U.S. Oil & Gas Company Earnings Take a Huge Hit in Q3 2015

Since commodity prices began to drastically fall in Q4 2014, U.S. oil and gas companies in the upstream sector have seen their respective net incomes drop significantly. Operating margins have been tightly squeezed and assets have suffered major impairments. The low price environment has endured throughout 2015 and, as a result, Q3 2015 earnings for U.S. companies are the lowest since prices began to fall in Q4 2014.

Evaluate Energy has analysed the preliminary Q3 earnings statements of 48 U.S. companies and compared it with their earnings in previous periods. The 48 companies had a combined total net loss of US$25.5 billion, which is a staggering 70% and 58% larger than these companies’ significant combined net losses of US$14.9 billion and US$16.6 billion in Q1 and Q2 2015 respectively (see note 1).

EarningsImpairmentsQ32015-1

Source: Evaluate Energy, see note 1. Sign up to the CanOils & Evaluate Energy Mailing List here and be informed as soon as new analysis reports like this are available.

Impairments Skyrocket in Latest Set of Quarterly Results

Impairments (see note 2) are clearly the main reason for this continued downward trend. Evaluate Energy released a similar piece of analysis earlier this year focused on U.S. company impairments in Q4 2014. In Q3 2015, impairments for U.S. companies have not only continued to be recorded due to low prices, they are in fact significantly larger.

Of the 48 companies in this study, only 10 did not report any kind of impairment in their earnings statements, while the remaining 38 collectively reported impairments totalling US$32.8 billion in Q3 2015. This is a 79% increase over last quarter’s combined impairments of US$18.4 billion for the full group of 48 companies. In total, since prices began to drop in Q4 2014, the 48 companies have recorded a grand total of US$84.6 billion in impairments and Q3 2015’s total makes up 39% of this.

EarningsImpairmentsQ32015-2

Source: Evaluate Energy, see note 2. Sign up to the CanOils & Evaluate Energy Mailing List here and be informed as soon as new analysis reports like this are available.

On an individual company basis, Devon Energy Corporation (NYSE:DVN) reported the largest impairment this quarter at US$5.9 billion. Devon has been recording impairments all year; this quarter’s US$5.9 billion represents around 38% of 2015 impairments. Of the companies that recorded this quarter’s biggest impairments, Occidental Petroleum Corp. (NYSE:OXY), Murphy Oil Corporation (NYSE:MUR), Whiting Petroleum Corporation (NYSE:WLL) and Carrizo Oil & Gas Inc. (NASDAQ:CRZO) suffered over 90% of their respective impairments for the year in Q3 2015. Whiting’s impairments were especially noteworthy as the US$1.7 billion figure of asset impairments in the chart below does not include an additional US$870 million of goodwill impairments associated with its acquisition of Kodiak Oil & Gas, which only recently closed in December 2014.

EarningsImpairmentsQ32015-3

Source: Evaluate Energy, see note 2. Sign up to the CanOils & Evaluate Energy Mailing List here and be informed as soon as new analysis reports like this are available.

All data in this report was pulled together using the Evaluate Energy database, which provides clients with efficient data solutions for oil and gas company analysis. This includes over 25 years of financial and operating data for the world’s biggest and most significant oil and gas companies, M&A deals, a global E&P assets and LNG database, and an emerging product that focuses on the North American shale industry.

Notes

1) Net income/Loss here refers to post-tax net earnings on the 48 companies’ income statements; the figures have not been adjusted for non-recurring items such as impairments, gains or losses on asset sales or unrealised gains or losses on hedging contracts.

2) Impairments are taken from the income statement of each company and refer to impairments of assets, i.e. property and equipment, only. Impairments related to financial assets, investments or goodwill are not included.

3) The 48 companies were chosen as they had all reported preliminary results by the morning of November 5, 2015 (UK time).

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Canadian Upstream Oil & Gas M&A Rebounds in September 2015

Analysis in CanOils’ new report “Upstream M&A Value in Canada Rebounds in September 2015” shows that September was the biggest month for Canadian M&A activity since May, if the three deals announced in 2015 with a value of over Cdn$1 billion are excluded. The Canadian oil and gas sector had Cdn$563 million of upstream M&A deals announced during September 2015. It marks a steep improvement on the approximate Cdn$59 million of deals that were witnessed during August 2015. The low value of August 2015 was also the lowest monthly total in at least the past 8 years, as the double dip in oil price experienced that month, allied with an already deflated gas price, led to a tentative industry. October has started with a bang as Suncor Energy bid Cdn$6.6 billion for Canadian Oil Sands Limited. The new report is the first of CanOils’ new monthly reviews of Canada’s M&A industry, in which all the month’s major deals, deal stories and assets for sale will be looked at in depth using data from all of CanOils’ databases, including CanOils Assets.

CanOilsMAGraph1Sept2015

Source: CanOils M&A Database. *Note: October deal value correct as of Friday October 9, 2015. Deals allocated according to the month they were announced, rather than completed.

Of course, the above chart is dominated by the deals/potential deals of over Cdn$1 billion. In May, Crescent Point Energy Corp. announced the acquisition of Legacy Oil + Gas Inc., in June, Cenovus Energy Inc. announced that the Ontario Teachers’ Pension Plan was acquiring its royalty business and then in early October, Suncor Energy made a $6.6 billion bid for its Syncrude partner Canadian Oil Sands Limited.

If we exclude these three deals, the increase in activity in September is easier to see. In fact, activity aside from major deals picked up to its highest level in terms of overall value since May.

CanOilsMAGraph2Sept2015

Source: CanOils M&A Database. *Note: October deal value correct as of Friday October 9, 2015. Deals allocated according to the month they were announced, rather than completed.

Inside this Month’s Canadian M&A Report:

Suncor Energy Making Waves in the Oilsands Mining Industry

Suncor Energy is a huge part of the upturn in deal value in recent weeks and is undoubtedly the major focus of this month’s report “Upstream M&A Value in Canada Rebounds in September 2015”. Not only did it make an offer for Canadian Oil Sands in what could prove to eventually be Canada’s biggest deal of 2015 should it ever complete, it also increased its ownership in the Fort Hills mine project in a Cdn$310.0 million deal for an extra 10% interest from Total. Both deals, along with Canadian Oil Sands’ immediate response to Suncor’s offer, are analysed in detail in this month’s report.

Also:

  • Penn West Exploration and Cardinal Energy strike deal for waterflood assets in Central Alberta
  • Pengrowth Energy, Bellatrix Exploration and Black Swan Energy all selling assets
  • A round up of all the deal stories impacting Canada’s oil and gas industry in September and the very start of October.

CanOils_MA_Report_Sept_2015_Cover

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Insights from CanOils’ M&A database, as well as data from CanOils’ Assets, Financings, Financial & Operating and Oilsands databases, help to provide a thorough, independent overview of the month’s biggest deals in the Canadian oil and gas industry in this report. Image cover is sourced from Syncrude’s Flickr account and cropped to fit the required space.

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Do You Spend Hours Downloading Oil and Gas Company Reports?

1000s of Canadian Oil & Gas Company Reports at Your Fingertips

As part of CanOils’ continued lead in oil and gas company financial and operating analysis solutions, we are pleased to announce an upgrade that adds Canadian company quarterly, annual and reserve reports to our Documents product, a simple web-based platform that CanOils subscribers can use to download all the reports they need in a matter of minutes.

Find out more by requesting a demo of CanOils Documents here

The Upgraded Service

In addition to the 1000s of corporate presentations that CanOils has collected, stored and made available since 2008, we have now added 1000s of new reports to our offering.

New Additions to CanOils Documents:

  •   Quarterly & Annual Financial Statements
  •   Management Discussion & Analysis Reports
  •   Annual Reports (includes 10-Ks/40-Fs for dual-listed SEC reporting companies)
  •   Annual Information Forms (AIFs and NI 51-101s)
  •   Reserve Reports
  •   Supplemental Quarterly & Annual Filings

These have been cleaned, catalogued and backdated for all TSX and TSX-V listed companies in the CanOils coverage portfolio and all future reports will be available within 1 working day of release.

Fully Automatable

As an additional service, document capture from CanOils can be fully automated and integrated into user workflow, meaning CanOils is able to feed company results directly to the people who need them, creating actionable opportunities and saving hours of valuable time.

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If you would like further information on either the CanOils Documents product or the automation service, or if you would simply like one of our support team to walk you through the product, simply contact your local representative on the number below or complete a demo request here and we’ll take care of the rest.

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List of Canadian Oil & Gas Companies

There are 100s of oil and gas companies operating inside Canada varying from large international and oilsands players such as Suncor Energy Inc. and Cenovus Energy Inc., down to small junior players.

The Evaluate Energy Database covers and tracks performance of every single publicly listed oil and gas company based in Canada, including international focused operators, providing clients with all their production data, their financial and operating performance metrics, M&A deals, hedging positions, guidance and much more.

More from Evaluate Energy:

 

Canadian oil and gas companies

(List of active Canadian-based E&P companies correct as of October 10, 2023)

  • Advantage Energy Ltd.
  • Advantagewon Oil Corp.
  • Africa Energy Corp.
  • Africa Oil Corp.
  • Altima Resources Ltd.
  • Alvopetro Energy Ltd.
  • ARC Resources Ltd.
  • Arrow Exploration Corp.
  • Athabasca Oil Corporation
  • Avanti Helium Corp.
  • Avila Energy Corporation
  • Barnwell Industries Inc.
  • Baytex Energy Corp.
  • Bengal Energy Ltd.
  • Birchcliff Energy Ltd.
  • Blacksteel Energy Inc.
  • Bonterra Energy Corp.
  • Canada Energy Partners Inc.
  • Canadian Natural Resources Limited
  • Canadian Overseas Petroleum Limited
  • Canadian Spirit Resources Inc.
  • CanAsia Energy Corp.
  • Capitan Investment Ltd.
  • Cardinal Energy Ltd.
  • Cenovus Energy Inc.
  • Centaurus Energy Inc.
  • CGX Energy Inc.
  • Claren Energy Corp.
  • Clearview Resources Ltd.
  • Cobra Venture Corporation
  • Coelacanth Energy Inc.
  • Condor Energies Inc.
  • Crescent Point Energy Corp
  • Crew Energy Inc.
  • Criterium Energy Ltd.
  • Crown Point Energy Inc.
  • District Mines Ltd.
  • East West Petroleum Corp.
  • Eco (Atlantic) Oil & Gas Ltd.
  • EF EnergyFunders Ventures, Inc.
  • Enerplus Corporation
  • Falcon Oil & Gas Ltd.
  • First Helium Inc.
  • Forza Petroleum Limited
  • Freehold Royalties Ltd.
  • Frontera Energy Corporation
  • Gear Energy Ltd.
  • Gran Tierra Energy Inc.
  • Greencastle Resources Ltd.
  • Hammerhead Energy Inc.
  • Headwater Exploration Inc.
  • Hemisphere Energy Corporation
  • Highwood Asset Management Ltd.
  • Horizon Petroleum Ltd.
  • Imperial Oil Limited
  • InPlay Oil Corp.
  • International Frontier Resources Corporation
  • International Petroleum Corporation
  • Jericho Energy Ventures
  • Journey Energy Inc.
  • Jura Energy Corporation
  • JX Energy Ltd.
  • Kaymus Resources Inc.
  • Kelt Exploration Ltd.
  • Kingsland Energy Corp.
  • Kiwetinohk Energy Corp.
  • KR Investment Ltd.
  • Lithium One Metals Inc.
  • Logan Energy Corp.
  • Lucero Energy Corp.
  • Lycos Energy Inc.
  • Marksmen Energy Inc.
  • McChip Resources Inc.
  • MCF Energy Ltd.
  • MEG Energy Corp.
  • Metalore Resources Ltd.
  • New Zealand Energy Corp.
  • NG Energy International Corp.
  • Niko Resources Ltd.
  • NuVista Energy Ltd.
  • Obsidian Energy Ltd.
  • Oracle Energy Corp.
  • Pambili Natural Resources Corporation
  • Paramount Resources Ltd.
  • Parex Resources Inc.
  • Permex Petroleum Corporation
  • Perpetual Energy Inc.
  • Petrichor Energy Inc.
  • PetroFrontier Corp.
  • Petrolympic Ltd.
  • PetroTal Corp.
  • Petroteq Energy Inc.
  • Petrox Resources Corp.
  • Petrus Resources Ltd.
  • Peyto Exploration & Development Corp.
  • Pieridae Energy Limited
  • Pine Cliff Energy Ltd.
  • Pipestone Energy Corp.
  • Prairie Provident Resources Inc.
  • PrairieSky Royalty Ltd.
  • Prospera Energy Inc.
  • Pulse Oil Corp.
  • Questerre Energy Corporation
  • Razor Energy Corp.
  • Reconnaissance Energy Africa Ltd.
  • ROK Resources Inc.
  • Rubellite Energy Inc.
  • Saturn Oil & Gas Inc.
  • Serrano Resources Ltd.
  • ShaMaran Petroleum Corp.
  • Sienna Resources Inc.
  • Sinopec Canada Energy Ltd.
  • Sintana Energy Inc.
  • Sonoro Energy Ltd.
  • Source Rock Royalties Ltd.
  • Southern Energy Corp.
  • Spartan Delta Corp.
  • Strikewell Energy Corp.
  • Suncor Energy Inc.
  • Sunshine Oilsands Ltd.
  • Surge Energy Inc.
  • TAG Oil Ltd.
  • Tamarack Valley Energy Ltd.
  • Tenaz Energy Corp.
  • Tenth Avenue Petroleum Corp.
  • Terrace Energy Corp.
  • Topaz Energy Corp.
  • Touchstone Exploration Inc.
  • Tourmaline Oil Corp.
  • Trans Canada Gold Corp.
  • Trillion Energy International Inc.
  • Valeura Energy Inc.
  • Vermilion Energy Inc.
  • Vital Energy Inc.
  • Waskahigan Oil & Gas Corp.
  • Wedgemount Resources Corp.
  • WesCan Energy Corp.
  • Whitecap Resources Inc.
  • Wilton Resources Inc.
  • XXL Energy Corp.
  • Yangarra Resources Ltd.
  • Zenith Energy Ltd.

Return to https://blog.evaluateenergy.com for more from Evaluate Energy

 

What are 3P Oil & Gas Reserves and Why Are They Important?

Evaluate Energy has recently added 3P oil and gas reserves to our databases, enhancing two already extensive oil and gas company data analysis tools.

Find out more about our financial and operating database here.

What are 3P reserves, and why are they important?

What Are 3P Reserves?

Understanding a company’s recoverable oil & gas reserves is important when trying to establish their present and future value, but to do this you first need to understand the reserve information that is being provided.

There are 3 main reserve categories under the Society of Petroleum Engineers (SPE) definition: proved; probable and possible reserves.

For an oil or gas deposit to be classified as “reserves,” you first need to establish technical and commercial certainty of extraction using existing technology. Once this has been established, the degree of this certainty is then decided, breaking reserves down into 3 distinct categories:

  • Proved Reserves, 90% Certainty of Commercial Extraction
  • Probable Reserves, 50% Certainty of Commercial Extraction
  • Possible Reserves, 10% Certainty of Commercial Extraction

3P reserves refers to the combination of all three of these totals, i.e. Proved plus Probable plus Possible.

Anything below “possible”, i.e. less than a 10% certainty of being able to commercially extract the oil or gas with currently available technology, will fall into ‘contingent resources’ or ‘recoverable resources’ categories. See the below diagram of the SPE definitions for further detail.

Why Do Only Some Companies Report 3P Reserves?

Proved (1P) and Proved plus Probable (2P) reserves are commonly used throughout the oil and gas world, but 3P reserve information, Proved plus Probable plus Possible, is relatively scarce. This is due to basic reporting requirements set by governing bodies. In Canada, for example, companies have to report proved (1P) and proved plus probable (2P) reserves under NI-51-101 regulations, but 3P will only be reported if the company chooses to do so, as there is no legal obligation. This means that the cost of having oil and gas deposits evaluated by reserves engineers for 3P reserves can be weighed up against the overall benefit/potential investment a company will get from publishing the findings, to see if it is worth carrying out at all.

Therefore, many companies will not report their full spectrum of reserves under all classifications to the investment community unless they see a benefit of doing so. This balance between cost and benefits is also a reason why many companies will only give 3P reserves for certain fields, focus areas, or prized assets – paying for assessments of deposits you aren’t going to develop any time soon is not required.

Why are they important?

Despite this lack of legal obligation and the extra costs involved causing many companies to opt out of 3P reserves disclosure, and the fact that reserves engineers are only between 10%-49% certain of being able to extract them, Evaluate Energy and CanOils still feel that it is important information for our clients to see.

We are now seeing more and more companies beginning to report 3P reserves, especially from the junior end of the company spectrum. Junior companies will typically buy into prospective fields, spend their first few years in existence trying to prove commerciality, and then either get acquired by or merge with a bigger player, or are joined in their commercially viable oil or gas project by a bigger player who typically takes on most of the operating costs – known as a farm-in partner.

In the junior companies’ early days of evaluating an asset, there isn’t a lot of money going around to pay for extensive exploration work. So typically, only a high level overview is possible, which results in little or no proved or probable reserves being booked, but maybe a high amount of possible reserves. 3P reserves are therefore a great barometer, despite their 10% certainty rating, to assess the potential of certain assets or entire companies if they are at these early stages of development.

The TSX-V exchange in Canada and the AIM exchange in London have many companies that fit this description, and 3P reserves and the hundreds of metrics Evaluate Energy and CanOils provide alongside them will be vital to any analysis of these emerging oil and gas players.

SPE Oil & Gas Reserves and Resources Definitions

SPE-Definitions

Evaluate Energy provides efficient data solutions for oil and gas company analysis, with over a decade of historical financial and operating data, and extensive M&A, Assets and Financings databases. To find out more about the financial and operating data we provide, click here.

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Oil & Gas Company Benchmarking

Evaluate Energy has been providing benchmarking tools and undertaking benchmarking studies to major oil and gas companies and their advisors for over 25 years. Evaluate Energy has a proprietary database covering financial and operating data for over 700 oil and gas companies, comprising literally thousands of data points. This is oil and gas data at its easiest to find.

Corporate benchmarking allows oil companies to compare their performance over a number of years or quarters against similar size companies, determine their strengths and weaknesses and use it to enhance performance.

Many of our clients use our data to provide proof to board members, investors or the wider community of how they are competing against their peers for any number of metrics.

Evaluate Energy clients range from Investors, Banks, Corporate clients or advisors who use our data to add value for their clients. They look at metrics that are important for the industry such as exploration expenses, finding and development costs (F&D Costs), reserve data (1p/2p/3p), production data, as well as traditional financial metrics.

These items are all included in the Evaluate Energy service and can be downloaded quickly and easily with minimal work or effort. The service will save you time and money when compared with doing the work yourself and is significantly better priced than much of the competition.

It is possible to arrange a trial of the service for no charge.

For those clients who do not have the analyst capacity to undertake benchmarking work, we provide our own bespoke consultancy service focused on the area we know best – benchmarking.

It enables users to choose from 1000s of different line items – taken from company fillings, quarterly reports and annual reports – and compare on a like for like basis. We cover almost 300 of the most important public oil & gas companies world wide, from the majors right down to important players on the global scene.

Key Features

  • Like for like comparisons using hundreds of industry metrics for all the important players
  • Peer Group Comparison at the click of a button. Build a template and go.
  • Drill down on any figure and calculation and see the underlying assumptions.
  • Build Bespoke Reports, select the metrics important to you such as EBITDA, EBITDAX, F&D Costs, 1p/2p Reserves worldwide, by country or by region, reserves, net successful drilling activity, product sales and industry segmental data
  • Export to Word or Excel for use in management reports or presentations

We’ve created a free guide to show you how Evaluate Energy and CanOils benefit corporate strategists in their jobs.

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