximately $4,300 in the fourth quarter of 1999 from $5,100 in the fourth quarter of 1998. Utilization for ENSCO's marine fleet was 62 percent in the fourth quarter of 1999, compared to 77 percent in the year earlier quarter. "As anticipated, 1999 was a difficult year due to the disruption caused by low oil prices in 1998 and early 1999," said Carl Thorne, chairman and CEO. "Our 1999 results reflect this market softness. ENSCO managed through this disruption, and we enter 2000 in excellent financial condition with approximately $165 million of cash and short-term investments, and availability of $380 million of additional liquidity from unused credit sources. "Improvement in commodity prices in the second half of 1999 has led to an increase in drilling activity in certain markets. The Gulf of Mexico has led the recovery due to the strong fundamentals for natural gas in this country, and international markets are only now beginning to show improvement. "Supplementing the significant operating leverage we presently enjoy, the expected completion of our two new rigs in 2000 should contribute to our results this year, and more fully in 2001," said Thorne. "ENSCO 101, a new harsh environment heavy duty jackup rig, and ENSCO 7500, our new semisubmersible drilling rig, are scheduled to be delivered during the first and fourth quarters of 2000, respectively." Schlumberger Schlumberger Limited reported 1999 operating revenue from continuing operations of $8.39 billion, a decrease of 22 percent over 1998. Before the first and fourth quarter 1999 charges, income was $458 million, 54 percent lower than last year before the third quarter 1998 charge. Fourth quarter operating revenue from continuing operations of $2.18 billion was 13 percent below fourth quarter 1998. Oilfield Services revenue, excluding Sedco Forex Offshore, decreased 16 percent year over year as the rig count grew 7 percent. Compared with the third quarter of 1999, revenue increased 5 percent. Oilfield Services fourth quarter revenue increased 5 percent sequentially and declined 16 percent year over year. The rig count increased 16 percent sequentially and 7 percent year over year. Pretax operating income grew 20 percent sequentially and fell 34 percent versus the fourth quarter of 1998. Compared with last year, revenue increased in North and South America and decreased in all other major geographical regions and across all of the oilfield services. On December 30, Schlumberger completed the spin-off of its offshore contract drilling business, Sedco Forex, to its stockholders. Following the spin-off, Sedco Forex merged with Transocean Offshore Inc., which changed its name to Transocean Sedco Forex Inc. The transaction created the world's largest offshore drilling company and the fourth largest oilfield services company by market capitalization.