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During the first quarter of 1999, lower crude oil and natural gas prices led to a sharp decline in profits for a sampling of North American oil and gas companies.
Both revenues and profits were down from the year earlier. There was a significant increase in world and U.S. demand for petroleum, but the higher level of oil consumption was not sufficient to offset the negative impact on profits from the low prices.
For many of the companies, the exploration and production sector earnings showed the sharpest decline. But refining and marketing earnings were also down for the year. Refining margins deteriorated as product prices fell along with crude oil feedstock costs.
For the first quarter of 1999, total profits for the 101 companies that Oil & Gas Journal surveyed were down 42% compared with first quarter 1998 results. First quarter net income for the group totaled $2835 billion compared with $4.886 billion in the same period a year earlier. The decline in earnings was due in part to a 10.3% drop in total revenues to $87.677 billion.
Of the 101 companies sampled, only 26 had higher profits in the first quarter this year than in the same period of 1998. Lower quarterly earnings were posted by 30 of the companies, while 45 posted losses, compared with only 35 showing losses for first quarter 1998.
Demand and prices
increased oil demand in the first quarter of 1999 partially offset the impact on earnings of lower oil and natural gas prices. According to the International Energy Agency (IEA), worldwide petroleum demand averaged an estimated 76 million b/d for the period, up 1.3 million b/d from the average 74.7 million b/d in first quarter 1998.
The rise in demand appears to signify the beginnings of a recovery from the worldwide slowing of growth that occurred in 1998 due to the economic problems in Asia and other developing regions.
U.S. petroleum product demand averaged an estimated 19.193 million b/d in the first quarter of this year, up 4% from 18.454 million b/d in the same period a year earlier. Closer to normal winter weather and continuing economic growth boosted U.S. product demand.
U.S. natural gas demand moved up 1.9% to 6.779 tcf for the first quarter, compared with 6.651 tcf in first quarter 1998. Natural …