Profits for OGJ group show big gain in 1993; revenues dip. (Oil & GAs Journal's group of 22 US oil companies) (Industry Overview)

Earnings for Oil & Gas Journal's group of 22 large U.S. oil companies jumped sharply last year, increasing 78.6% from 1992. Profits totaled $16.2 billion in 1993, compared with $9.1 billion in 1992.

This is in sharp contrast to performance in 1992, when group net income fell 47%. That was due mainly to costs related to restructuring, staff reductions, and adoption of new accounting rules. The new rules moved forward some charges stemming from future retirement benefits and caused a substantial slide in 1992 profits for a number of companies.

The absence of similar charges last year was a major reason for the increase in earnings.

Profits were strongest during the first three quarters of the year. Oil prices were substantially lower during second half 1993 and slid significantly in the fourth quarter.

Performance in 1993 restored group profits to about the 1991 level, when they were $15.7 billion. Net income was as high as $30.2 billion in, 1980. Profits plunged to $11 billion in 1987, then rebounded to recent highs of $21.5 billion in 1988 and 1990.

Sixteen companies in the OGJ group had higher earnings in 1993 than in 1992. Five companies had lower earnings, while two posted losses in 1993. However, the loss for USX-Marathon Group was less than in 1992. Ten of the companies posted losses in 1992.

Even though profits rose markedly, total revenues for the OGJ group fell 3.8% to $436.3 billion in 1993. Lower crude oil and petroleum product prices were the main culprits.

Sixteen companies posted lower revenues in 1993, while six had higher revenues. The sharpest decline was posted by Unocal Corp., down 17.1% at $8.3 billion. PennzOil Co. booked the biggest percentage increase with revenues up 18.1% at $2.8 billion.

Exxon Corp. accounted for 25.5% of the group's 1993 revenues with $111.2 billion. Exxon revenues were down 5% from $117.1 billion in 1992.

Earnings by sector

Segment earnings were mixed because falling oil prices affected individual companies differently.

In general, refining and marketing earnings were up from 1992 levels. Lower feedstock costs, particularly in the fourth quarter, boosted margins and earnings.

increased petroleum product demand helped, too, mainly in the U.S. and Far East. Refining earnings also got a boost from past restructuring and a resulting gain in operating effidency.

But sluggish economic activity in Japan and several major industrial countries in western Europe weakened demand in those areas.

Exploration and production profits were mixed, closely related to oil and gas production volumes and prices.

Higher gas prices and volumes led to increased earnings from U.S. E&P for a number of companies. However, the profits improvement from gas was offset by lower crude oil volumes and prices.

Even though profits rose, the group cut capital and exploration spending from the 1992 level.

Investments tend to be influenced to a great extent by profits in the prior year. In addition, falling oil prices during second haft 1993 made companies reluctant to commit funds to some projects.

Group capital and exploration spending was down 5.8% at $38.8 billion. By contrast, outlays averaged $42.2 billion/year during the preceding …