### DOE/EIA-0206(04) Distribution Category UC-950



# Performance Profiles of Major Energy Producers 2002

February 2004

Energy Information Administration Office of Energy Markets and End Use U.S. Department of Energy

Washington, DC 20585

This report was prepared by the Energy Information Admi nistration, the independent stat istical and analytical agency within the U.S. Department of Energy. The information c ontained herein should be attribut ed to the Energy Information Administration and should not be construed as advocating or re flecting any policy position of the Department of Energy or any other organization.Energy Information Administration/ Perfor mance Profiles of Major Energy Producers 2002 ii 

# Contacts

This report was prepared in the O ffice of Energy Markets and End Use of the Energy Information Administration (EIA), U.S. Department of Energy, under the general directi on of W. Calvin Kilgore. The project was directed by Mark E. Rodekohr, Director of the Ener gy Markets and Contingenc y Information Division (202) 586-1130, and Mary E. Northup, the Team Leader for Financial Analysis (202) 586-1383. Specific technical information concerning this report and the associated data survey (Form EIA-28) ma y be obtained from Greg Fila s (202) 586-1347. The following authors contributed to this report: Mary Northup, Neal Davis, Jon Rasmussen, Bob Schmitt, and Larry Spancake. In addition, Kevin Forbes of SAIC pr ovided essential research into ma jor resource development areas.



# Data File Information
Historical Financial Reporting System (FRS) data are available from the Energy Information Administration's File Transfer Protocol (FTP) site. Thes e data cover the years 1977 through 2002, published in the Energy Information Administration's annual editions of Performance Profiles of Major Energy Producers. There are two different sets of data: aggregate data from the FRS survey form and multi-year tables from Appendix B of Performance Profiles of Major Energy Producers. The Financial Reporting System 1977-2002 data files can be downloaded from the Energy Information Administration's FTP site by accessing the following EIA Web site: http://www.eia.doe.gov/emeu/finance/page2.html. For further assistance, please contact the National Energy Information Center at (202) 586-8800, FAX (202) 586-0727, TTY (202) 586-1181, or by email: infoctr@eia.doe.gov. For further information on the Financial Reporting System data, please contact Greg Filas at (202) 586-1347, FAX (202) 586-9753, or by email: greg.filas@eia.doe.gov.



# Dedication

This issue of Performance Profiles is dedicated to the memory of Jon Rasmussen, who passed away on December 19, 2003. Jon served as the Senior Economist for the Financial Reporting System for 24 ye ars. He was respected as one of the foremost analysts in energy economics. His intellectual leadership, his dedication, and his professionalism served as a guiding light and inspiration to all who worked with him. Jon will be sorely missed by his many friends and colleagues at the Energy Information Admi nistration, and by all those in both the public and private sectors who came to him for his insights on the energy industry. We are truly grateful for the time we had with him.

# Preface

Performance Profiles of Major Energy Producers presents a comp rehensive annual financial review and analysis of the dom estic and worldwide activities and operations of the m ajor U.S.-based energyproducing comp anies. 1 

## (For a list of the comp anies covered in this report, the Financial Reporting System (FRS) comp anies, see Chapter 1, the box entitled "The FRS Com p anies in 2002" on page 1.) Em erging issues in financial perform a nce are also analyzed. The report prim arily exam ines these comp anies’ (the m a jors’) operations on a consolidated corporate level, by individual lines of business, by m a jor functions within each line-of-business, and by various geographic regions. A com p anion analysis of foreign investm e nt 2 

## (trends and transactions) in U.S. energy resources, assets, and com p anies was previously included as a separate chapter in the report. However, the annual report, Foreign Direct Investment in U.S. Energy is now published separately on the Internet (see http://www.eia.doe.gov/em eu/finance/fdi/index.htm l ). Performance Profiles annually looks at aggregate changes in the U.S. energy industry resulting from m a jor energy comp any current operations, and from st rategic corporate decisions relating to profits, investm e nts, and new business initiatives. Signif i cant organizational decisions of the m a jors (such as those involving corporate m e rgers or joint ventures) are highlighted, and new strategic directions (such as concentration on core businesses or comp etencies, m ovem e nts into new lines of business, or changes in global investm e nt patterns) are discussed. Changes in the m a jors' investm e nt and resource developm ent patterns, which m a y result in new or increased opportunities for independent oil and gas producers and fast-growing petroleum refiners in the United States, are also explored.
This edition of Performance Profiles reviews financial and operating data for the calendar year 2002. Although the focus is on 2002 activities and results, important trends prior to that tim e and em erging issues relevant to U.S. energy comp any operations are also discussed. The analysis in this report is based on detailed f i nancial and operating data and inf o rm ation subm itted each year to the Energy Inform ation Adm i nistration (EIA) on Form EIA-28, the Financial Reporting System . The analysis and FRS data are also supplem ented by additional inform ation from com p any annual reports and press releases, disclosures to the U.S. Securities and Exchange Com m i ssion, news reports and articles, and various comp lem e ntary energy industry data sets.
Since the Form EIA-28 data are collected by the EIA on a unif o rm , segm ented basis, the comp arability of inform ation across energy lines of business is unique to the FRS reporting system . For example, petroleum activities of the m a jor U.S. energy comp anies (and f i nancial returns attributable to these activities) can be comp ared to activities in other lines of energy business (such as coal, and/or alternative energy) or nonenergy areas (such as chem icals). Sim ilarly, financial returns and operating results f r om dom estic activities can be comp ared to results f r om f

o reign activities and operations.
The inf o rm ation in Performance Profiles responds to the requirem e nts of the Financial Reporting System , set forth in P.L. 95-91, the Departm e nt of Energy Organization Act of 1977 (see http://www.eia.doe.gov/em eu/finance/page1a.htm l ) . Both this report, and sim ilar energy financial analyses provided by the EIA (see http://www.eia.doe.gov/em eu/finance/pubs.htm l ), are intended for use by the U.S. Congress, governm e nt agencies, industry analysts, and the general public.

Energy Information A d ministration/ Perfor mance Profiles of Major Energy Producers 2002 

### iiiEnergy Information Administration/ Perfor mance Profiles of Major Energy Producers 2002 iv 

## Additional information about Form EIA-28 can also be found at http://www.eia.doe.gov/emeu/finance/page1a.html . Also see Appendix A of this report for information concerning the format of Form EIA-28, importa nt financial reporting concepts and accounting principles, and other information about the Financial Reporting System. For a glossary of terms and definitions used in this report, see http://www.eia.doe.gov/emeu/perfpro/glossary.html

.



# Endnotes

1 

### The U.S.-based energy companies that respond to the Financia l Reporting System (FRS) Form EIA-28 are considered to be U.S. majors by the Energy Information Administration (see P.L. 95- 91, Sec. 205 (h)). Per the requirements of that statute, the Administrator of the Energy Information Administration designa tes "major energy-producing companies" and selects them as respondents to the FRS. Currently, the Administrator uses the fo llowing selection criteria: at least 1 percent of U.S. oil (cr ude oil and natural gas liquids) reserves or production, or at least 1 percent of U.S. natural gas reserves or production, or at le ast 1 percent of U.S. crude oil distillation capacity, or 1 percent of refined petroleum product sales. 2 

### The purpose of the foreign direct investment report is to provi de an assessment of the degree of foreign ownership of energy assets in the United States. Section 657, Subpart 8 of the U.S. Department of Energy Organization Act (Public Law 95-91) requires an annual report to Congress which presents: “...a summary of activities in the United States by companies which are foreign owned or controlled and which own or c ontrol United States energy sources and supplies....”

# Contents

Preface

............................................................................................................................. .............................. iii Executive Summary

............................................................................................................................... ................. xi
1. Market Developm ents and FRS Com p anies in 200 2

...................................................................................... 1 Petroleum and Natural Ga s M a rkets in 2002

............................................................................................... 1 Demise of Energy Trading Impacts Fina ncial Results

................................................................................. 3 Changes in t h e FRS Group in 20 02

.............................................................................................................. 5 New Survey Entrant

.......................................................................................................... ....................... 5 Mergers and Acquisitions

.................................................................................................... .................... 5 The FRS Co mpanies' Imp o rtance in the U.S. Econom y
................................................................................ 5 2. Fina ncial Developm ents in 2002

....................................................................................................................... 9 Income and Cash Flow

............................................................................................................................... 10 Downstream Petroleu m Perfo rmance Hit a New Low in 2002

.............................................................. 10 FRS Co m p anies’ Pipeline Earnings

............................................................................................ ........... 12 Low Natural Gas Pric es Hurt Upstream Profits

................................................................................ ..... 13 Other Energy Plagued by E n ergy Trading Collapse

............................................................................. . 13 Chem ical Operations Yield Rare Gains in Earnings

............................................................................ .. 14 Record Cash Flow in 2001 Followe d by Mediocre Cash Flow in 2002

................................................ 15 Targets of Investm e nt

............................................................................................................................... ... 16 FRS Co m p anies Increase F o cu s on OECD Europe, North Sea

............................................................. 16 Highlight : Upstream M e rger Wave Ebbs

.............................................................................................. 20 Mergers Driv e Increase in Refini ng/Marketing Capital Expendit u res................................................... 20 Other Energy No Longer A Source of Corporate Growth

..................................................................... 26 Sources and Uses of Cash

........................................................................................................................... 26 3. Behind t h e Bottom Line

............................................................................................................................... ... 31 Upstream Inc o me
............................................................................................................................... ......... 31 Lifting Costs Little Change d – Production Taxes Decli n e
.................................................................... 3 3 U.S. Refining and Marketing

...................................................................................................................... 37 Profitabilit y of U.S. Refining/Marketing Operations Lowest in Survey Histor y
................................... 37 Lower Product Prices Re duce Product Sales Rev e nue
.......................................................................... 3 9 Lower Product Sales Mag n if y Downward Pressure on Revenue

.......................................................... 39 Gross Margin Squ eezed as Product Prices Fall

................................................................................ ..... 42 Operating Costs Rise Desp ite Lowe r Energy and Marketing Costs

...................................................... 43 Highlight : Environm ental Co m p liance Partially Ec lipses Recent Gains in Profitability

..................... 47 Foreign Refin ing a nd M a rketing

................................................................................................................ 52 Profitabilit y of Foreign Re fining/Market ing Operations At An All-Ti m e Low

.................................... 52 Consolidated Operations Contribute t o Net Inco m e
........................................................................... .. 52 Asian-Pacific Markets Continue Poor Pe rformance

............................................................................. . 53 European Markets Continue to Bols ter Foreign Refini ng/Marketing Results

....................................... 54 Other Energy

............................................................................................................................... ................ 55 Revenue and Income Drop Due to Energy Trading De cline

................................................................. 55 Nonconventi onal Energy : Tar Sa nds and Geotherm al Stand Out

......................................................... 56 4. Resourc e De velopment T rends

....................................................................................................................... 61 S

PECIAL 

## T

OPIC 

## : Findi ng Costs Increased in Most R e gions

.................................................................. 61 S

PECIAL 

## T

OPIC 

## : The Gulf of Mexico – Do Technology and Recent Econom ics Favor Oil Reserv es Over Natural Gas?

................................................................................................ ....... 68 S

PECIAL 

## T

OPIC 

## : Natural Gas Suppl y – A New Parad i gm ?

................................................................... 71 S

PECIAL 

## T

OPIC 

## : Canada’s McKenzie Delta – One Pa rt of Future Natural Gas Suppl y ?

..................... 74

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## v

## 5. Eme r ging Issues

............................................................................................................................... ................ 77 S

PECIAL 

## T

OPIC 

## : FRS Company Producti on from Renewables

............................................................ 77 S

PECIAL 

## T

OPIC 

## : Recent Upstream M e rgers: A Tradeo ff Between Growth a nd Pr ofitability?

............. 81 S

PECIAL 

## T

OPIC 

## : LNG – A Future for t h e FRS Co m p anies?

................................................................. 83

Appendices A. The Financial Reporting S y stem (FRS)

........................................................................................ .............. 87 B. Detailed Statistical Tables

................................................................................................. .......................... 89 Glossary (available on EIA's Web sit e at http:// www.eia.doe.gov/e m e u/perfpr o /glossary.html)

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## vi

# Ta ble s
1. Consolidated Income Statement for FRS Com p anies and the S&P I ndustrials, 2001-2002

......................... 9 2. Contributi ons to Net Income by Line of Business for FRS Co m p anies, 2001-2002

.................................. 11 3. Operating Income in Chemicals and Other N onenergy Segments for FRS Com p anies, 2001- 2002

.......... 15 4. Line-of-Business Contributions to Preta x Cash Flow for FRS Companies, 2001- 2002

............................. 16 5. Additions to I nvest m e nt in Place by Li ne of Business for FRS Com p anies, 2001-2002

........................... 17 6. Value of Mer g ers, Acquisitions, and Re l a ted Transact ions by FRS Co m p anies, 2002

.............................. 24 7. Sources and Uses of Cash for FRS Companies, 2001- 2002

...................................................................... . 26 8. Income Co mponents and Financial Ratios in Oil and Natural Gas Production fo r FRS Com p anies, 2001- 2002

................................................................................................................... ........................... 32 9. Average Prices, Sales, and Production i n O il and Natural Gas for FRS Co m p anies, 2001-2002............... 33 10. Lifting Costs by Region f o r

FRS Com p anies, 2001, 2002

..................................................................... .... 35 11. U.S. and Fore ign Refining/ Marketing Fi nancial Item s for FRS Com p anies, 2001-2002

........................... 39 12. Sales, Prices, Costs, and Margins in U.S. Refining/Marketing for F R S Co m p anies, 2001-2002

............... 40 13. U.S. Refined Product Marg ins and Costs per Barrel Sold and Pro duc t Sales Volume for FRS Co m p anies, 2001-2002

........................................................................................................ .................. 42 14. U.S. and Fore ign Refining Investm e nt and Operating Item s for FRS Com p anies, 2001-2002

.................. 42 15. Motor Gasoline Distributio n and Num b er of Direct-Supplied Brand e d Outlets for FRS Companies, 2001- 2002

................................................................................................ ............ 46 16. Co m ponents of the Gross Refining Margin and Aver age Refined Product Revenues for FRS Co m p anies, 1988, 1995, and 2001

......................................................................................... ........ 50 17. Regional Distribution of F o reign Refinery Capacity for FRS Com p anies, 2001 - 2002

............................ 53 18. Income Co mponents for O t her Energy f o r FRS Com p anies, 2000-2002

................................................... 57 19. Finding Costs by Region f o r FRS Com p anies, 1999-2001 and 2000-2002

................................................ 62 20. Finding Rates and Expenditures per Well by Re gion f o r FRS Com p anies, 1999-2001 and 2000-2002

.... 63 21. Average Finding Cost and Return on Investment for FRS Co m p anies, 1997-2002

................................... 82 B1. Selected U.S. Operating Statistics for FRS Co m p anies and U.S. Industr y , 1996-2002

............................. 89 B2. Selected Financial Item s fo r the FRS Co m p anies and the S&P I ndustrials, 2001-2002

............................ 90 B3. Balance Sheet Item s and Financial Ratio s for FRS Com p anies and S&P Industrials, 2001- 2002

................................................................................................................... ........................... 91 B4. Consolidated Balance Sheet for FRS Com p anies, 1996-2002

................................................................... . 92 B5. Consolidating Statem ent of Income for FRS Co m p anies, 2002

................................................................. 93 B6. Consolidating State m ent of Income for FRS Co m p anies, U.S. and Foreign Petroleu m Seg m ents, 2002

.............................................................................................................. ........................ 94 B7. Net Property , Plant, and Equipm ent (PP&E), A dditions to PP&E, Invest m e nts and Advances, and Depreciation, Depletion, and Am ortization (DD&A), by Lines of B u sin ess for FRS Co m p anies, 2002

................................................................................ .... 95 B8. Return on Invest ment for Lines of Bu siness for FRS Co m p anies R a nked by Total Energy Asset s, 2001- 2002

.................................................................................................... ................. 96 B9. Research and Developmen t Expendi t u res for FRS Com p anies, 1996-2002

............................................... 97 B10. Size Distribution of Net Invest m e nt in Place for FRS Co m p anies R a nked by Total Energy Asset s, 2002

................................................................................................... .................. 98 B11. Consolidated Statement of Cash Flows for FRS Com p anies, 1996-2002

.................................................. 99 B12. Co m position of Incom e Taxes for FRS Co m p anies, 1996-2002

.............................................................. 100 B13. U.S. Taxes Other Than Inc o me Taxes fo r FRS Com p anies, 1996- 2002

.................................................. 101 B14. Oil and Gas Exploration and Devel opment Expendit u res for FRS Com p anies, United States and Foreign, 1996- 2002

....................................................................................... .......... 102 B15. Co m ponents of U.S. and F o reign Ex plor ation and Developm ent Expenditures for FRS Com p anies, 2002........................................................................................................................

.............................. 103 B16. Exploration and Development Expendit u r es by Region, for FRS Com p anies, 1996-2002

...................... 104 B17. Production (L ifting) Costs by Region f o r

FRS Com p anies, 1996- 2002

................................................... 105 B18. Oil and Gas Acreage fo r FRS Co m p anies, 1996-2002

.......................................................................... ... 106

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## vii

# Ta ble s (c onti n ued) B19. U.S. Net Wells Co m p leted for FRS Co mpanies and U.S. Industr y, 1996-2002

....................................... 107 B20. U.S. Net Drilling Fo otage and Net Prod uci ng Wells for FRS Com p anies and U.S. Industr y , 1996- 2002

................................................................................................................... ......................... 108 B21. Nu m b er of N e t Wells Co mpleted, In-P rogress Wells, a nd Producing Wells by Foreign Regions for F R S Co m p anies, 1996-2002

........................................................................................ .... 109 B22. Nu m b er of Net Wells Co mpleted, and Average Depth, Onshore and Offshore, for FRS Com p anies, 2001 and 2002

............................................................................................................... ....................... 111 B23. Oil and Gas Reserves for FRS Co m p anies and U.S. Industr y , 2002

........................................................ 112 B24. Oil and Gas Reserve Balances by Regi on for FRS C o m p anies, 2002

...................................................... 113 B25. Oil and Gas Exploration and Development E xpendit u res, Reserves, and Prod uction b y Region for FRS Companies and Total Industr y , 2002 and Per cent Change from 2001

................................... 115 B26. U.S. and Fore ign Refining/ Marketing Sources and Dispositions of Crude Oil and Natural Gas Liquids for F R S Co m p anies, 1996-2002

........................................................................................ ..... 117 B27. U.S. Purchases and Sales of Oil, Natural G as, Other Raw Mat e rial s, and Refined Products for FRS Companies, 1996- 2002................................................................................................

........... 118 B28. U.S. and Fore ign Petroleum Refining Statistics for FRS Co m p anies, 1996-2002

.................................... 119 B29. U.S. and Fore ign Refiner y Output and C a pacity for F R S Co m p anies, Ranked by Total Energy Asset s, and Industr y , 2002

..................................................................................... ........ 120 B30. U.S. Refining /Marketing Dispositions of Refi ned Prod ucts b y Chan nel of Distribution f o r FRS Co m p anies, 1996-2002

.................................................................................................... ............ 121 B31. Sales of U.S. Refined Prod ucts, b y Volu me and Price, for FRS Co m p anies Ran k ed b y Total Energy Asset s, 2001- 2002

.............................................................................................. ............ 122 B32. U.S. Refining/Marketing Revenues a nd Costs for FRS Com p anies, 1996-2002

...................................... 123 B33. U.S. Petroleum Refining/Marketing Gene ral Operati ng Expenses for FRS Companies, 1996- 2002

................................................................................................................... ......................... 124 B34. U.S. Coal Reserves Balance for FRS Com p anies, 1996-2002

.................................................................. 1 25



# Illustrations

1. Operating Revenues by Li ne of Business for FRS Com p anies, 1977-2002

................................................. 6 2. Shares of U.S. Energy Production and Re finery Capacity for FRS C o m p anies, 1981-2002

........................ 6 3. Return on Equit y for FRS Co m p ani es and the S&P I ndustrials, 1973-2002

.............................................. 10 4. Operating Return on Invest ment in Ch emicals for FRS Com p anies, 1975-2002

....................................... 15 5. Exploration and Development Expendit u r es by Region for FRS Com p anies, 1999-2002

......................... 18 6. Recent Merg ers Affecti ng FRS Oil and Gas Producer s
......................................................................... ..... 21 7. Long-Term Debt/Equit y Ra tio for FRS C o m p anies and the S&P Industrials, 1974-2002

......................... 27 8a. Oil Production for FR S Com p anies, 1981-2002

............................................................................... .......... 34 8b. Natural Gas Production for FRS Com p anies, 1981- 2002

....................................................................... .... 34 9. Direct Oil an d Gas Lifting Costs for FRS Com p anies, 1981-2002

............................................................ . 36 10. Production T a xes for FRS Co m p anies, 1974-2002............................................................................

......... 36 11. Return on In v estment in U.S. and Foreig n Refi ning/M a rketing, and All Other Lines of Business for FRS Companies, 1980- 2002................................................................................................

............. 38 12. U.S. Refined Product Marg ins and Costs per Barre l of Petroleum Product Sol d fo r FRS Com p anies, 1980- 2002

................................................................................................................... ........................... 39 13. Quarterly U. S. Commercial Petroleu m Produc t Stoc ks, 1996-2000 Average, 2001, and 2002

.................. 41 14. Quarterly U. S. Motor Gasoline St ocks, 1996- 2000 Average, 2001, and 2002

........................................... 41 15. Monthl y Gross Refined Product Margin for United St ates, 1996-2000 Average, 2001, and 2002

............ 44 16. Quarterly U. S. Crude Oil Stoc ks, 1996- 2000 Average, 2001, and 2002

.................................................... 44 17. Real Price Difference Between Light Crude Oil and Heavy Cr ude Oil, 1978- 2002

.................................. 45 18. Real Resale P r ice Difference Between Moto r Gasoline and Residual Fuel Oil, 1978-2002

...................... 45 19. Co m p any
- Operated and Dealer Outlets for FRS Com p anies, 1984-2002

.................................................. 46

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## viii

# Illustrations (continued) 20. U.S. Refining /Marketing Return on I nve stm e nt and Net Refined Product Margin for FRS Co m p anies, 1977-2001

.................................................................................................... .............. 49 21. U.S. Refining Capital Expenditures for F R S Co m p anies, 1988-2001

........................................................ 50 22. Environm ental Capital Expenditures as a Share of U.S. Refining C a pital Expend itures for FRS Companies, 1988- 2001

................................................................................................ ............ 51 23. Operating Return on Invest ment in U.S. Refining/Marketing for FR S Com p anies, 1988-2001

................ 51 24. Foreign Refining/Marketing Net Income from Cons olidated Operati ons and Unconsolidated Affiliates of FRS Com p anies, 1990-2002

................................................................................................. ............. 53 25. Foreign Refining Margins, 2000- 2002......................................................................................

.................. 54 26. Petroleu m Consum ption by Region, 1997-2002

................................................................................ ......... 55 27. Net Invest ment in Place in Other Energy and All Other Businesses for FRS Com p anies, 1995-2002

...... 57 28. Maxim u m an d Minim u m Three-Year Weighted Average Regional Finding Co sts for FRS Co m p anies, 1990-1992 to 2000- 2002

........................................................................................ .... 65 29. Five-Year Weighted Average Regional Finding Costs for FRS Com p anies, 1990-1994 to 1998-2002

.... 65 30. U.S. Onshor e, U.S. Offshore, and Forei gn Three-Year Weighted Average Findin g Costs for FRS Companies, 1979- 1981 to 2000-2002

................................................................................... ... 67 31. Indices of Three-Y ear Ave r age Do m e sti c Real Pric es of Crude Oil and Natural Gas and Worldwide Fi nding Costs for the FRS Com p anies, 1979-1981 t o 2000-2002

...................................... 67 32. Reserve Repl acement Rati os for the FR S Com p anies in the U.S. O ffshore, 1993-2002

............................ 70 33. The Domesti c Wellhead Price of Natura l Gas and the Nu m b er of D o mestic G as Well Co m p letions by the FRS C o m p anies, 1990-2002

.................................................................................. 71 34. Natural Gas Reserve Additions per Well for FRS Com p anies in U.S. Onshore, 1990-2002

..................... 72 35. The Domesti c Natural G a s Reserve R e place ment Rati o for the FRS Com p anie s a nd the Do m estic Natural Gas Suppl y In dustr y a s a Whole, 1990-2002

........................................................... 73 36. The Ratio of Natural Gas Production to Prove d Natu ral Gas Reserves for the FRS Co m p anies and the Domestic Natural Gas Suppl y I ndustr y , 1990-2002

.................................................................. 73 37. Share of FRS Com p anies’ Do m esti c Oil and Natural Gas R eserve Additions Due to Mergers and Acquisitions, 1981- 2002

........................................................................................................ ................ 82

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## ixEnerg y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## xEnergy Information Administration/Performance Profiles of Major Energy Producers 2002 

## xi 

# Executive Summary
The year 2002 began with the world oil market in a state of excess supply. Reflecting this market condition, the earnings of the U.S.-based major en ergy companies in 2002 declined 45 percent compared to their net income in 2001, after havi ng already dropped 29 percent from the year 2000. Key developments in 2002 included:

• Global petroleum inventories began the year well above normal levels.

• In the United States, petroleum st ocks (crude oil plus finished pe troleum products) at the beginning of 2002 were over nine percent high er than at the beginning of 2001.

• Natural gas in working storage opened th e year at its highest level since 1990.

• The crude oil price (as represente d by the U.S. composite refiner acquisition price) climbed over the year, beginning the year at $17.38 pe r barrel and ending the year clos e to $27 per barrel, as excess supplies were reduced.

• Also as excess supplies were reduced, estimated natu ral gas prices at the U. S. wellhead rose from $2.35 per thousand cubic feet in January to $3.84 in December, an increase of over 63 percent. To see how these and other developments have affected energy industry financial and operating performance, strategies, and indus try structure, the Energy Informa tion Administration (EIA) maintains the Financial Reporting System (FRS). Through Form EIA-28, major U.S. energy companies a nnually report to the FRS (see the box entitled "The FRS Companies in 2002" in Chapter 1 of this report). Financial and operating information is reported by major lines of business, including oil and gas production ("upstream"), petroleum refining and marketing ("downstream"), other ener gy operations, and nonenergy businesses. 

# Major Energy Companies’ Profits D ecline In 2002 As Income From Both Upstream And Downstream Operations Falls Net income of the FRS companies totaled $20.6 b illion in 2002, a 45-percent decrease from the $37.7- billion result achieved in 2001. (E xcluding the effects of unusual item s (such as asset writedowns), the decline in 2002 was 36.6 percent.) In addition to the 2002 result bei ng the majors’ second net income decline in two years, on a constant -dollar basis, it repres ented the lowest level of net income achieved since 1998 and the eighth-lowest level over the 1974 through 2002 peri od of FRS data collection. Further, 2002 was an unusual year for the FRS co mpanies in that both upstream and downstream earnings were negatively affected re lative to prior-year levels. Net income from oil and gas operations was down by over $4 billion, a 21-percent decrease, larg ely due to a glut of natural gas in the United States in the first half of 2002, whic h resulted in lower natural gas pric es. However, financial results of the FRS companies’ refining/marketing operatio ns were significantly worse with overall refining/marketing net income declining in 2002 by $16.8 billion, or 111 percent.

## W ith recession in m u ch of the global econom y, t h e impacts of Septem ber 11, 2001, a relatively warm 2001-2002 winter, and world oil su pply outpacing dem a nd until m i d-20 02, dom e stic refiner m a rgins for the U.S. energy industry were squeezed, as petroleu m product prices declined while crude oil prices increased. Although net incom e from the foreign re fining/m a rketing operations of the FRS comp anies m a naged to rem a in positive, both foreign and dom e s tic operations registered a steep d eclin e, with dom e stic refining/m a rketing net incom e falling to a loss of $0.3 billion, an all-tim e low for U.S. refining/m a rketing profitability over the 1977 to 2002 period of FRS line-of-bus iness data collection. Further, these historic losses fo r dom e s tic refining/m arketing are a ll the m o re troubling as 2001 was the second-m o st profitable year for U.S refining/m a rketi ng, reflecting this industry’ s continuing efforts at cost-cutting.
The dem i se of energy trading activities across the en ergy industry, driven by the collapse of the Enron Corporation in late 2001, also nega tively affected m a ny of the overall financial results in 2002 for the FRS comp a n ies. Although only a sm all m i nority of FRS companies were si gnificantly involved in energy trading, the drop in cash flow for those FRS comp anies involv e d in energy trading exceed ed that of all other FRS comp a n ies com b ine d. Further, net incom e from the FRS comp anies’ “other energy” line of business (now largely cons isting of electric power and energy trading activities) plunged from a positiv e $2. 0 billion in 2001 to a lo ss of $1.5 billion in 2002 , a $3.5-billion declin e. 

# Despite Lower Profits, Capital Expenditures Remain High Due to Acquisitions Capital expenditures of the FRS companies (as measur ed by additions to invest m e nt in place) totaled $98 billion in 2002, 11 percent below the all-time high of $110 billion reached in 2001. Am ong t h e geographic regions, the U.S. Ons hore region continued to be the m o st popular upstream target of investm e nt, even with an exploration and developm en t cutback of 17 percent. Additionally, while most FRS comp a n ies reduced their spendi ng in the U.S. Offshore region, several projects in the Gulf of Mexico m oved ahead in 2002, and total U.S. Offs hore spending held stea dy, declining by only one percent between 2001 and 2002. The largest cutback wa s for projects in the Canadian region, which were down by 37 percent and were concentrated am ong thos e m a jors having m a de significant acquis ition s in rec e nt yea r s. Politic al turm oil in Venezuela m a y have af f

ected explo r ation and developm ent spending in South Amer ica (in the Other W e stern Hem i sp here region) as it declined a relatively steep 43 percent. However, spending f o r Asian Pacific project s (in the Other Eastern He m i sphere region) was up 22 percent in 2002, and spending for European projects (in the OECD Europe region, and m o s tly in the North Sea) increas ed by $0.9 billion, or 19 pe rcent, over 2001 levels.
W ith the exception of the Devon Energy acquisition of Mitchell Energy and the comp letion of the ConocoPhillips m e rger, the upstream m e rgers by the FR S companies that were a prom inent feature of the 1998 to 2001 period fell off. Som e of the compan ies previously involved in significant upstream m e rger activ ity (o ther th an Devon and ConocoPhillips) m a y have ceased their m e rg er activ ity in order to address debt level or stock value problem s on thei r balance sh eets. In c ontrast, the bulk of capital expenditures in 2002 (as in 2001) reported by the FRS comp a n ies for U.S. refining and m a rketing operations involved transactions between FRS c o mp anies. Excluding the effects of m e rgers and acquis ition s , the FRS companies’ capital expend itures increased by only 5 percen t between 2001 and 2002.

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## xii

# 1. Market Development s and FRS Comp anies in 2002

The 28 m a jor U.S. energ y comp anies 1 

## reporting to the Energy Inform ation Adm i nistration’s (EIA) Financial Reporting System (FRS) derive the bulk of their revenue s and in com e f r om petro l eum operations, including natural gas p r o duction. A m a jor ity of these comp anies ar e m u ltinational, with 39 percent of the m a jors' net investm e nt located abro ad. W o rldwide petroleum and natural gas m a rket developm ents are of prim ary i mportance to the comp an ies' fi nancial perf orm a nce. (These comp anies are listed below ) The FRS Companies in 2002
Am erada Hess Corporation LYONDELL-CITGO Refining, L.P. Anadarko Petroleum Corporati on Marathon O il Corporation Apache Corporation Motiva En terpris e s, L.L.C. BP Am erica, Inc. 2 

## Occidental Petroleum Corporation Burlington Resources, Inc. Phillips Petroleum Company ChevronTexaco Corporation Prem cor, Inc. CITGO Petroleum Corporation Shell Oil Company Conoco, Inc. Sunoco, Inc. Devon Energy Corporation Tesoro Petroleum Corporation Dom i nion Resources, Inc. Total Fi na E l f Holdings USA, Inc. El Paso Energy Corporation Unocal Corporation EOG Resources, Inc. Valero Energy Corporation Exxon Mobil Corporatio n The W illiam s Comp anies, Inc. Kerr-McGee Corporation XTO Energy, Inc.

Overall, petroleum and natural gas m a rket developm en ts led to deterioration in the m a jors’ financial perform a nce in 2002 compared to results for 2001. De velopm ents in the capital m a rkets in 2002 also had particularly adverse consequences fo r a num ber of the m a jor energy co mpanies. 

# Petroleum and Natural Gas Markets in 2002 Gauged by financial perform a nce, the year 2002 was unusual for the m a jor energy companies in that earnings from both upstream operations (oil and ga s exploration, developm ent, and production) and downstream petroleum operations (refining, m a rketi ng, and transport) were down considerably from prior-year levels. As in 1998, thes e conditions reflected m a rket im balances in which excess supplies put downward pressure on oil and natu ral gas pric es and squeezed refiners ’ profit m a rgins.
The world oil m a rket began 2002 in a state of excess supply. This situation had been building for som e tim e. W o rld oil supplies had been generally outp acing dem a nd since early 2000 and continued to do so until the second quarter of 2002. The im balance was es pecially exacerbated in the second half of 2001 by econom i c downturns in m u ch of t h e world, a relative ly m i ld onset of winter weather in the United States, and the impacts of the te rrorist attacks in the United Stat es on Septem ber 11, 2001 (hereafter referred to as 9/11).

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 1

## These higher-than-norm a l inventories indicated an exce ss of supplies in the m a rk etplace. Beginning-ofyear petroleum inventories in 2002 (excluding governm e nt stockpiles) among the industrialized nations of the Organization for Econom ic Cooperation and Deve lopment (OECD) were near a 5-year m a ximum

. In the United States, stocks of m o tor gasoline, dis tillate fuel, and crude oil were at the top of their ranges. Natural gas in working storage in the Unite d States opened the year at the highest level since 1990. Oil and natural gas prices and refiners’ m a rgins (t he difference between product prices received and crude oil prices paid by refiners) began the year 2002 at sharply reduced levels comp ared to 2001. In January 2002, the price of crude oil, as m easured by the composite U.S. refiner acquisition cost of crude oil, was $17 per barrel compared w ith $25 per barrel in January 2001. The U.S. refiner m a rgin plunged from an all-tim e peak of $18 per barrel in May of 2001 to $7 per barrel in January 2002. Natural gas prices at the U.S. wellhead averaged $2.35 per th ousand cubic feet (m cf) in January 2002, down from $6.82 per Mcf in the prior January, a record high.
The elim ination of exces s supplies an d recovery of prices and m a rgins characterized much of petroleum and natural gas m a rkets for 2002. Turning first to petroleum m a rkets, on the dem a nd si de, growth in worldwide petroleum de m a nd, which was near zero for 2001, grew steadily in 2002 compared to the prior year. Th e growth in petroleum dem a nd m a i n ly reflected the improvem e nts in worl d econom ic activity. As m easured by real gross dom e stic product (GDP), world eco nom i c growth be gan to recover in 20 02 from recession and th e impacts of 9/11. Year-over-year global real GDP growth steadily improve d, from near zero in the fourth quarter of 2001 to an annual rate of 2.5 percent in the fourth quarter of 2002. For all of 2002, world oil dem a nd was up alm o st 1 percent over dem a nd in 2001. Growth in petroleum de m a nd cam e largely from Asia (apart f r om Japan) and Russia. Petroleu m dem a nd in the United States was up 1 percent.
Dom e stically, the m odest growth in U.S. petr oleum de m a nd was led by a 2.8-percent increase in gasoline dem a nd. The i n crease in gasoline demand in part reflected higher econom ic growth, but also continued reluctance by busine sses and consum e r s to return to pre-9/ 11 levels of airlin e trav el. This latter developm ent was evident in the dem a nd for jet fuel, which dropped 2 percent in 2002 following a 4-percent drop in 2001. On the supply side, the nations of the Organizatio n of Petroleum Exporting C ountries (OPEC), including Iraq, m a naged to cut p r o duction by 1 .9 m illion barrels per d a y (mmb/d) in 2002 comp a r ed to the prior year. Notable increases in oil production by Angola, Brazil, Canada, and Russia were only m i nor offsets to the OPEC cuts. For the year, world oil pr oduction was 1.2 mmb/d lower in 2002 than in 2001. Adjustm e nts by OPEC a nd a recovery in petroleum de m a nd elim inated most of the excess of petroleum supplies by the second half of 2002. In the United St ates, petroleum stocks (excluding the Strategic Petroleum Reserve) at the begi nning of 2002 were 6 percent above norm a l levels. As world oil production was cut and petroleum dem a nd recovered, U.S. refiners drew down inventories. By the end of 2002, petroleum stocks were below the average level of recent years.
As oil m a rkets cam e into balance du ring 2002, o il pri ces rose. In December 2001, th e refiner acq uisition cost of imported crude oil was $16 per barrel. By Decem ber 2002, it was $ 27 per barrel. Most petroleum product prices in the United States, with th e exception of jet fuel, rose slightly faster than crude oil input prices, providing a boost to refiners’ m a rgins. However, despite this latter im provem e nt, refiners’ m a rgins throughout 2002 were well below the levels of 2001. On an annual basis, the refiners’

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 2

## m a rgin was down to an average $8 per barrel in 2002 from just under $12 per barrel in 2001. The sharp drop in the m a rgin had a deva stating effect on U.S. refine rs’ financial results for 2002. In refining operations abroad, m a rgins also tended to rise during 2002 in the key European and Asia Pacific regions. For the year as a whole, though, m a rgins tended to be lower in 2002 than in 2001. Natural gas m a rket developm ents had the m o st seve re impac t s on upstream financial results in 2002. The year 2002 opened with the highest lev e l of natura l gas in working sto r age in the United Sta t e s since 1990 (using previous year-end levels to approximate beginning year leve ls of the current year). The buildup of natural gas inventories wa s in part due to m ild winter we ather at the outset of 2002 (U.S. heating degree days in the fourth quarter of 2001 were 27 percent below the previous fourth quarter) and in part due to the falloff in econom ic activity in th e second half of 2001. Mild winter weather continued into early 20 02, putting f u rther down w ard pressu re on U. S. natural gas p r ices. The U. S. wellhead price in February 2002 was slightly over $2 per m c f, down from over $5 per m c f in the previous February. Natural gas suppliers drew dow n inventories during 2002, aided by higher econom ic growth and a colder-than-norm a l start to winter weather in the f ourth quarter of 2002. As excess gas inventories declined, estim a ted natural gas prices rose. Howeve r for the y ear, es tim ated U.S. wellhead natu ral gas prices averaged $2.95 per Mcf in 2002, a 27-percen t drop from $4.02 per Mcf in 2001. Lower natural gas prices were the m a in cause of reduced U.S. ups tream earnings for the m a jors in 2002 comp ar ed to 2001.
Outside th e United Sta t e s , the m a jors were also h i t by lower n a tura l gas p r ices. The F R S comp anies’ reported foreign natural gas prices averaged $2. 54 per Mcf in 2002, down from an average of $2.82 per Mcf in 2001. 

# Demise of Energy Trading Impacts Financial Results Many of the overall financial results of the FRS c o mp anies were aff ected by the dem i se of the energy trading business in 2002. Late in 2001, the Enron Corporation m a de revelations of improper financial disclosures going back four years. The abuses of financial reporting sta ndards included deliberate inflation of revenues, m i sclassification of liabilities to hide debt financing, and m a nipulati on of reported earnings to m eet earlier forecasts. Many of the a buses were related to Enron’s ener gy trading business, Enron being the larges t energy trader at the tim e. Enron’s energy trading custom ers wit hdrew their business on a m a ssive s cale, having lost confidence in Enron’s ability to gu aran tee future co ntracted trad es at s t ated term s. Following the acc ounting revelations that began with its report of thir d quarter earnings on Oct ober 16, 2001, investors lost confidence in Enron and its ability to generate future earnings. C onsequently, Enron’s share prices plunged in value to less than $1 a share on Nove mber 28, 2001, from a peak value of $84.87 a share on Decem ber 28, 2000. 3 

## The dem i se of Enron’s trading business, its rapidly declining net worth, and its growing debt repaym ents led the company to file for Chapter 11 bankruptcy in November 2001.
The loss in investor conf idence in energy trading ac tivities rapidly spread be yond Enron to other energy comp anies engaged in th ese ac tivitie s. Custom ers who had utilized ene r g y trade r s to contra ct f o r f u ture delive r ie s of energy com m odities an d m a nage th e pric es of f

u ture de live r ies a l so los t conf idence. The
Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 3

## financial impacts of the Enron afterm ath were severe for companies that depended on energy trading as a core source of revenues and earnings.
As custom ers cut back on their use of energy trad ing services, an important source of revenue shrank, reducing the net incom e of energy trading comp a n ies. Prior to the Enron collapse, revenue from e n ergy trading was the m a in source of reported revenue growth for companies with significant trading operations. Energy tr ad ers gain ed p r of it by ta ilo ring f u ture d e live r ie s and purchases o f energy co mmodities a t contracted prices to their custom er s’ particular needs. A key compone nt of these transactions was the trader’s assu rance to the custom er that the stat ed future conditions woul d be fulfilled. The energy trading custom er was essentially purc hasing assurances of future deliveri e s and sale s a t spec if ied p r ices or within price ranges.
In order to a ssure th at f u ture trans actions could b e comp leted, the ene r gy trader h a d to take pos itio ns in contracts (i. e ., the buyin g and sellin g of m u ltiple contracts, su ch as in the futures, com m odities, an d other m a rkets), both financial and ph ysical. The energy trader’s positi on often entailed borrowing funds in order to provide ready cash to expeditiously settl e contracts. As long as the cash flow from the trading business was growing, or at least steady and predictable, payb ack of borrowed funds was done in the norm a l course of business. However, should the trading business go into a rapid decline and associated cash flow dim i nish, the energy trader coul d be in a situation in wh ich the cash needed to pay back prio r b o rrowings exceeds th e cash currently com i ng in from the trading business. In this situation, the trader m u st borrow more or sell assets to pay back its borrowings. Following the Enron debacle, energy-trading custom ers lost confidence in the proces s, concern e d that future contracts m i ght not be wholly fulfilled. T h e loss of business had a double-edg e d effect. The first effect is simp ly that loss of custom er s m eans loss of revenue and lower bottom

- line results. The other, more adverse effect stemm e d from pa ybacks of borrowed funds and a ssociated interest expense that exceeded cu rrent cash flow from the trad ing business. To m a ke paybacks in excess of cash flow, energy traders borrowed m o re, moving the trad er into a riskier position. W ith higher risk com e s a higher cost of capital for additiona l funds. Increased borrow i ng at higher inte rest rates further eroded the financial results of energy trading comp anies. Selling assets is another way of ra ising cash. Energy-trading comp anies priced som e of their assets for quick sale to raise cash, of ten at prices below the assets’ balance sheet value. In co rp orate finan c ial reporting, when a fixed asset (e.g., a pipeline) is sold for a price be low its book value, the loss reduces net incom e , resulting in lower repor ted profits. Traders sold other a ssets because th ey were profitable with m a ny ready buyers. In this si tuation, the energy trader was reducing its profit s in order to raise cash. Again , the need to raise cash reduced repo rted profits as well as the comp any’s stock of productive assets. Thus, m a ssive defection of trading custom ers, in creased borrowing costs, and negative bottom

- line impacts of hurried asse t sales reduce d the net inc o m e and cash flow of companies engaged in energy trading in 2002. Although only a sm all m i nority of FRS companies were si gnificantly involved in energy trading, the dem i se of the energy trading busin ess appeared to have e ffects on overall financial results for 2002. For example, as discussed in the next chapter, the drop in cash flow from comp a ny operations in 2002 of the handful of energy traders in the FRS group exceeded that of all other FRS comp anies com b ined.

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 4

# Changes in the FRS Group in 2002

Ne w Sur v ey Entrant XTO Energy, Inc. (formerly Cross T i m b ers Oil Co mp any) was added to the FRS respondent group for 2002 due to its oil and gas reserves and production le vels. XTO’s growth over the last few years was largely due to asset acquisition s and resulted in its addition to the FRS respondent grou p. 

# Mergers and Acquisitions Two FRS companies m e rged with other FRS comp anies during 2002. On March 3, 2002, Equilon was f u lly consolidated in to S h ell Oil Company f o llo wing Shell’s acquisition of Texaco’s 44-percent ownership of Equilon on February 18, 2002, and c onsolidated retroactivel y as of January 1, 2002. 4 

## On August 30, 2002, Conoco and Phillips comp leted their m e rger, a transaction valued at $15.2 billion when originally reported in Novem b er 2001. ConocoP hillips Comp any is the nam e of the resulting comp any, but both Conoco and ConocoPhillips reported to the FRS survey as stand-alone com p anies for 2002.
Two other comp anies, Tosco and Ultram ar Dia m ond Sha mrock, were stand-alone respondents to the FRS for 2001 despite being acquired by other FRS comp anies (Phillips an d Valero, respectively) before the end of 2001. These comp anies have now been fully consolidated into Phillips and Valero and, as of 2002, are no longer reported to the F R S survey on a stand-alone basis.



# The FRS Companies’ Importance in the U.S. Economy For the reporting year 20 02, 28 m a jor energy comp anies reported thei r financial and operating data to the EIA on Form EIA-28. 5 

## These companies (referred to as the FRS companies in this report) occupy a signif i can t p o sition in th e U.S. 6 

## economy. In 2002, operating revenues of the FRS companies totaled $699 billion, which is equal to 10 pe rcent of the $7.0 trillion in revenue s of the Fortune 500 largest U.S. corporations. 7 

## The reporting comp anies engage in a wide range of business activ ities, bu t the i r m o st important activities are in the energy sector. About 88 per cent, or $642 billion, of al located operating revenues 8 

## were derived from energy sales. Nearly all of th ese revenues were derived from the comp anies’ core petroleum operations (w hich includes natural gas) (F igure 1). (For the purpos es of this report, the petro l eum line of business includ es n a tura l gas. 9 

## ) In 2002, the FRS comp a n ies accounted for 49percent of total U.S. oil, which includes crude oil and natural gas liquids (NGL) production, 10 

## 45 percent of natural gas produc tion, and 84 percent of U.S. refining capacity (Figure 2). The bu lk of the FRS comp anies ’ asse ts and new investm e nts were devoted to sustaining various aspects of petroleum pr oduction, processing, transportation, and m a rketing. Energy production other than oil and natural gas has been a relatively sm all, but growing, part of the FRS comp a n ies’ operations since 1994. During 2002, the combined operating revenues of the coal and

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 5

### 0 100 200 300 400 500 600 700 800 900 1, 000

1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001Billions of 2002 Dollars



### S our c e : E ner gy I n f o r m at i on A d m i ni s t r a t i on, F o r m E IA

- 28 ( F i nanc i a l R epor t i ng S y s t em )

. 

### Fi gure 1

. O p e r a t i ng R e v e nue s by Li ne of B u s i ne s s

f o r FR S C o m p a n i e s , 1 9 7 7 - 2 0 0 2

P

e t r ol eum ( O i l and N a t u r a l G a s )

N

on- P e t r ol eum E ner gy N onener gy

0 10 20 30 40 50 60 70 80 90 100

1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002Percent of TotalUnitedStates. 

### Ref i ner y Capac ity

Cr ude O il and NG L

Natural Gas

Coal Ur anium O x ide Figur e 2. Shar es of U

. S. Ener gy Pr oduction and R e finer y C a pacity for FR S C o mpanies, 1981-2002

Not e : The FRS c o m pani es l a s t produc ed urani um i n 1991. S ourc e s : Tabl e B 1 ; Tot a l i ndus t r y urani um ox i de produc t i on i s f r om E nergy I n f o rm at i on A d m i ni s t rat i on, Urani um I ndus t r y A nnual 1992, DOE / E I A

- 0478(92) (W as hi ngt on, DC, Oc t ober 1993).

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 6

## other energy operations of the FRS c o mp anies totaled $44 billion, or 6 percent of allocat ed revenues. Incre a sed ac tivity in e l ec tricity m o re than of f

s et the continu e d declin e in coal ac tiv ity by the FRS comp anies beginning in 1994 and continuing through 2001, but declined in 2002. In particular, the FRS comp anies accounted for 29 percent of U.S. coal production in 1991, 15 percent in 1997, 7 percent in 1998, and 3 percent in 2002, with these declines largely being due to th e relative lack of profitability attributable to this line of busin ess. Meanwhile, FRS other energy (exc lusive of coal), which is chiefly composed of electricity operations, increased from 0.3 percent of allocate d revenues in 1994 to 10.2 percent in 2001, but fe ll to 6 percent in 2002. During the 1980’s, the F R S comp anies were m a jor pr oducers of dom e stic uranium

. However, no FRS comp any ha s produced u r anium oxide since 1991 . Nonenergy businesses, m a inly chem icals, acco unted for slightly more than 6 percent, or $46 billion, of the FRS compan ies’ allocated revenues in 2002.



# Endnotes

1 

### The U.S.-base d e n ergy c o m p anies that res p on d t o t h e Fi na nci a l R e p o rt i n g Sy st em (FR S ) F o rm EIA

- 28 are c o nsi d e r ed t o be U.S

. m a jors by the E n er gy In f o rm ation A d m i nistration (se e P.L. 9 5

- 9 1, Se c. 2 0 5 (h ))

. Pe r the re qui rem e nts of t h at statu t e, t h e A d m i ni st rat o r of t h e Ene r gy I n f o rm ati o n A d m i ni st rat i on de signates “ m ajor ene r gy -produ cing c o m p anies” a n d sele cts th em as respo n d e n t s to t h e FR S. C u rren tly, th e Ad m i n i strato r u s es th e fo llo wi n g selection criteria: at least 1 p e rcen t o f U.S

. cru d e oi l o rnat u ral gas l i q ui ds rese rves o rpr od uct i o n, o r at l east 1 perce n t of U. S. nat u ral gas reser v es o r p r o d u ct i o n , or a t least 1 p e rcen t o f U.S. cru d e oil d i stillat i o n cap acity. Th e co m p an ies th at repo rted to th e FRS fo r th e years 1 974 thro ug h 2 002 are listed in App e nd ix A, Tab l e A1 . Three o f t

h e FR S com p anies are owne d by forei g n com p anies: BP Am erica— ow ne d by B P p l c; Tot a l F i n aEl f H o l d i n gs US A— ow ne d by To talFin aElf; an d Sh ell Oil—o w n e d b y Ro y a l Du tch / Sh ell. 2 

### BP Am erica, the U.S. s u bsidi a ry of BP plc of th e Un ited Ki n gdo m , is th e FRS respo n d e nt. 3 

### H oust o n C h r

o ni cl e , “H ist o r y o f Enro n Cor p .” (N ov em b e r29 , 20 01)

. 4 

### Details o f th e tran saction were larg ely u n d i sclo sed, b u t t

h e v a lu e of th e overall tran saction was $ 3 .8 b illio n
. Th e tran sactio n had se veral as p ect s. S h el l acq ui re d Te xac o ’s 4 4

- p erce nt ow ners hi p o f E q u i l on, Shel l ac q u i r e d a b o u t 48 perce n t of Tex aco’s 32.8-perce nt s h are of M o tiva , and Saudi Re fi ni n g ac q u i r e d ab out 5 2 perce n t o f Te xac o ’s 32 .8

- p erce nt s h are o f M o t i v a
. T h e results of the t r ansaction are t h at Te x aco ( n o w C h ev ro nTe x aco) has n o o w ners hi p i n Eq ui l on o rM o t i v a , Shel l f u l l y o w ns Eq ui l o n (a nd s ubs eq ue nt l y co nsol i d at ed i t ) , Shel l an d Sau d i R e fi ni n g ar e no w 5 0 / 5 0 joi n t vent ure pa rt n e rs i n M o t i v a
. 5 

### A g g r eg ate time ser i es d a ta fro m Fo r m EI A

- 2 8 fo r 197 7 thro ugh 2 001 an d pr ev i o u s ed iti o n s of t

h is r e po r t can b e ob tain ed fro m th e EIA (see h ttp ://www.eia.do e .g ov /emeu / fin a n ce/ pag e 2.h t m l ). 6 

### Fo r th e pu rpo s es of th is rep o rt, th e term "United States" typi cally includes the 50 States, t h e District of Co lu m b ia, Pu erto Rico, a n d the U.S. Virgi n Isl a nds. 7 

### The Fo rt u n e 5 0 0 i s a l i s t o f t

h e 50 0 l a rgest U.S

. c o r p o r at i o ns, ra nke d by r e ven u es , pu bl i s he d a n n u al l y by F o rt une m a gazi ne (see h ttp ://www.fortun e .co m / f

ortun e /fo r tun e 5 00). 8 

### Note that “allocated ope r ating re venu es” e x c eeds c o r p orat e ope rat i n g re ve nue beca use o f d o u b l e –co u n t i ng t h at i s eliminated whe n calculating c o r p orat e ope rat i ng re ven u es. 9 

### Gene rally accepted acc ounti n g pri n ciples (G AAP) for t h e United States do not re qui re that energy c o mpanies sepa rate ly account for c o s t s of oil produc tion a n d na t u ra l gas production in com p any financia l rec o rds. Vari ous e x ploration a n d devel opm ent c o st s ca nn ot eas i l y or se parat e l y be assi gne d t o ei t h e r oi l p r o duct i o n o r nat u ral gas p r od uct i on. 10 

### No te t h at U.S. to tals in clud e ro yalty p r o d u c tio n wh ile th e FRS pr odu ctio n lev e ls do no t. Thu s , t h e FR S sh ar e of cr ud e o il and nat u ral gas l i qui d s pr od uc t i on a n d nat u ra l gas pr o duct i o n a r e s o m e what un de rst a t e d b y t h ese cal cul a t i ons.

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 7

# 2. Financial Development s in 2002

Net incom e of the FRS comp anies 10 

## declined 45 percent, from $37.7 b illion in 2001 to $20.6 billion in 2002 (Table 1). This was the second lowest level of net incom e in the past eight years and well below the FRS companies’ peak earn i ngs of $53.2 billion in 2000. Profitability (at 7 percen t, as m easured by return on equity 11 

## ), was also at th e second lowest level in th e p a st ten years (Figur e 3 ) . Profitability of other large U.S. industrial corporations, as repres ented by the Standard and Poor’s (S &P) Industrials, 12 

## rebounded from poor results in 2001 and was well above the profitability of the FRS c o mp anies in 2002.

In co me St at emen t It ems 2001 2002 Percen t Cha nge 2001- 2002 2001 2002 Percen t Cha nge 2001- 2002 O per ating Revenues 803.7 698.9

- 13.0 4 ,527.1 4 ,608.7 1 .8 O per ating Ex pens es - 735.6

- 659.7

- 10.3

- 4,068.9

- 4,124.7 1 .4 O per ating Inc o m e 68.1 39.2

- 42.4 458.1 484.0 5 .6 Inter e s t Ex pens e - 9.1

- 10.7 18.7

- 105.6

- 94.5

- 10.5 O t her Revenue ( E x pens e) 6.3 6 .7 5.8

- 124.3

- 147.4 18.6 Inc o m e T a x Ex pens e - 27.7

- 14.6

- 47.3

- 108.6

- 124.7 14.8 Net Inc o m e 37.7 20.6

- 45.4 119.7 117.3

- 1.9 Net Inc o m e Ex c l uding Unus ual Item s 51.2 32.5

- 36.6 N A N A

Not e : S u m of c o m ponent s m a y not equal t o t a l due t o i ndependent roundi ng. P e rc ent c hanges w e re c a l c ul at ed f r om unrounded dat a. NA = not avai l abl e. So u r ce s: FR S C o m p anies : E nergy I n f o rm at i on A d m i ni s t rat i on, Form E I A

- 28 (Fi nanc i a l Report i ng S y s t em ); S& P Indust r ials : Com pus t a t P C P l us , a s e rvi c e of S t andard and P oor' s

. 

### T a ble 1

. Cons olida t e d Inc o me S t a t e m e n t for FRS Compa n ie s a nd the S & P Indus tr ia ls , 2001- 2002 ( B illion D o llar s ) FRS Compa n ie s S &P Indus tr ia ls 1

1 Ti m e W a rner and Qw es t Com m uni c a t i ons dat a have been ex c l uded f r om S & P I ndus t r i a l s dat a due t o anom al i e s i n t he dat a f o r bot h c o m pani es i n 2002, w h i c h, w hen i n c l uded, great l y di s t ort ed t he num bers f o r t he group as a w hol e.



## The prim ary explanation for the steep decline in ne t incom e was the excess supply of petroleum (crude oil and refined products) at the beginning of 2002 that squeezed refining m a rgin s (the spread between refined product prices and crude oi l input prices) for m o st of 2002. Lo wer natural gas prices, due to a glut of natural gas in the United States in the first half of 2002, also reduced the net incom e of the FRS comp anies. Another developm ent in 2002 that had an adverse imp act on incom e and c a sh flow was the collapse of the energy trading business following the dem i se of the Enron Corporation in late 2001. 13 

## Although only a m i nority of FRS comp anies were significan tly involved in energy trading, these comp anies appeared to do m u ch worse in term s of financial results than did ot he r FRS comp anies

. For example, the comp anies tha t were most af f

ected by energy trad ing activ ity (E l Paso, W illiam s Comp anies, a nd ChevronTexaco through its Dynegy s ubsidiary) registered a drop in net incom e of 138 percent, comp ared to a 38-percent decline for other FRS comp anies, and acc ounted for over one-half of the FRS comp anies’ declin e in cash fl ow from their operations. Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 9

### 0 5 10 15 20 25

1973 1976 1979 1982 1985 1988 1991 1994 1998 2002Percent

Not e : Ti m e W a rner and Qw es t Com m uni c a t i ons dat a have been ex c l uded f r om S & P I ndus t r i a l s dat a i n 2001 and 2002 due t o anom al i e s i n t he dat a f o r bot h c o m pani es i n 2002, w h i c h, w hen i n c l uded, great l y di s t ort ed t he num bers f o r t he group as a w hol e. So u r ce s: FR S C o m p anies : E nergy I n f o rm at i on A d m i ni s t rat i on, Form E I A

- 28 (Fi nanc i a l Report i ng S y s t em ). S& P Indust r ials : Com pus t a t P C P l us , a s e rvi c e of S t andard and P oor' s

. FRS Com pani es

S & P I ndus t r i a l s 

### Figur e 3. R e tur n on Equity for FR S C o mpanies and the S& P Industr ials, 1973-2002



## Unusual item s, which are charges against and additi ons to net incom e of a non-recurring nature, had a sizeab le effect in 2002 as they di d in 2001. Of the $11.9 billion (net) charges against incom e in 2002, $7.9 billion was for asset writedowns. Most of th e writedow ns stemm e d from lower projected cash flows from oil and gas projects, but nearly $3 b i llion in asse t writedow ns appeared to be related to energy trading activ ities. Restructuring change s, which usually accomp any downsizin g and planne d divestitures, totaled $1.5 billion, and discontinued operations reduced net incom e by $1.0 billion. Excluding the effects of unusual item s, net incom e of the FRS comp anies wa s down 37 percent between 2001 and 2002, from $51.2 billion to $32.5 billion (Table 1). Nearly all lines of business registered incom e declines in 2002. The worst financial pe rfor m ance, by far, was in petroleum refining and m a rketing.



# Income and Cash Flow

Downstream Petrol eum Perf ormanc e Hit A New Low in 2002

Net incom e 14 

## from the FRS comp anies’ U.S. refining/m a rketing line of business, excluding unusual item s , fell from $12.8 billion in 2001 to a loss of $ 0.3 b illion in 2002 (Table 2). The loss in 2002 was an all-tim e low for the FRS comp anies’ U.S. refini ng/m a rketing operations during the 1977 to 2002 period of FRS data collection. The profita bility of these operations, as m easured by return on investm e nt, 15 

## was

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 10Energy Information Administration/Performance Profiles of Major Energy Producers 2002 

## 11 Production 17,646 15,030 -14.8 20,635 16,232 -21.3 Refining/Marketing 11,951 -2,164 -118.1 12,829 -284 -102.2 Pipelines 3,345 1,694 -49.4 3,754 2,141 -43.0 Total U.S. Petroleum 32,942 14,560 -55.8 37,218 18,089 -51.4
Production 14,558 12,918 -11.3 16,101 15,744 -2.2 Refining/Marketing 3,115 452 -85.5 3,239 526 -83.8 International Marine 176 -38 -121.6 176 -38 -121.6 Total Foreign Petroleum 17,849 13,332 -25.3 19,516 16,232 -16.8 Total Petroleum 50,791 27,892 -45.1 56,734 34,321 -39.5 Coal 134 -46 -134.3 136 -350 -357.4 Other Energy 1,993 -1,460 -173.3 2,000 2,118 5.9 Nonenergy -2,726 1,842 -- 320 2,088 552.5 Total Allocated 50,192 28,228 -43.8 59,190 38,177 -35.5 Nontraceables and Eliminations -12,457 -7,636 -- -7,975 -5,716 -- Consolidated Net Income b 

### 37,735 20,592 -45.4 51,215 32,461 -36.6 

### Table 2. Contributions to Net Income by Line of Business for FRS Companies, 2001-2002 (Million Dollars)

a The Petroleum line of business includes natural gas operations. b The total amount of unusual items was -$2,286 m illion and -$13,480 million in 2000 and 2001, respectively. Source: Energy Information Administration, Form EIA-28 (Financial Reporting System). 

### 2001 2002

-- = Not meaningful. 

### Percent Change 2001- 2002 Percent Change 2001- 2002 Petroleum a 

### U.S. Petroleum

Foreign Petroleum a 

### 2002 Line of Business Net Income Net Income Excluding Unusual Items

2001



## also at an all-time low. Over two-thirds of the $17.1-billion declin e in the FRS companies’ total net income can be attributed to the plunge in U. S. refining/marketing financial results. The dramatic reversal in performa nce was caused by a confluence of events and market developments (discussed in detail in Chapter 1), including:
• world oil supply that outpaced demand until mid-2002,
• recession in much of the global economy,
• the impacts of the attacks of 9/11,
• a relatively warm 2001-to-2002 winter, and
• low natural gas prices that encouraged s ubstitution away from petroleum products. These developments resulted in glut of crude o il and petroleum products at the beginning of 2002. Excess petroleum supplies, which had been buildi ng for several months prior to 2002, put downward pressure on petroleum prices. Refiners’ margins were squeezed. For example, the average margin for U.S. refiners plunged from an all-time peak of $18 pe r barrel in May of 2001 to $7 per barrel in January 2002. The workings of the market, aided by oil produ ction cutbacks by the Organization of Petroleum Exporting Countries (OPEC) averaging nearly 2 milli on barrels per day, eventu ally eliminated excessEnergy Information Administration/Performance Profiles of Major Energy Producers 2002 

## 12 petroleum supplies by the second half of 2002. Refi ner margins rose throughout the year, but not by enough to offset the earlier damage. On an annual ba sis, U.S. refiner margin s were $8 per barrel in 2002, down from nearly $12 per barrel in 2001. Also, among the FRS refiners, operating costs (the costs of running refineries and refined product supply networks) were up by $2 per barrel between 2001 and 2002, continuing an upward trend evid ent since 1999. This trend is, at least in part, the result of the recent rapid pace of merger and acquisition activ ity and the difficulties of integrating acquired companies and assets into complex and geographi cally dispersed manufact uring and distribution networks. However, recent data do not indicate that environmental re quirements were the prime culprit in increased operating costs (see the Highlight en titled “Environmental Compliance Partially Eclipses Recent Gains in Profitability” in Chapter 3 for a more detailed description). The FRS companies’ downstream petroleum operations outside the United States also registered poor financial results in 2002. Net income from the fo reign refining/marketing line of business, excluding unusual items, fell by 84 percent in 2002 compared to net income in 2001. Ho wever, the decline in income was not as steep as the 102-percent decline in U.S. refining/marketing net income. Available data indicate that refiner margins in the regions of Europe and Asia-Pacific, the main areas of the FRS companies’ foreign downstream operations, did not decl ine as much as U.S. margins (see Chapter 3 for additional details). The growing weakness of the U.S. dollar during 2002 contributed to this result.


# FRS Companies’ Pipeline Earnings Net income from the FRS companies’ pipeline operations, excluding unusual items, was down 43 percent between 2001 and 2002. This is an unusual resu lt since pipelines, both inte rstate and intrastate, tend to be subject to economic re gulation. A characteristic of econom ically regulated industries is stability of rates of return and earnings. The volatility of the FRS companies’ pipeline prof its comes from the commingling of regulated and unregulated activities in this line of business. Due to limitations in the current design of Form EIA-28, companies have to report downstream natural gas opera tions in the pipeline line of business section of the Form. Downstream natural gas includes gas gath ering (the collection of gas from field production locations) and processing, transmissi on (the transport of natural gas from producing areas to consuming areas), distribution (the local delivery of gas to re sidences and commercial es tablishments), marketing, and trading. (Note that, beginning with the 2003 re porting year, Form EIA-28 will have a separate downstream natural gas line of business.) The inclusion in pipeline operations of natural gas trading, which de clined sharply in 2002 (as did all energy trading), caused the large decline in net income from the pipeline line of business. The impact of reduced trading activity can be ga uged by the change in non-transport revenues. For companies whose pipeline operations were wholly or primarily in natural gas, non-transpor t revenues fell by $3.5 billion, or 92 percent. Net inco me from pipelines for this group, excl uding unusual items, fell from $2.7 billion in 2001 to $1.2 billion in 2002. In contrast, the balan ce of net income, which is primarily from liquids pipelines, was $1.1 billion in 2001 and $0.9 billion in 2002, a 15-percent decline (unrounded data).Energy Information Administration/Performance Profiles of Major Energy Producers 2002 

## 13 

# Low Natural Gas Prices Hurt Upstream Profits Net income from U.S. oil and gas production, excl uding unusual items, was down 21 percent (or by over $4 billion) in 2002 from net income in 2001 (Table 2). The decline was largel y attributable to lower estimated natural gas prices. In January 2002, the price of natural gas was $2.35 per thousand cubic feet (Mcf) -- 66 percent below the wellh ead price of the prior January. 16 

## The year began with a high level of natural gas in storage, a result of mild winter weather and a fall off in demand stemming from reduced economic activity in the second half of 2001. Natura l gas suppliers drew dow n inventories throughout the year, aided by a recovery in economic growth and a colder-than-normal start to winter in late 2002. By December 2002, the wellhead price was $3.84, a 12- percent rise from the price of $3.44 of the previous December. On an annual basis, however, the U.S. wellhead natural gas price averaged $2.95 per Mcf in 2002, a 27-percent drop from $4.02 per Mcf in 2001. On an annual basis, U.S. oil pri ces at the wellhead aver aged $22.50 per barrel in 2002, up 3 percent from 2001. Oil prices were up because of cutbacks in oil production of 1.9 million barrels per day by OPEC and a modest recovery in world economic growth and petroleum demand. However, the effect of higher oil prices could not fully offset the adverse impact of lower na tural gas prices. Also, the FRS companies’ U.S. oil production and natural gas pr oduction were both 1 percent lower in 2002 compared to 2001, which further contributed to lower revenues and income. Foreign upstream operations fared somewhat better than U.S. upstream operations. Net income, excluding unusual items, was nearly flat, down only 2 percent between 2001 and 2002 (Table 2). Foreign upstream production is tilted more toward oil than is U.S. production (58 percent oil abroad vs. 46 percent in U.S. operations), so th at foreign operations benefited more from higher oil prices and were hurt less by lower gas prices. Also, natural gas pr ices abroad realized by the FRS companies (see Chapter 3) did not fall as much as U.S. prices. An increase in foreign natural gas production of 12 percent and an increase in forei gn oil production of 1 percent by the FRS companies both mitigated the decline in foreign upstream net income.


# Other Energy Plagued by Energy Trading Collapse Although the “other energy” line of business was originally intended for reporting on nonconventional energy (synthetic fuels and renewabl e energy), it now largely consists of electric power activities and energy trading. The shift in composition of the other energy line of business occurred over the past 10 years and reflects two developments. First, in recent years, several companies that satisfy the FRS survey respondent selection criter ia have significant electric powe r operations. These companies have acquired natural gas production operati ons large enough to account for at least one percent of U.S. total natural gas production and/or rese rves and thereby qualify as FRS respondents. Second, several longtime FRS respondents have become involved in various aspects of electric power, both in the United States and abroad, including gene ration, distribution, marketing, and tr ading. Due to the limitations of Form EIA-28, electric power financial information is reported in the other energy line of business. (Note that, beginning with the 2003 reporting year, Form EIA-28 will have a separate electric power line of business.)Energy Information Administration/Performance Profiles of Major Energy Producers 2002 

## 14 Net income from the other energy line of business plunged from a positive $2.0 billion in 2001 to a loss of $1.5 billion in 2002, a $3.5-billion downturn. The dec line is attributable to the large amount, $3.6 billion, in unusual items in 2002. The unusual items were the balance sheet c onsequences of actions taken to repair the damage from the collapse of th e energy trading business follo wing the demise of the Enron Corporation in late 2001. Since these acti ons tended to reduce the value of a company’s stockholders’ equity, the impacts on required stockholde rs’ equity are to be included in the income statement. The energy trading activities of Chev ronTexaco and El Paso accounted for most of the unusual items. ChevronTexaco reported an after-tax writedown of $1.6 billion due to the decline in the value of its ownership of Dynegy. Dynegy is an unconsolidated subsidiary of Chevr onTexaco, which (until 2002) was one of the largest ener gy traders in the United States. Chevr onTexaco also took an after-tax charge of $0.7 billion for its share of Dynegy’s asset wr itedowns, revaluations, and loss on asset sales. 17 

## El Paso reported after-tax charges ag ainst income totaling $1.1 billion from its energy trading and related businesses. The charges were largely for reductions in the fair market value of energy trading contracts, reductions in the value of its investments in energy-tr ading subsidiaries, litigati on directed at its energy trading business, and changes in accounting principles rela ted to reporting the va lue of energy trading contracts. 18 

## Excluding unusual items, net income from the othe r energy line of business was up 6 percent to $2.1 billion in 2002. This result suggests that th e core of ongoing other energy operations -- production/generation, transmission, di stribution, and marketing of elect ricity -- continued to yield positive returns even while the energy trading business was collapsing.


# Chemical Operations Yield Rare Gains in Earnings Net income from the FRS companies’ nonenergy line of business, excluding unusual items, totaled $2.1 billion in 2002, a nearly seven-fold increase over results for 2001. Th e increase in income was due to increased earnings from chemical manufacturing a nd decreased losses from the remaining businesses beyond energy. Operating income from the FRS companies’ chemical businesses 19 

## , excluding unusual items, was $1.9 billion in 2002, more than double the amount in 2001 (T able 3). Increased earnings were widespread with all but 2 of the 11 companies with chemical operations reporting an earni ngs improvement in 2002. The improvement reflected increased sales volumes co mpared to 2001. However, chemical margins, the difference in product prices and new material inpu t prices, may not have improved much overall in 2002. For example, Exxon Mobil noted, “chemicals earnings... were $123 million higher than 2001...[benefiting] from reco rd...product sales volumes,” 20 

## but elsewhere said, “Earnings for 2002 ... were higher than 2001, after excludin g special items ... as strong volume growth more than offset lower margins.” 21 

## However, despite the sharp upswing in income in 2002, the profitability of the FRS companies’ chemical operations remained low in an historical context (Figure 4). The balance of the FRS companies’ activities outside en ergy is reported in the “oth er nonenergy” line of business. Other nonenergy has been a long-running target of retrenchment. As di scussed in detail in the previous edition of this report, 22 

## the FRS companies’ other nonenergy assets as a share of their total assets steadily declined from a peak of 13 percen t in 1983 to 1.3 percent in 2001. The share declined again in 2002, to 1.0 percent, as Exxon Mobil so ld its Chilean copper operations for $1.3 billion. 23 

## Most

## of the FRS c o mp anies’ other nonenergy activity in 2002 was in technology development. Real estate, financial services, and remnants of telecomm unic a ti ons ventures were also included by som e of the comp anies. The other no nenergy line of busine ss, however, c ontribu ted p o sitiv ely to bottom

- line results, as the FRS comp anies were able to reduce their operating loss es in this area in 2002 by more than $0.2 billion (Table 3).

Seg m en t 2 001 20 02 Percen t Change 2001- 2 002

Chem ic als 906 1 , 921 1 12.0 O t he r Nonener gy - 1 ,176

- 907

- - T a b l e 3. O p erat in g In co me in Ch emicals a n d O t h e r Non e n e rg y Se g m en t s f o r F R S Co mp an ies, 2001- 2002 ( M illion Dollar s )

S ourc e s : E nergy I n f o r m at i on A d m i ni s t rat i on, Form E I A-28 (Fi nanc i a l Report i ng S y s t e m ), ex c ept f o r c hem i c a l s s egm ent ope rat i ng i n c o m e , w h i c h f o r c o m p a n i e s w i t h opera t i ons i n bot h s e g m ent s w a s c o m p i l ed f r om c o m pany annual r eport s t o s hareh ol ders

. 

### O per a t ing Inc o m e , Ex c l uding Unus ual Item s

-- = no t m eani ngf ul

0 5 10 15 20 25 30 35 40 45 50

1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001Return on Investment (Percent)



### O per at i ng R e

t u r n on I n ves t m ent

N o t e : O per at i ng r e

t u r n on i n ves t m ent i s

oper at i ng i n c o m e as a per c ent of

net pr

oper t y , pl ant , and equi pm ent

. Sour c e : Ener gy I n f o r m at i on Adm i ni s t r a

t i on, For m EI A- 28 ( F i nanc i a l R epor t i ng Sys t em ) , and c o m pany annual r epor t s

t o s t oc k hol der s

. Fi gur e 4. O p er at i ng R e

t u r n on I n vest m e nt i n

C h em i cal s f o r FR S C o m p ani es, 1975- 2002



# Recor d

Cash Flow in 2001 Followed by Mediocre Cash F l o w in 2002

Cash flow is the cash realized from a comp a ny’s ongoing operations. Cash includes currency, dem a nd deposits, and interest-bearing assets of less than 30 days m a turity. Cash flow from operations is usually computed by adding to (subtracting f r om ) net incom e those cost (revenue) item s that did not actually involve an outlay (receipt) of cash. 24 

## For energy companies, the largest non-cash item ge nerally is
Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 15

## depreciation, depletion, and am orti zation (DD&A), which is an allowa nce for the decline in value of property, plant, and equipm ent recorded as a charge against incom e
. In 2002, the FRS comp a n ies’ cash flow from ope ra tions was down $15 billion from the reco rd of $90 billion realized in 2001 (Table 4). Although this wa s a substantial drop, the FRS companies’ cash flow perform a nce in 2002 was still som e what better than in recent years. Cash flow of $75 billion realized in 2002 was slightly above the average of $70 billio n fo r the prior five years , from the 1997 to 2001.
Due to lim itations of Form EIA-28, cash flow by lines of business can be computed only on a pretax basis. The decline in overall pretax cash flow of $30 billion (Table 4) was in line with the $32-billion decline in pretax incom e (Table B12). Am ong the lines of bus iness, downstream petroleum operations, with a drop in cash flow of $25 billio n, were larg ely re spon sible for the d eclin e in cas h flow in 2002.

( B illion Dollar s )

C ontr i bution to P r e t a x C a s h Flow a 

### 2001 2002 Percent Change 2001- 20 02 Petr ol eum b 

### O il a nd G a s Pr od uc tion 8 5 .0 76. 2

- 10.3 Ref i n i ng, Mar k eti ng, and T r an s por t 3 4.8 10. 3

- 70.3 Coal a nd O t her En er gy 3

. 3 0 .4

- 88.6 Chem ic als 0 .9 1

. 5 61.6 O t her Nonener gy 0

. 2 1 .2 6 49.7 Nontr a c eable

- 7

. 3

- 2

. 9

- - T o ta l Contr i butio n to Pr etax Cas h F l ow a 

### 116 .8 86. 7

- 25.8 Cur r e n t Inc o m e T a x e s - 2 4 .0

- 14. 5

- 39.5 O t her ( N et)

- 3

. 2 2 .8

- - Cas h F l ow f r om Oper ations 8 9 .6 75. 0

- 16.4 T a b l e 4. L i n e - o f - Bu sin ess Co n t rib u t io ns t o Pret ax Cash F l o w f o r F R S Comp an ies, 2 001- 2002

a Def i ne d as t he s u m o f operat i ng i n c o m e , deprec i a t i on, depl et i on, a nd am ort i zat i on , and dry hol e ex pense.
-- = No t m eani ngf ul

.

S ource: E nergy I n f o rm at i on A d m i ni st rat i on, Form EI A

- 28 (Fi nanc i a l Report i ng S y s t em ). Not e : S u m of c o m pon ent s m a y not e qual t o t a l due t o i ndependent roundi ng. P e rcent c hanges w e re c a l c ul a t ed f r om unroun ded dat a. b The pe t r ol eum l i ne of bus i nes s i n c l u des nat ural gas operat i ons

.



# Targets of Investment

FRS Com p anies Increase Upstream Focus on OECD Europe, Nor t h Sea Capital expe nditur e s of the FRS companies ( a s measured by additions to investm e nt in place 25 

## ) in 2002, at $98 billio n, were 11 percen t belo w the 2001 all-tim e high of $110 billion (Table 5). Oil and gas production accounted for nearly two-thirds of the FRS comp a n ies’ capital expenditures in 2002. The FRS collects oil and gas explor ation and developm ent expenditu res by region and by function. Exploration and developm ent expenditu res include exploration expenses as well as ca pita l expend itur e s. Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 16

## Reviewing patterns of exploration an d development expenditures yields a picture of targets of upstream investm e nt across regions. Regions that were targets of increased explora tion and developm ent in 2002 were in the Eastern He m i sphere while cutbacks were in the W e stern He m i sphere. Overall expl oration and development expenditures for the Eastern Hem i sphere were up $3.0 billion, or 20 percent, while exploration and developm ent expenditures in total for the W e stern He m i sphere were dow n $5.0 billion, or 16 percent.

( B illion D o llar s )

L i n es o f Bu sin ess 2001 2002 Percen t Cha nge 2001- 2002 Percen t Ch an g e E x c l uding M e rg ers an d A c quis i tions

2001- 2002 Petr oleum a 

### U.S. Petroleum Pr oduc tion 33.0 30.1

- 8.9 3 .9 Ref i ning/Mar k eting Ref i ning 12.1 15.1 25.1 111.4 Mar k eting 5 .6 1.9

- 66.3

- 35.6 T r ans por t 1 .6 1.9 19.5 19.5 T o tal Ref i ning/Mar k eting 19.2 18.9

- 1.9 39.7 Pipelines 3.8 2 .7

- 28.1

- 13.7 T o tal U.S. Petr oleum 56.0 51.7

- 7.8 11.1
F o r e ign Petr oleum a 

### Pr oduc tion 35.9 33.7

- 6.1 18.1 Ref i ning/Mar k eting 4 .6 5.0 9 .7

- 0 .8 Inter national Mar i ne 0.0 0 .0

-- -- T o tal F o r e ign Petr oleum 40.5 38.7

- 4.3 14.8
T o tal Petr oleum a 

### 96.5 90.4

- 6.3 12.6 Coal 0.1 0 .0

- 80.0

- 80.0 O t her Ener gy 5.0 3 .7

- 26.6 19.5 Nonener gy Chem ic als 3 .8 2.3

- 38.8

- 28.5 O t her Nonener gy 3.4 0 .4

- 87.9

- 86.9 T o tal Nonener gy 7.2 2 .7

- 62.1

- 58.2 Nontr a c eables 1.5 1 .2

- 22.7

- 23.0 Additions to Inves t m ent in Plac e b 

### 110.4 98.0

- 11.2 5 .0 Additions Due to Mer ger s and Ac quis i tions 45.8 30.2

- 34.1 T o tal Additions Ex c l uding Mer ger s and Ac quis i tions 64.6 67.8 5 .0

S ourc e : E nergy I n f o rm at i on A d m i ni s t rat i on, Form E I A

- 28 (Fi nanc i a l Report i ng S y s t em ), ex c ept f o r envi r onm ent al c api t a l ex pendit u res , w h ic h c a m e f r om c o m pany f ilings of S e c u rit i es and E x c hange Com m i s s i on Form 10-K

. 

### T a b l e 5. A d d i t i o n s t o In v est men t in Place b y L i n e o f Bu sin ess f o r F R S Co mp an ies, 2001- 2002

b A ddi t i ons t o i n ves t m ent i n pl ac e = addi t i ons t o propert y , pl ant , and equi pm ent , pl us addi t i ons t o i n ves t m ent s and advanc es

. -- = Not m eani ngf ul

. Not e : S u m of c o m ponent s m a y not equal t o t a l due t o i ndependent roundi ng. P e rc ent c hanges w e re c a l c ul at ed f r om unrounded dat a. a The P e t r ol eum l i ne of bus i nes s i n c l udes nat ural gas operat i ons

.

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 17

## Am ong the geographic regions, the U.S. onshore contin ued to be the m o st popular upstream target (Figure 5), though spending for exploration and de velopm ent was down 17 percent. Cutbacks were widespread, with 16 companies reduc ing exploration and developm ent e xpenditures. A clear exception to this developm ent was Devon. More than 95 per cent of Devon’s total oil and natural gas production com e s from the western United States, the Gulf of Mexico, and western C a nada , with about two-thirds of the production being natural gas. 26 

## Devon completed its acquisiti on of Mitchell Energy in early 2002, 27 

## giving the comp any tota l prove d oil and na tural gas res e rves of appr oxim a tely two billion b a rre ls of oil equivalent.

0 5 10 15 20 25 30

U.S. Onsho r e U.S. O ffs h o r e Eu r o p e As ia Pa c i fi c A f rica Canada S o uth Am er i c a FSU Mid EastBillion Dollars 

### Pr oved ac r eage ex penditur e s Ex penditur e s ex c l uding pr oved ac r eage Figure 5. Exploration and D e v e lopment Ex penditures by R e gion for FR S C ompanies, 1999-2002

Not e : I n eac h quadrupl e of bars , t he f i rs t bar depi c t s 1999, t he s e c ond 2000, t he t h i r d 2001, and t he f ourt h 2002. Regi ons are i n order of ex pl orat i on and devel opm ent ex pendi t u res , ex c l udi ng proved ac reage, i n 2002. FS U = Form er S o vi et Uni on and E a s t ern B l oc c ount ri es

. S ourc e : E nergy I n f o rm at i on A d m i ni s t rat i on, Form E I A

- 28 (Fi nanc i a l Report i ng S y s t em ). 

## Offshore spending held steady, de clining by only one percent between 2001 and 2002. However, comp anies reducing offshore spending outnum bered othe r offshore producers by two to one. Two of the largest participants in the Gulf of M e xico forged ahead with projects in 2002. Shell’s increased G u lf production levels in 2002 were driven by the expans ion of production capacity at the Brutus platform

. 28 

## BP, the largest acreage holder in the deepwater Gulf, announced that it expects to spend at least $15 billion over the next ten years on exploration, production, and devel opm ent in the Gulf of Mexico, focusing prim arily on drilling wells and developing already-discovered fields. 29 

## The largest absolute regional cutback in expendi tures excluding proved acreage was f o r Canadian upstream projects, which were down by $2.5 billion, o r 37 percen t. The cutback s were concen trated am ong majors m a king significant acquisitions in recen t years. ConocoPhillips annou nced a shift away from short-life, high-decline fields to longer-life, low-decline fields in Canada, with plans to reduce operating co sts and sell more than $ 300 m illion worth of nonstrategic co nventional p r operties. 30 

## Devon acquired Anderson Exploration Ltd. in early 2002, which increased th e relative importance of its Canadian operations: at year -end 2002, 36 percent of Devon’s prove d reserves were in Canada. 31
Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 18Energy Information Administration/Performance Profiles of Major Energy Producers 2002 

## 19 However, Devon recorded writedowns to its Canadian oil and gas properties in 2002 based on lower oil and natural gas prices. 32 

## Anadarko began its operations in Cana da in 2000 with the merger of Union Pacific Resources Group, Inc. (later named the RME Holding Company), and further expanded in 2001 with the purchase of Berkley Petroleum Corpor ation. During 2002, however, Anadarko sold its heavy oil assets in eastern Alberta for about $160 million. 33 

## In 2002, Apache made two acquisitions in Alberta, one from Burlington Resources for $26 million, and one from Canadian affiliates of ConocoPhillips for $60 million. 34 

## However, the company also sold marginal properties for $7 million. To some extent, these companies were sorting out the assets that be long in their North American core before undertaking significant new projects. South America also registered a relatively steep 34-percent decline in exploration and development expenditures (excluding proved acreag e). The political turmoil in Venezuela in the 2001 to 2002 period was probably key to this development. BP, however , was noticeable by its incr eased spending in South America. BP has been operating in Trinidad and Tobago since 1961 and has been spending there to expand production. 35 

## For example, the company expects its natural gas production to increase from 1.2 billion cubic feet (bcf) per day in 2002 to 2.0 bcf pe r day in 2003 to supply Atlantic LNG’s (in which BP has an interest) new liquefied natural ga s production train, wh ich was approved in 2003. 36 

## BP has also been developing Trinidad’s Kapok Field, wh ich is expected to deliver natural gas by 2003. Asian-Pacific projects drew the largest step up in spending in 2002 -- up $1.0 bill ion, or 22 percent, with two-thirds of the companies report ing higher spending (exclu sive of purchases of proved acreage). Deepwater prospects oriented toward gas appeared to be favored targets. Comp anies noting projects in the region included ConocoPhillips, E xxon Mobil, Unocal, and ChevronTexaco. Exploration and development expenditures directed to Europe, almost entirely for the North Sea, were up $0.9 billion over the prior year. An increased comm itment to North Sea proj ects may be surprising since some FRS companies have announced plans to reduce their North Sea hol dings. The rationale given is that the North Sea is a mature oil and gas province with few larg e frontier properties. Nevertheless, on an overall basis, the FRS companie s increased their spending on European prospects by 19 percent in 2002. For example, ConocoPhillips (a long with its partners) has developed and in 2002 began natural gas production from the Hawksley field in the North Sea. 37 

## ChevronTexaco, operator of the Alba Field in the North Sea, developed and in 2002 began production from the southern region of the field. 38 

## Exxon Mobil has continued developing oil and natural gas resources in the North Sea, leading to the start of production in February 2003 from the Ri nghorne platform, part of a $1.1-billion development located in the North Sea’s Norwegian sector. 39 

## Exxon Mobil is the operator and sole owner of the project. Exxon Mobil is also developing two other proj ects in offshore Norway, which will produce both oil and natural gas. Africa continued to attract investment from the majors in 2002. Exploration and development expenditures were up 17 percent, or by $0.7 billion, in 2002. The bulk of the spending is for deepwater prospects off the coast of West Africa. Countries accounting for most of the active deepwater projects include Angola, Equatorial Guinea, and Nigeria. Notable projects in the region in 2002 include those of Exxon Mobil, Marathon, ChevronTexaco, and Amerada Hess. Exploration and development efforts in Africa also include projects in No rth Africa, mainly projects by An adarko in Algeria and by Apache in Egypt. Expenditures in the countries of the Former Soviet Union region registered the steepest percentage increase, 60 percent, of all the regions shown in Figure 5. Most of the majors’ activity involvesEnergy Information Administration/Performance Profiles of Major Energy Producers 2002 

## 20 prospects in the Caspian Sea area, including those of ChevronTexaco, ConocoPhillips, and Unocal. Exxon Mobil has been developing oil reserves in th e Sakhalin Island area, which is located north of Japan. The upstream mergers that were a prominent featur e of the 1998 to 2001 period fell off in 2002, with two exceptions: in 2002, Devon Energy continued thei r acquisition spree of recent years by acquiring Mitchell Energy; and Phillips Petroleum and Conoc o, Inc. (now ConocoPhillips) completed their merger, which had been announced in 2001. For a further exposition of the upstream mergers over this period, see the Highlight entitled “Upstream Merger Wave Ebbs” and Figure 6.) 

# Upstream Merger Wave Ebbs Several mergers among the FRS survey respondents and acquisitions by FRS oil and gas producers (both non-vertically integrated a nd vertically integrated ones) o ccurred over the 1998 to 2002 period (see Figure 6 for a diagram of the upstream merger transactions during this period). Devon Energy emerged as the apparent leader in this series of mergers based on sheer number of major transactions they undertook. The recent wave of upstream merg ers and acquisitions, howev er, may have ended in 2001, as there were only three merger completions after that – Devon Energy’s acquisition of Mitchell Energy in January 2002 40 

## , the completion of the ConocoP hillips’ merger in August 2002 41 

## , and Devon Energy’s acquisition of Ocean Energy in February 2003 42



## . Some of the companies previously involved in si gnificant upstream merger activity (other than ConocoPhillips and Devon) may have ceased their merg er activity in order to address problems on their balance sheets. For example, some companies may ha ve not wanted to further increase their level of debt or further dilute the value of a single share of their stock, de pending on the degree to which they had used debt or equity financing in their previous merger transactions. As in other industries, other energy companies may merely be waiting for confir mation that economic activity has recovered from the events of 9/11, the aftermath, a nd subsequent economy-wide changes. Nonetheless, whatever the reasons, the wave of upstream merger and ac quisition activity that characterized the FRS oil and gas producers in the late 1990’s appears to have paused in 2002, and continued to do so in 2003.



# Mergers Drive Increase in Refining /Marketing Capital Expenditures In contrast, in 2002, the bulk of cap ital expenditures report ed by the FRS companies for U.S. refinery and marketing operations in 2001 and 2002 were for intra-FRS mergers and acquisitions. In 2001, Phillips Petroleum acquired Tosco while Valero ac quired Ultramar Diamond Shamrock, two of BP’s Rocky Mountain refineries, and El Pa so’s Corpus Christi refinery. In 2002, Phillips Petroleum acquired Conoco to form ConocoPhillips (Table 6). This ac quisition included four refineries (566 million barrels per day (mmb/d) of crude distillation capacity) along with some related pipelines, terminals, and retail gasoline outlets.1 / 8 9 

### Figur e 6. R e c e n t M e rge r s A f f e ct ing FR S Oil a n d Ga s Pr odu ce r s 1999 2001 2002 2003 2 000 Sa nt a Fe

Oc cid enta l

8/ 0 2 Con o co

Gu lf Ca nad a R e so urc e s

Ph illip s Co no c o 

# *

* * *

* *

O ccid ent al

5/0 1

* 

### I n d i ca t e s c o m p a n y w a s a n F R S re s p o n d e nt in th e n e ares t y ear ; i.e., a star to th e left o f a c o m p an y na m e in dicates th at co m p an y w a s an F R S c o m p an y i n 1 9 9 8 (in th e case o f S O H I O, th is co m p an y w a s a resp o n d e n t in 1 9 8 9 w h en i t w a s acq uired b y B P ). Alternati v el y , if t h e st a r is t o th e ri g h t o f th e co m p an y , th en it w a s a n F R S re s p o n d e nt i n 2 0 0 2

. F o o t n o te a nd s o urce n o t e s a r e a t the bo tt om o f th e third pa g e o f the g e neal ogy f i g u r e s. 

# *

* Cono coPhillip s 

# * *

* 4/0 0 4/9 9 1/ 99 Sny d e r

Pe nn zEn e rgy

12 /98 BP Am e r ica

BP Am oco

AR CO BP Am er ic a Sea gull

SO HIO BP Am eri c a

Dev o n

M i tc hell Ene r g y 6/ 99 10/ 01

De v o n

1/99 6/0 0

Dev o n Sa nta Fe Sny d e r

De v o n

De v o n

O c ea n E nerg y Oc ean En ergy 4/ 0 3 A nde rso n E x pl orat ion

1/02 De v o n

(AR C O Lon g B eac h a nd A l tur a E nerg y a ) 1 / 8 9 

### Figur e 6. R e c e n t M e rge r s A f f e ct ing FR S Oil a n d Ga s Pr odu ce r s 1999 2001 2002 2003 2 000 Sa nt a Fe

Oc cid enta l

8/ 0 2 Con o co

Gu lf Ca nad a R e so urc e s

Ph illip s Co no c o Oc cid enta l

8/ 0 2 Con o co

Gu lf Ca nad a R e so urc e s

Ph illip s Co no c o 

# *

* * *

* *

O ccid ent al

5/0 1

* 

### I n d i ca t e s c o m p a n y w a s a n F R S re s p o n d e nt in th e n e ares t y ear ; i.e., a star to th e left o f a c o m p an y na m e in dicates th at co m p an y w a s an F R S c o m p an y i n 1 9 9 8 (in th e case o f S O H I O, th is co m p an y w a s a resp o n d e n t in 1 9 8 9 w h en i t w a s acq uired b y B P ). Alternati v el y , if t h e st a r is t o th e ri g h t o f th e co m p an y , th en it w a s a n F R S re s p o n d e nt i n 2 0 0 2

. F o o t n o te a nd s o urce n o t e s a r e a t the bo tt om o f th e third pa g e o f the g e neal ogy f i g u r e s. 

# *

* Cono coPhillip s 

# * *

* 4/0 0 4/9 9 1/ 99 Sny d e r

Pe nn zEn e rgy

12 /98 BP Am e r ica

BP Am oco

AR CO BP Am er ic a Sea gull

SO HIO BP Am eri c a

Dev o n

M i tc hell Ene r g y 6/ 99 10/ 01

De v o n

1/99 6/0 0

Dev o n Sa nta Fe Sny d e r

De v o n

De v o n

O c ea n E nerg y Oc ean En ergy 4/ 0 3 A nde rso n E x pl orat ion

1/02 De v o n

(AR C O Lon g B eac h a nd A l tur a E nerg y a ) 4/9 9 1/ 99 Sny d e r

Pe nn zEn e rgy

12 /98 BP Am e r ica

BP Am oco

AR CO BP Am er ic a Sea gull

SO HIO BP Am eri c a

Dev o n

M i tc hell Ene r g y 6/ 99 10/ 01

De v o n

1/99 6/0 0

Dev o n Sa nta Fe Sny d e r

De v o n

De v o n

O c ea n E nerg y Oc ean En ergy 4/ 0 3 A nde rso n E x pl orat ion

1/02 De v o n

(AR C O Lon g B eac h a nd A l tur a E nerg y a )

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 21

## F i g u re 6

. Re cen t M e r g ers A f fect i n g F R S O i l an d G as P r o d u cers ( c o n t i n u ed ) 2003 1999 2001 2002 2000



# *

*

*

* 

### Indi c a te s c o m p a n y wa s a n FR S r e sp o n d e n t in the n e a r e s t y e a r ; i. e
. , a sta r to the le f t o f a c o m p a n y n a m e i ndi c a te s th a t c o m p a n y wa s a n FRS c o m p a n y in 199 8. A lte r n a t i v e l y , if the s t a r is to the r i g h t o f the c o m p a n y , the n it wa s a n FRS
r e spo n d e n t in 20 02. Foo t n o te s a n d s o u r c e n o te s a r e a t the bo tt om o f the th ir d a n d f o u r th p a g e s o f the g e n e a l og y f i g u r e s. 

# *

*

* 7/0 1 T r i t on En ergy

8/ 01 K e rr-M cGee

HS Resources Kerr-M cGee

El Paso

Co as t a l El Paso Am e r ad a He ss Am e r ad a He ss



# * Exx o n E x xo n Mo b i l 

# *

* *

* Mo b i l 12 /98

10 /99 

# * Te x a c o Ch e v ro n T ex ac o



# * Chev ron 

# * 10 /01

Sonat El Paso

W i lli am s

B a rret t Resources 

# *

5/0 1 W i l lia m s 1/0 1

7/ 01 Ve l v e t Ex pl ora t io n 

## 2003 1999 2001 2002 2000



# *

*

*

* 

### Indi c a te s c o m p a n y wa s a n FR S r e sp o n d e n t in the n e a r e s t y e a r ; i. e
. , a sta r to the le f t o f a c o m p a n y n a m e i ndi c a te s th a t c o m p a n y wa s a n FRS c o m p a n y in 199 8. A lte r n a t i v e l y , if the s t a r is to the r i g h t o f the c o m p a n y , the n it wa s a n FRS
r e spo n d e n t in 20 02. Foo t n o te s a n d s o u r c e n o te s a r e a t the bo tt om o f the th ir d a n d f o u r th p a g e s o f the g e n e a l og y f i g u r e s. 

# *

*

* 7/0 1 T r i t on En ergy

8/ 01 K e rr-M cGee

HS Resources Kerr-M cGee

El Paso

Co as t a l El Paso Am e r ad a He ss Am e r ad a He ss



# * Exx o n E x xo n Mo b i l 

# *

* *

* Mo b i l 12 /98

10 /99 

# * Te x a c o Ch e v ro n T ex ac o



# * Chev ron 

# * 10 /01

Sonat El Paso

W i lli am s

B a rret t Resources 

# *

5/0 1 W i l lia m s 1/0 1

7/ 01 Ve l v e t Ex pl ora t io n

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 22

## F i g u re 6. Recen t Mer g er s A f f ect i n g F R S O i l an d G as Pro d u cers ( c o n t i n u e d )

* 

### I ndi cat e s c o m p an y w a s an F R S res p o ndent in t h e neares t y e ar ; i

. e
. , a s t a r to t h e left o f a c o m p any na m e in d i c a te s th a t c o m p a n y w a s a n FRS c o m p a n y in 1 9 9 8

. A lte r n a tiv e l y , if the sta r is t o th e r i g h t o f the c o m p a n y , the n it wa s a n FRS r e sp o n de nt in 2 0 0 2

.

a 

### Oc ci dent al acqui re d co nt r o l o f Al tu r a Ener g y , a l i m i t e d par t ne rshi p ow n e d b y B P Amo c o and R o y a l D u tc h / Sh e ll ( t h r o u g h Sh e ll Oil) a t a p p r o x i m a t e l y the sa m e ti me a s it a c q u i r e d ARCO L o n g B e a c h

. Al tur a Energy w a s t h e l a r g e s t o i l pr o d ucer i n th e s t at e o f T e x a s at t h e t i m e o f t h e t r ans act i o n. S e e En ergy I n f o r m atio n Ad m i n i s t rat i o n , “ A spec t s o f Occ i dent al P e t r o l e u m’ s Purc h a se o f Al tu r a Energy a n d AR C O Lo ng B each” (Ap r i l 1 8 , 20 00). T h is i s a v a i l a bl e o n t h e I n t e rne t at http://w ww .e ia .d o e
. gov /e m e u/fi na nc e / m e r g e r s/ o x y i nde x.ht m l ( a s o f N o v e m b e r 28, 2003).

S o urces : Com p an y ne w s re l eas es and o t her p ubl i c di s c l o s u res
. 

# * * 1999 2001 2002 2003 2000

Dom i ni o n Louis Drey f u s Natural Ga s 

# * 10/01 Dom i nion 

# * A ndarko

U n ion Pacif i c Resources A ndar k o 

# * 7/00 

## F i g u re 6. Recen t Mer g er s A f f ect i n g F R S O i l an d G as Pro d u cers ( c o n t i n u e d )

* 

### I ndi cat e s c o m p an y w a s an F R S res p o ndent in t h e neares t y e ar ; i

. e
. , a s t a r to t h e left o f a c o m p any na m e in d i c a te s th a t c o m p a n y w a s a n FRS c o m p a n y in 1 9 9 8

. A lte r n a tiv e l y , if the sta r is t o th e r i g h t o f the c o m p a n y , the n it wa s a n FRS r e sp o n de nt in 2 0 0 2

.

a 

### Oc ci dent al acqui re d co nt r o l o f Al tu r a Ener g y , a l i m i t e d par t ne rshi p ow n e d b y B P Amo c o and R o y a l D u tc h / Sh e ll ( t h r o u g h Sh e ll Oil) a t a p p r o x i m a t e l y the sa m e ti me a s it a c q u i r e d ARCO L o n g B e a c h

. Al tur a Energy w a s t h e l a r g e s t o i l pr o d ucer i n th e s t at e o f T e x a s at t h e t i m e o f t h e t r ans act i o n. S e e En ergy I n f o r m atio n Ad m i n i s t rat i o n , “ A spec t s o f Occ i dent al P e t r o l e u m’ s Purc h a se o f Al tu r a Energy a n d AR C O Lo ng B each” (Ap r i l 1 8 , 20 00). T h is i s a v a i l a bl e o n t h e I n t e rne t at http://w ww .e ia .d o e
. gov /e m e u/fi na nc e / m e r g e r s/ o x y i nde x.ht m l ( a s o f N o v e m b e r 28, 2003).

S o urces : Com p an y ne w s re l eas es and o t her p ubl i c di s c l o s u res
. 

# * * 1999 2001 2002 2003 2000

Dom i ni o n Louis Drey f u s Natural Ga s 

# * 10/01 Dom i nion 

# * A ndarko

U n ion Pacif i c Resources A ndar k o 

# * 7/00



## The other large intra-FRS deal in 2002 was a consequence of Chevron’s m e rger with Texaco in 2001, which was also an intra-FRS transaction. Am ong other requirem e nts for approval of the m e rger, the Federal T r ade Comm ission (FTC) required the sale of Texaco’s ownership inte rest in Equilon Enterprises and Motiv a Enterprises. Equilon was for m ed in January 1998 as a 56/44 percent joint venture of Shell Oil and Texaco, which com b ined th e comp anies’ downstream petroleum assets in the western United States. Motiva bega n operation in July 1998 as a joint ve nture of Shell Oil (35 percent), Texaco (32.5 percent), and Saudi Aram co (32.5 percen t). T h is joint venture com b ined the comp anies’ downstream petroleum a ssets in th e Midwestern and eastern United St ates. In February 2002, the FTC approved Shell Oil’s acquisition of Texaco’s owne rship share of Equilon and about 48 percent of Texaco’s ownership interest in Moti va with Saudi Aram co acquiring the rem a inder. Subsequent to these transactions, Equilon becam e a part of Shell Oil’s consolidated operations a nd no longer exists as a

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 23

## separa te en tity. This m eans tha t E quilon’s operations continue to be in clu d ed in the F R S aggregate data but as part of Shell Oil. Motiva continues as a separate enterprise reporting to the FR S. The increase in refining/m arketing capital expenditure s is larger than it w ould have been had several FRS comp anies not m e rged. This is because bef o re a m e rger occurs, as sets are carried on a comp any’s books at their purchase prices (le ss the DD&A reductions that were taken over a number of years). However, since m e rgers involve the selling of asse ts from an acquired company to the newly m e rged entity, thes e sam e assets, after a m e rger, are carried on the newly m e rged entity’s books at new purchase prices, before the DD&A process begins anew on the books of the newly m e rged entity.

L i ne of Bus i ne s s a nd A c quir i ng Com p a n y M e r ge r or A c quis i tion Re por te d V a lue of A c quis i tion ConocoPhillips M er ger of Phil lips and Conoc o 16,000 Shell Oil A c quis i tion of r e m a ining 50% inter e s t in E quilon and 13.5% in ter e s t in Motiv a 3,100 T e s o r o V a ler o ’s G o lde n Eagle Ref i n e r y ( C alif or nia ) 923

Mar a th on Inter e s t s in Eq uator ial G u ine a f r om CMS Ener gy 993 Bur ling t on Res our c e s C anadian as s e ts f r om AT CO 349 Conoco R em aining 28 per c ent of G u lf Indones ia 327 Mar a th on Globex Ener gy ( E quator ial Guinea) 155 O c c i de ntal Petr oleum P a k i s t an pr ope r t ies 7 2
Devon M itc hell Ener g y & Developm ent 4,816 Unoc a l Rem a ining 35% inter e s t in P u r e O i l 410 X T O R oc k y Mounta i n pr oper ties 354 Anada r k o H ow ell Cor poration 311 Apac h e L ous iana pr op er ties f r om Ca r t ex Ener gy 259 El Paso T ens ion leg pl atf o r m , G u lf o f Mex i c o 190 Bur ling t on Res our c e s P r oduc ing pr o per ties in T e xas 141 Shell Oil P ennz oil Q uak er State 2 ,900 Dom i n i on Res our c e s C ove Point LNG Par t ner s h ip 225 Othe r E n e r gy Dom i n i on Res our c e s M ir ant State L i ne Ventur es , Inc

. 185

Sour ces : Com pany annual r epor ts to s har ehold e r s and pr ess r e leas es

. 

### T a b l e 6. Valu e o f M e rg ers, A c q u isit io n s , an d Relat e d T r a n sact io n s b y F R S Co mp a n ies, 2002 (M illion Dollars)

M e r g e r s a nd A c quis i tions be tw e e n FRS Com p a n ie s

U.S

. Oil and Natur a l Gas P r oduc tion

Ref i n i ng , M a rket in g, an d T r an spo r t For e i g n Oil a nd Na tur a l Ga s P r o duc tion Othe r A c quis i tions by FRS Compa n ie s



## Although most of the capital expend itures for U.S. refining cam e from companies involved in m e rgers and acquisitions, other F R S refiners showed an increased commit m ent to these operations in 2002. This latter g r oup of comp anies increase d their capital expenditu res for U. S. refining from $2.9 billon in 2001 to $4.8 billion in 2002. The increased spending was a pparently for refinery upgrades and enhancem ents rather than expansion, in that the gr oup’s crude distribution capacity fell one percent from the prior year. The FRS asset base in refining increased, part of which was due to an acc ounting change regarding Citgo’s Lem ont, Illinois refinery. 43

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 24 Projects noted by those FRS refine rs not involved in m e rgers and acquisitions in 2002 include Exxon Mobil and C h evronTexaco. Exxon Mobil reported a $2.45-billion (6 percen t) increase over 2001 inEnergy Information Administration/Performance Profiles of Major Energy Producers 2002 

## 25 downstream capital expenditures to meet low-sulfur fuel requirements, in addition to cogeneration projects underway at several refineries. 44 

## ChevronTexaco finished upgrades at its El Segundo, California refinery to produce gasoline meeting environmental requirements without the use of the oxygenated blending component methyl tertiary butyl ether (MTBE), and continued construction on a project at the Pascagoula, Loui siana refinery to produce lower-s ulfur motor gasoline and diesel. 45 

## The FRS companies trimmed their capital expenditures for U.S. petroleum mark eting operations sharply in 2002, from $5.6 billion in 2001 to $1.9 billion. In larg e part, this decline was due to fewer marketing assets in the mergers and acquisitions of 2002 compared to 2001. Even excluding mergers and acquisitions, the FRS companies’ capital expend itures for petroleum marketing were down by $1.0 billion, a decline of over 30 percent. The FRS companies’ reduced financial commitment wa s reflected in their owne rship of major gasoline outlets as direct-supplied branded motor gasoline outlets fell fr om 54,085 in 2001 to 46,561 in 2002. Nevertheless, some companies reported posi tive activity in gasoline marketing in 2002
. For example, Amerada Hess added 25 “Hess Express” convenience stores and Exxon Mobil added 180 new “On the Run” convenience stores. 46 

## Abroad, FRS companies’ interest in downstream petr oleum operations appeared to increase in 2002. The companies’ consolidated refi ning capacity outside the United States was 5,642 thousand barrels per day (mb/d), up from 5,572 mb/d in 2001 (Table B28). Further, their capital expenditures for foreign refining/marketing operations increased by 400 mill ion dollars between 2001 and 2002 (Table 5). However, these two developments present an overly positive view of the FRS companies’ commitment to downstream petroleum operations abroad. The increase in refining capacity was largely the result of a reorganization by BP plc, the British parent of the FRS respondent BP America, rather than investment in new capacity. Beginning in 2002, BP America’s consolidated operations include Australi an refineries in BulwerIsland (69.8 mb/d of capacity) 47 

## and Kwinana (158.5 mb/d of capacity) 48 

## . Excluding these two refineries, the FRS companies’ foreign refinery capacity is 5,414 mb/d. The big jump in capital expenditure s is attributable to Phillips Pe troleum’s acquisition of Conoco in 2002. This transaction added over $3 billion in fo reign downstream petroleum assets to the balance sheet of ConocoPhillips, the merged entity. However, the transaction simply sh ifted assets within the FRS group but resulted in no expansi on of capacity. The effect on foreign refining/marketing capital expenditures reported in Table 5 is less than $3 billion since plant and equipment are just parts of total assets but still large. Excluding the effects of mergers and acquisitions, the FRS companies’ capital expenditures for foreign refining/marketing operati ons was down one percent between 2001 and 2002. Despite the drop in expenditures, upgrading of fo reign downstream capacity was evident in 2002. For example, in 2002 Exxon Mobil completed the integrati on of its refineries in Port Jerome-Gravenchon (France) and the integration of its re finery/chemical complexes in Singapore. 49 

## Likewise, ChevronTexaco upgraded its refineries in Pembroke (UK) and Nerefco (Netherlands) to produce fuel meeting the new sulfur specifications. 50

# Other Energy No Longer a S our ce of Cor porat e Growth Until 2002, the other energy lin e of business was a source of corporate gro w th for a m i nority of the FRS comp anies. However, in 2002, other energy capit al expenditures fell 27 percent relative to 2001, reach ing a level of $3.7 billion (Tab le 5). Even th ough the oth e r energy lin e of business, exclud ing unusual item s, still con t ribu ted pos itively to net in com e , this line of business suffered fromthe postEnron flight from energy trading in electricity. (F or additional deta ils on the post-Enron collapse, see the section entitled “The De m i se of Energy Trad ing Impacts Financial Re sults” in Ch apter 1. ) More spec if ically, elec tr icity ge neration projects seem ed to be the prim ary focus of 2002 capital expenditures by FRS companies. For example, Exxon Mobil was expanding its generation capacity at the Black Point Power Station in Hong Kong. 51 

## Dom i nion Resources purchased a 515-megawatt plant in Indiana and comp leted construc tion on three power generation units in Pennsylvania, Ohio, and W e st Virginia. 52 

## BP Am erica is constructing a 570-m e gawatt c ogeneration plant at its Texas City refinery. 53



# Sources and Uses of Cash
In 2002, the FRS comp a n ies faced a num b er of problem s in their dep l oy m e nt of capi t al (Table 7 ) . Cash flow generated by comp a ny operation s was $15 billion lower than the year before, larg ely stemm i ng from poor fi nancial results in downstream petroleum

. Energy comp anies’ bala nce sheets were being scrutinized more intensively by i nvestors due to the collapse in energy trading and revelations of accounting irregularities following th e dem i se of the Enron C o rporation in late 2001. The general responses of the FRS companies were to cut back on outlays and reduce their am ount of debt financing.
( B illion D o llar s )

So u r ces an d Uses o f Cash 2001 2002 Percen t Ch an g e 2001- 2002

Cas h F l ow f r om O per ations 89.6 75.0

- 16.4 Pr oc eeds f r om Long- T e r m Debt 55.0 34.1

- 38.0 Pr oc eeds f r om Dis pos als of As s e ts 7.7 14.3 86.3 Pr oc eeds f r om Equity Sec u r i ty O f f e r i ngs 6.3 4 .9

- 22.2

Additions to Inves t m ent in Plac e 110.4 98.0

- 11.2 Reduc tions in Long- T e r m Debt 34.3 27.9

- 18.7 Dividends to Shar eholder s 17.1 17.7 3 .6 Pur c has e of T r eas ur y Stoc k 7 .5 4.7

- 37.4 O t her Inves t m ent and F i nanc ing Ac tivities , Net 11.9 23.1 93.2 Net Change in Cas h and Cas h Equivalents 1 .3 3.0 136.6

S ourc e : E nergy I n f o rm at i on A d m i ni s t rat i on, Form E I A

- 28 (Fi nanc i a l Report i ng S y s t em ). 

### M a i n S o u r ce s o f C a sh

Main Us es of Cas h T a b l e 7. So u r ces an d Uses o f Cash f o r F R S Co mp an ies, 2001- 2002

Not e : S ourc e s m i nus us es pl us ot her i n ves t m ent and f i nanc i ng ac t i vi t i es (net ) m a y not equal net c hange i n c a s h and c a s h equi val ent s due t o i ndependent roundi ng. P e rc ent c hanges w e re c a l c ul at ed f r om unrounded dat a.


## The large s t outlay is f o r capital expe nditur e s (m easured as additions to investm e nt in place). The FRS comp anies reduced their capital expenditures by $12 billion to $98 billion in 2002. The reduction was Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 26

## accomp lished through a respite from m e rgers and acquis ition s , which had been at reco rd levels in 2000 and 2001, and cutbacks in expenditures for projects outside oil and gas production. T o tal capital expenditures in 2002 for lines of business outsi de oil and gas production, excluding m e rgers and acquis ition s , were 27 percent below expenditu res in 2001.
The cutback s were widespread and reduction s in cap ital expenditures in excess of $1 billion were common a m ong comp anies with recent m e rgers and ac quisitions. Two of the comp anies involved in energy trading, El Paso and W illiam s Comp anies, reduced th eir capital expenditu res by nearly 50 percen t. The only comp anies that in creas ed their cap ital expenditures by more than $1 billion between 2001 and 2002 were ConocoPhillips, with the purchase of Conoco by Phillips fo r $16 billion, Shell Oil, with its acquisition of Pennzoil Quak er State and interests in Equil on and Motiva, and Exxon Mobil. Other outlays subject to cuts we re ex penditu res to reduce lon g -t erm debt, down 19 percent between 2001 and 2002, and purchases of treasury stock, down 37 percent. The only outlay that was not cut was cash dividends to shareholders. Di vidend payouts typically show m odest year-to-year increases. Also, the anticipation of favorable tax treatm ent of divide nds m a de comp anies reluctant to reduce dividends in 2002. The greater attention by investor s to energy comp any balance sheet s discouraged the use of debt financing. The FRS companies is sued $34 billion in long-term de bt in 2002, a 38-percent reduction from the $55 billion raised in the prior year. Even if the fallout from en ergy trading and accounting irregularities had not occurred, the FRS comp anies still would have s hown a reduction in debt financing due to the reduced leve l of m e rger and acquis itio n activ ity in 2002. Despite the emphasis on reducing the role of deb t in comp anies’ balance s h eets, the F R S comp anies’ ratio of long-term debt to stockholders’ equity (a summary measure of the importance of long-term debt in a comp any’s balance sheet) rose in 2002 (Figure 7). The apparent rise in long-term debt was the result of several comp anies recla ssif y ing short-term debt as long-te rm debt and Shell Oil’s assumption of debt in its acquisition of Pe nnzoil Quaker State and its rem a ining interests in Equilon. Cash raised through th e sale of assets by the FRS comp anies increased from $8 billio n in 2001 to $14 billion in 2002. Asset sa les by the companies m o st involved in en ergy trading increased from $1 billion to $3 billion

. However, comp anies with recent m e rgers and acquis ition s accounted f o r m o st of t h e asset sales as they sorted out acquired asse ts tha t they determ ined were not in tegral to the i r core busin e sses.

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 27 0 10 20 30 40 50 60 70 80 90

1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002Percent 

### S&P I ndus t r i a l s

FR S C o m p ani es

S o u r ce s: FR S C o m pani e s : Ener gy I n f o r m at i on Adm i ni s t r a

t i on For m EI A- 28, ( F i nanc i a l R epor t i ng Sys t em )

. S& P I ndust r i a l s : C o m pus t a t PC Pl us , a s e r v i c e of St andar d and Poor ' s

. 

### Fi gur e 7. Long- T e r m D

e bt / E qui t y

R a t i o f o r FR S C

o m p ani es and t h e S & P I ndust r i a l s , 1974- 2002Energy Information Administration/Performance Profiles of Major Energy Producers 2002 

## 28 

# Endnotes

10 

### For a list of the FRS companies in 2002, see the box en titled, “The FRS Companies in 2002,” in Chapter 1. 11 

### Return on equity, a frequently used measure of corporate profitability, is measured by the ratio of net income to stockholders’ equity. 12 

### The Standard and Poor's (S&P) Industrial s is a well-recognized database that incl udes nearly 400 of the largest U.S. industrial companies. Financial statistic s for the S&P Industrials were obtained by accessing Compustat PC Plus, a service of Standard & Poor's, Inc. 13 

### Energy Information Administration, Performance Profiles of Major Energy Producers 2001 , DOE/EIA-0206(01) (Washington, DC, January 2002), p. 53. 14 

### Line-of-business profit measures should be distinguished from measures that re flect company-wide results because the former reflect only allocated income, expense, and a sset items. Two measures of income are presented: operating income and contribution to net income . Operating income by line of business is similar in concept to the operating income measure for total company operations. It is the net of operating revenues and operating expenses (including depreciation, depletion, and amortization) for a line of business. Contribution to net income equals operating income plus income from unconsolidated affiliates and gains on disposals of property, pl ant, and equipment less income taxes imputed to the line of business and excludes certain non-allocable items, primarily interest expense. Interest expense is the principal source of difference between a company-wide net income figure and line-of-business contributions to net income (see Appendix A for further discussion). 15 

### Return on investment is net income divi ded by net investment in place, which is net property, plant, and equipment plus year-end balance for investments and advances to unconsolidated affiliates. 16 

### Energy Information Administration, Monthly Energy Review , (DOE/EIA-0035 (2003/11)) (Washington, DC, November 2003), Table 9-11. 17 

### ChevronTexaco Corporation 2002 Annual Report , pp. 36-37. 18 

### El Paso Coporation 2002 Securities and Exchange Commission Form 10-K, pp. 61-65. 19 

### For FRS purposes, separate reporting of income for chemical and other nonenergy segments was discontinued beginning with the 1987 reporting year. However, the disclosures of chemical segment revenues and operating income made by the FRS companies in their annual reports to shareholders closely track, in the aggregate, compar able disclosures in the Form EIA-28 from 1974 through 1986, when income statement items were collected for chemical bu sinesses by the FRS. Thus, the public disclosures of chemical segment revenue and operating income were utilized for 1987 through 2002. Revenues and operating income for the other nonenergy segment after the 1986 reporting year were obtained by subtracting the publicly disclosed chemical segment values from the none nergy line-of-business values reported on Form EIA-28. 20 

### Exxon Mobil Corporation 2002 Securities and Exchange Commission Form 10-K, p. 29. 21 

### Exxon Mobil Corporation, 2002 Financial and Operating Review , p. 77. 22 

### Energy Information Administration, Performance Profiles of Major Energy Producers 2001 , DOE/EIA-0206(2001) (Washington, DC, January 2003), p. 81. 23 

### Exxon Mobil Corporation, press release (November 13, 2002). 24 

### The largest of these non-cash items is the cost of depreciation, depletion, and amor tization. Also, outlays (receipts) of cash that were recognized as non-cash items in previous income statements (e.g., provisions for a legal settlement taken as a charge against income in a previous year but not actually pa id until the current year) are subtracted from (added to) net income in computing cash flow. Lastly, changes in working capital (excluding cash) due to operations are subtracted. 25 

### To the extent possible, capital expenditures are measured by additions to investment in place , which is defined as additions to property, plant, and equipment (PP&E) plus additions to i nvestments and advances. In 2002 , additions to PP&E accounted for 92 percent of capital expenditures so measured. 26 

### Devon Energy Corporation 2002 Annual Report , p. 14. 27 

### Devon Energy Corporation, press release (January 24, 2002). 28 

### Royal Dutch/Shell, press release (October 31, 2002). 29 

### BP, press release (August 2, 2002). 30 

### ConocoPhillips 2002 Annual Report , pp. 13-15. 31 

### Devon Energy Corporation 2002 Securities and Exchange Commission Form 10-K, p.19. 32 

### Devon Energy Corporation 2002 Securities and Exchange Commission Form 10-K, p.47. 33 

### Anadarko Petroleum Corporation 2002 Securitie s and Exchange Commission Form 10-K, p.14. 34 

### Apache Corporation 2002 Securities and Exchange Commission Form 10-K, p. 4, F16. 35 

### BP November 2003 discussion on: Upstream Build Projects.” Web address: http://www.eia.doe .gov/perfpro/ref_pi/fig5.gif. 36 

### Two other trains that were approved earlier have yet to begin full operations, although one began deliveries in August 2002. Atlantic LNG, Company Website (at H http://www.atlanticlng.com H) train2_3.php3 (as of 1/14/2004).Energy Information Administration/Performance Profiles of Major Energy Producers 2002 

## 29 37 

### ConocoPhillips, press releas e (September 23, 2002). 38 

### ChevronTexaco Corporation, pres s release (October 1, 2002). 39 

### Exxon Mobil Corporation, press release (February 11, 2003). 40 

### Devon Energy Corporation, press release (January 24, 2002). 41 

### ConocoPhillips Company, press release (August 30, 2002). 42 

### Devon Energy Corporation, press release (April 25, 2003). 43 

### CITGO Petroleum Corporation 2002 Securities and Exchange Commission Form 10-K, p. 2. 44 

### Exxon Mobil Corporation, 2002 Financial and Operating Review , pp. 63, 66. 45 

### ChevronTexaco Corporation, 2002 Supplement to the Annual Report , p. 40. 46 

### Exxon Mobil Corporation, 2002 Annual Report , p. 17. 47 

### The Oil and Gas Journal , Volume 100, Number 52 (December 23, 2002), p.72. 48 

### The Oil and Gas Journal , Volume 100, Number 52 (December 23, 2002), p.72. 49 

### Exxon Mobil Corporation, 2002 Financial and Operating Review , p. 65. 50 

### ChevronTexaco Corporation, 2002 Supplement to the Annual Report , p. 40. 51 

### Exxon Mobil Corporation, 2002 Financial and Operating Review , pp. 31 and 40. 52 

### Dominion Resources, Inc., 2002 Annual Report , pp. 13 and 63. 53 

### BP plc, Annual Report on Form 20-F 2002 , p. 43.

# 3. Behind the Bottom Line Upstream Income The oil and gas production operation s of the FRS comp anies in the United States fared worse in financial perfor m ance in 2002 than did the comp anies’ foreign operations. Net incom e from U.S. oil and gas production, excluding unusual item s, totale d $16.2 billion in 2002, a 21- percent decline f r om prior-year results (Table 8). Fore ign upstream operations registered a m u c h sm aller 2-percent decline. The difference in financial results is largely traceable to changes in revenues in 2002.
Revenues from U.S. ups tream operations declined al m o st $8 billion, largely due to lower natural gas revenues (T able 8). The realized natural gas pric es of the FRS comp anies averaged $3.07 per thousand cubic feet (Mcf) in 2002, a decline of 90 cents, or 23 percent, from the average price realized in 2001 (Table 9). This decline was less than the drop in the overall U.S. wellhead price of $1.07 per Mcf. A contributing factor m a y be due to the FRS comp anie s having som e success in hedging their natural gas prices, or it m a y be that the FRS companies sold m o re of their natural gas wh en prices were higher. (EIA’s average U.S. wellhead price excludes the e ffects of price hedges.) Nevertheless, the lower natural gas price m o re than offset the 10-percent in creas e in th e FRS comp anies’ U.S. upstream natural gas sales volum es.
Dom e stic oil revenues declined slightly between 2001 and 2002, as a 2-percent increase in FRS comp anies’ average U.S

. wellhead price (dom estic pr oduction average sales price) was m o re than offset a by a 4-percent drop in sales vo lumes (Table 9). Foreign oil production was up one percent as increased production from Canada, Af rica, and South Am erica m o re th at offset lower North Sea and Form er Sovi et Union and Eastern Europe production.
The decline in dom estic natural gas revenues was pa rtially offset by lower operating expenses in 2002 (Table 8). Operating expenses we re lower, in part, because the FR S companies’ U.S. crude oil and natural gas production levels were each down 1 percen t (Table 9). More important was the nearly $2- billion decline in depreciation, depletion, a nd am ortization (DD&A) between 2001 and 2002. DD&A was unusually high in 2001, up by $7 billion from the pr ior year, because of writedowns of oil and gas assets. As n o ted in the p r ev ious edition of this report ( Performance Profiles of Major Energy Producers 2001, January 2003): “In 2001, the FRS comp anies charged $5.3 billion against pre-tax inco m e for asset writedowns in U.S. oil and gas production operation s and $2.7 bi llion in foreign upstream operations. Asset writedowns are usually included in depreciation, depletion, and am ortization (DD&A). Higher expenses for DD&A wer e the m a in sources of in creas ed operating co sts in the FRS comp anies’ upstream operations between 2000 and 2001.” 54 

## Foreign upstream revenues of the FRS comp anies were less affected by lower natu ral gas prices in 2002. Natural gas is a sm aller share of foreign oil and gas production than dom e s tically, 42 percent vs. 54 percen t, resp ectiv ely, on an energy -e quivalent basis. Accordingly, th e impact of lower gas prices on foreign upstream revenues is less than on dom e stic ups tream revenues. Also, the fall in dom e stic natural gas prices was m u ch steeper than th e fall in foreign prices in 2002 (Tab le 9). This decline m o re than offset higher oil and gas production and higher crude oil prices. Natural gas production from foreign

Energ y I n for m at ion A d mi nistra ti on / Perf orma nc e Profiles of Maj o r Energ y Pr od ucers 2002 

## 31

### 2001 2002 2001 2002 2001 2002 O il and Natur a l G a s Revenues O i l N A N A 31.6 30.9 N A N A Natural G a s N A N A 47.4 40.2 N A N A T o tal Revenues 141.7 132.5 79.0 71.1 62.7 61.4 Ex pens es Depr ec iation, Depletion, and Am or tiz a tion 32.2 32.8 20.0 18.3 12.1 14.6 Lif t ing Cos t s 24.7 25.1 12.9 12.5 11.8 12.6 Ex plor ation Ex pens es 5.2 4 .7 3.0 3 .1 2.2 1 .5 G ener al and Adm i nis t r a tive Ex pens es 2.7 2 .6 1.9 1 .7 0.8 0 .9 Raw Mater i al Pur c has es 21.9 15.8 16.1 12.5 5.8 3 .3 O t her Cos t s ( R evenues ) 4.9 10.6 -0 .2 3

. 8 5.1 6 .8 T o tal O per ating Ex pens es 91.2 91.1 53.3 51.4 37.9 39.7 O per ating Inc o m e 50.5 41.5 25.7 19.7 24.8 21.7 O t her Inc o m e ( E x pens e) a 

### 4.8 4 .8 1.6 1 .6 3.2 3 .2 Inc o m e T a x Ex pens e 23.1 18.3 9.6 6 .3 13.4 12.0 Net Inc o m e 32.2 27.9 17.6 15.0 14.6 12.9 Les s Unus ual Item s -4 .5 -4 .0 -3 .0 -1 .2 -1 .5 -2 .8 Net Inc o m e , Ex c l uding Unus ual Item s 36.7 32.0 20.6 16.2 16.1 15.7 Unit Values ( D ollar s Per Bar r e l of Pr oduc tion CO E) b 

### D i re ct L i f t i n g C o st s (E xcl u d i n g T a xe s) 3.49 3.58 3.53 3.56 3.45 3.60 Pr oduc tion T a x e s 0.78 0.67 0.85 0.75 0.70 0.59 Ratios ( P er c ent) Return on Inv e s t m ent c 

### 12.2 9 .9 13.1 10.5 11.2 9 .2 E f f e ct i v e T a x R a t e d 

### 41.7 39.9 35.3 29.7 48.0 48.6 T a ble 8

. Inc o me Compone nts a nd Fina nc ia l Ra tios in Oil a nd Na tur a l Ga s P r oduc tion f o r F R S Co mp an ies, 2001- 2002 (Billion Dollars)

Not e : S u m of c o m ponent s m a y not equal t o t a l due t o i ndependent roundi ng. NA = Not avai l abl e. c Net I n c o m e di vi ded by net i n ves t m ent i n pl ac e (Net i n ves t m ent i n pl ac e = net propert y , pl ant , and equi pm ent pl us i n ves t m ent s an d advanc es ). d I n c o m e t a x ex pens e di vi ded by pret ax i n c o m e

. a E a rnings of unc ons olidat ed af f iliat e s and gain (los s ) on dis pos it ion of as s e t s

. b COE = Crude oi l equi val ent

. Dry nat ural gas w a s c onvert ed at 0. 178 barrel s of oi l per t hous and c ubi c f eet

.

S ourc e : E nergy I n f o rm at i on A d m i ni s t rat i on, Form E I A

- 28 (Fi nanc i a l Report i ng S y s t em ). 

### Compone nts of Inc o me a nd Fina nc ia l Ra tios Wor l dw ide For e i gn Un it ed St at es



## fields was up 11 percent between 2001 and 2002 vs. a 1- percent decline in the United States (Figures 8a and 8b ). The bulk of the increased foreign natural gas produc tion was from Canada and Asia-P acific locales. Canadian natural gas production increased 24 per cent, with so m e of the companies that m a de acquisitions of Canadian producers in recent y ears (Devon Energy and Burlington Reso urces) accounting f o r m o st of t h e increase. The 17-perc ent increase in the FRS com p anies’ Asia-Pacific natural gas production largely cam e from Exxon Mobil and, to a lesser extent, from ChevronTexaco. Exxon Mobil’s 2002 production in In donesia rebounded from a low in 2001 that had resulted from a shutdown in onshore operations “due to civil unrest,” 55 

## while ChevronTexaco’s production in the Philippin e s grew because 2002 was its fi rst full y ear of operation there. 56 

## Other regions registering notable incr eases in n a tu ral gas p r oduction were South Am erica and Af rica, as well as comp anies active in deepwater production off the west coast of Afri ca. South Am erican natural gas production was up 16 percent, larg ely due to in creased production from BP’s Am herstia fiel d in Trinidad-Tobago in order to

Energ y I n for m at ion A d mi nistra ti on / Perf orma nc e Profiles of Maj o r Energ y Pr od ucers 2002 

## 32

## supply a second liquefied natural gas train there. 57 

## African natural gas production was also up, by 37 percent, largely due to B P ’s increased production from the Tem s ah field in Egypt, 58 

## and Marathon O il’s initiation of production in Equatorial Guinea. 59



### P r ices, S a les, and P r oduction 2001 2002 Percen t Ch an g e 2001- 2002 W o rldw ide O il and G a s Production a 

### C r ude O il and N G L (M illion Barrels) 3 ,087 3,093 0.2 D r y N a tural G a s (Billion C ubic Feet) 15,148 15,747 4.0 T o tal (M illion Barrels C O E) b 

### 5,784 5,896 1.9 D o mestic O il and G a s Production a 

### C r ude O il and N G L (M illion Barrels) 1 ,363 1,346 -1.2 D r y N a tural G a s (Billion C ubic Feet) 8 ,838 8,713 -1.4 T o tal (M illion Barrels C O E) b 

### 2,936 2,897 -1.3 D o mestic O il and G a s Sales Volumes C r ude O il and N G L (M illion Barrels) 1 ,498 1,433 -4.3 D r y N a tural G a s (Billion C ubic Feet) 11,957 13,109 9.6 T o tal (M illion Barrels C O E) b 

### 3,626 3,766 3.9 D o mestic Production Av erage Sales Prices C r ude O il and N G L (D ollars Per Barrel) 21.11 21.59 2 .3 D r y N a tural G a s (D ollars Per T housand C ubic Feet) 3 .96 3 .07

- 22.6 Com pos ite (Dollars Per Barrel COE) b 

### 21.79 18.89

- 13.3 Foreign O il and G a s Production a 

### C r ude O il and N G L (M illion Barrels) 1 ,724 1,747 1.3 D r y N a tural G a s (Billion C ubic Feet) 6 ,310 7,034 11.5 T o tal (M illion Barrels C O E) b 

### 2,847 2,999 5.3 Foreign Production Av erage Sales Prices C r ude O il and N G L (D ollars Per Barrel) 22.04 23.05 4 .6 D r y N a tural G a s (D ollars Per T housand C ubic Feet) 2 .91 2 .54

- 12.8 C anada 3.63 2.68 -26.1 O E C D Europe 3.18 2.93 -8.0 O t her Foreign 2 .25 2 .33 3 .6 Com pos ite (Dollars Per Barrel COE) b 

### 19.97 19.38 -2.9

b COE = Crude oi l equi val ent

. Dry nat ural gas w a s c onvert ed at 0. 178 barrel s of c r ude oi l per t hous and c ubi c f eet

. S ourc e s : E nergy I n f o rm at i on A d m i ni s t rat i on, Form E I A

- 28 (Fi nanc i a l Report i ng S y s t em ). Forei gn produc t i on s egm ent per uni t s a le s v a lues w e re c o m p iled f r om inf o rm at ion in FRS c o m panies ' f ilings of S e c u rit i es and E x c hange Com m i s s i on Form 10-K , annual report s t o s harehol ders , and s uppl em ent s t o annual report s

. 

### T a ble 9. A v erage P r ices, S a les, and P r oducti on in Oil and Natural Gas for FRS Companies, 2001- 2002

a P r oduc t i on i s on a net ow ners h i p bas i s

. S a l e s are dom es t i c produc t i on s egm ent s a l e s

. S ee A ppendi x A f o r di s c u s s i on of FRS report i ng c onvent i ons

.



## Lifting costs decreased $0.4 billion in the United States but increased $0.8 billion abroad (Table 8). The decrease in the United States occu rred because o i l and gas production (Table 9) and production taxes per barrel fell, while the incr ease abroad resulted from increased o il and gas production and increased lifting costs per barrel, excluding production taxes. The next section of th is chapter reviews lifting costs in more detail. 

# Lifting Costs Little Changed -- Product i on Ta xe s Decli n e Worldwide lifting costs (including taxes) changed lit tle in 2002, with a sm all decline in the United States offsetting a sm all increase in f o reign regi ons (Table 10). Over the long term , lifting costs declined very slightly between 1994 and 2002, after de clining faster in the early years of the 1990’s (Figure 9). [Lifting costs (also ca lled production costs) are the per ba rrel costs of pr oducing oil and
Energ y I n for m at ion A d mi nistra ti on / Perf orma nc e Profiles of Maj o r Energ y Pr od ucers 2002 

## 33

### 0 200 400 600 800 1, 000 1, 200 1, 400 1, 600 1, 800 2, 000

1981 1984 1987 1990 1993 1996 1999 2002Million Barrels



### Sour c e : Ener gy I n f o r m at i on Adm i ni s t r a t i on, For m EI A- 28, ( F i nanc i a l R epor t i ng Sys t em )

. For ei gn 

### Figure 8a. O il Production for FR S C o m p anies, 1981-2002

O ffs h o r e O n shor e



### 0 1, 000 2, 000 3, 000 4, 000 5, 000 6, 000 7, 000 8, 000

1981 1984 1987 1990 1993 1996 1999 2002Billion Cubic Feet



### Sour c e : Ener gy I n f o r m at i on Adm i ni s t r a t i on, For m EI A- 28, ( F i nanc i a l R epor t i ng Sys t em )

. F o r e ig n 

### Figure 8b. N a tural G as Production for FR S C o m p anies, 1981-2002

O ffs h o r e O n shor e

Energ y I n for m at ion A d mi nistra ti on / Perf orma nc e Profiles of Maj o r Energ y Pr od ucers 2002 

## 34

## natural gas (m easured on a barrel-of-oil equivalent basis). T h ey include the costs to operate and m a intain wells and related equipm ent and facilities after hydrocarbons (both cr ude oil and natural gas) have been found and/or acquired, and developed f o r production.] These per barrel costs include depreciation costs for capital equipm ent and facilities used in producti on. Total lifting costs are direct lifting costs plus production taxes.

2001 2002 Per c ent Change 2 001 2002 Per c ent Change 200 1 2002 Per c ent C hange United States O n s h o r e - - - - - - - - - - - - 5

. 1 9 5

. 0 2

- 3 Of f s ho re -- -- -- -- -- -- 2

. 9 3 2

. 9 3 0

. 0 T o t a l United State s 3.53 3.5 6 0.7 0 .85 0 .75

- 11.5 4

. 3 9 4 .32

- 1.6 Fo re i g n Cana da 3.92 4.0 7 3.8 0 .22 0 .19

- 13.8 4

. 1 4 4 .26 2 .9 O E C D Eur ope 3.51 3.5 4 1.1 0 .66 0 .52

- 20.3 4

. 1 6 4 .07

- 2.3 F o r m er Soviet Unio n and Eas t er n Eur ope 3.85 3.2 1

- 16.6 0 .89 0 .00

- 100.0 4

. 7 4 3 .21

- 32.3 Af r i c a 3.58 4.2 3 18.3 1 .20 0 .92

- 22.9 4

. 7 7 5 .15 8 .0 Midd le Eas t 3.05 3.7 8 24.1 0 .41 0 .35

- 15.9 3

. 4 6 4 .12 19.3 O t he r Eas t er n Hem i s pher e 3 .21 3 .2 7 1 .8 0.88 0.72

- 17.4 4

. 0 9 4 .00

- 2.3 O t he r W e s t er n Hem i s pher e 2 .75 2 .5 7

- 6.7 0 .66 1 .12 70.7 3

. 4 1 3 .69 8 .2 T o t a l Foreign 3 .45 3 .60 4 .6 0.70 0.59 -14.8 4

. 1 4 4 .20 1 .3
W o r l d w ide T o tal 3 .49 3 .5 8 2 .6 0.78 0.67

- 13.3 4

. 2 7 4 .26

- 0.3

S ourc e : E nergy I n f o rm at i on A d m i ni s t rat i on , Form E I A

- 28, ( F i nanc i a l Report i n g S y s t em ). 

### T a b l e 10. L i f t i n g C o st s b y Reg i o n f o r F R S Co mp an ies, 20 01- 2002 ( D ollar s Per Bar r e l of C r ude O il Equivalent)

-- = Da t a not avai l abl e. Not e : S u m of c o m ponen t s m a y not add t o t o t a l due t o i nde pendent roundi ng

. 

### Re gion Direct Liftin g Cost s P roduction T axes T o tal

. 3



## One of the most notable changes in lifting costs in 2002 was the dec line in both domestic and foreign production taxes (Table 10). 60 

## Production taxes increased only in the Other W e stern Hem i sphere region (prim a rily L a tin Am erica), which ex perien ced a fairly large increas e. 61 

## In the United States, production taxes (also called severance taxes) are largely levied by State governm e nts, largely against production in the U.S. Onshore and usually in the form of a pe rcent of the value of the oil and gas produced. 62 

## In the first half of the 1980’s, dom e stic production taxes per barrel-of-o il equivalent (boe) f o r the FRS comp anies fell sharply from their 1981 high of $10 per boe (in real 2002 dollars), re flecting in large part a substantial decline in crude oil pr ices and, to a lesser extent, natural gas prices over th at period (Figure 10). However, in 2000 and 2001, when crude oil and natu ral gas prices reached hi ghs not seen since the m i d-1980’s, dom e stic production taxes rem a ined below $1 per boe.
One reason that dom estic production taxes for the FRS comp a n ies did not respond m o re dram atically to increased prices in 2000 and 2001 is th e m ove m e nt of dom e stic production from onshore to offshore. In 1985, 31 percent of the F R S comp anies’ dom estic oil and gas production (on a boe basis) cam e from the Offshore region. By 2002, production from the Offshor e reached 51 percent of the dom e stic total. Since production from Federal Offshore areas is not subject to State severance taxes, the share of production exposed to severance taxe s for the FRS comp anies has been falling. Inexplicably, production taxes paid b y the FRS comp anies on foreign pro ducti on, which is subject to m u ltiple tax schem e s, have historically moved in ta ndem with dom e stic pro duction taxes (Figure 10). 63

Energ y I n for m at ion A d mi nistra ti on / Perf orma nc e Profiles of Maj o r Energ y Pr od ucers 2002 

## 350 1 2 3 4 5 6 7 8

1981 1984 1987 1990 1993 1996 1999 2002Constant Dollars (2002) per BOE Uni t ed S t at es

For e ign

Not e : Di rec t l i f t i ng c o s t s are t he c o s t s of ex t r ac t i ng oi l and gas , ex c l udi ng produc t i on t a x e s

. B O E = B a rrel s of c r ude oi l equi val ent

. S ourc e : E nergy I n f o rm at i on A d m i ni s t rat i on, Form E I A

- 28 (Fi nanc i a l Report i ng S y s t em ). 

### Figur e 9. D i r ect O il and G as Lifting C o sts for FR S C o mpanies, 1981-2002

0. 00 2. 00 4. 00 6. 00 8. 00 10. 00

1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002Constant Dollars (2002) per BOE

Dom esti c Foreign

Not e : Forei gn produc t i on t a x e s i n c l ude royal t y paym ent s w h i l e dom es t i c produc t i on t a x e s do not

. B O E = B a rrel s of c r ude oi l equi val ent

. S ourc e : E nergy I n f o rm at i on A d m i ni s t rat i on, Form E I A

- 28 (Fi nanc i a l Report i ng S y s t em ). 

### Figur e 10. Pr oduction Taxes for FR S C o mpanies, 1974-2002

Energ y I n for m at ion A d mi nistra ti on / Perf orma nc e Profiles of Maj o r Energ y Pr od ucers 2002 

## 36

## The sm all declin e in wo rldwide pro duction taxes was offset by an increa se in per barrel direct lifting costs in 2002 (Table 10). Africa wa s the la rges t c ontribu tor to the inc r eas e in worldwid e dire ct lif t ing costs. This is because p r oduction by the FRS companie s in Africa increased only 6 percen t, while to tal expenditures on production (excluding production taxes) incr eased 25 percent, which resulted in an 18- percen t increase in d i rect lifting costs. W o rldwide di rect lifting costs of the FRS companies als o were notably influenced by in creas es in C a nada and the Middle East, but be cau se of rela tiv el y less production there, were not as signif icant as thos e of Africa. 64 

## One cause of higher direct lifting costs can be a decline in oil and gas pr oduction, with fixed costs spread over less production. Another possible cause of higher lifting costs is related to th e launching of new projects, such as bringing new production online or initiating enhanced recovery program s, which often have higher costs initially.
W ith an increase of 15 percen t, Ca nada led all regions for increased production in 2002 (Table B 25). Production in Africa also increased, by 3 percent, while production in the Middle East declined slightly. In contrast, the Other W e stern Hem i sphere was th e only region m a king a subs tantial co ntribu tion to lower worldwide direct lifting costs; oil and gas production there grew tw ice as fast as direct production spending. While 2002 worldwide total lifting costs (i.e., direct li fting costs plus producti on taxes) were virtually unchanged, although the Middle East re gion and the Form er Soviet Uni on and East Europe region had relatively large changes in total lifting costs in 20 02. In the Middle East, production taxes declined, and an increase in direct lifting costs wa s the only cause of the in creas e in to ta l lifting costs. In contrast, the Form er Sovi et Union and East Europe was the only re gion to exhibit a decline in both direct lifting costs and production taxes, which resulted in a large relative decline in tota l lifting costs for the region. The FRS comp a n ies have just begun subs tantial production in the Form er Soviet Union and East Europe, with production there m u ch less than in any other region. Increased pr oduction at established projects also m a y lead to falling lifting costs because fixed costs are spread over more production.


# U.S. Refining and Marketing
Profitability of U.S. Refining/Marketing Oper ations Lowest in Survey History

The results of 2002 established a new record as th e m o st unprofitable year for the F R S comp anies’ refining/m a rketing operations in the 26-year history of the FRS. These disappointing results cam e after a 6-year period of alm o st continuous ly increasing profitability, which had resulted in returns from the FRS dom e st ic refining/m a rketing operations becom i ng competitive with all other lines of business (Figure 11) and was referred to ju st a year ago as a “sort of ‘g olden age’ of U.S. refining and m a rketing.” 65 

## In addition, perhaps one of the m o st unsettling aspects of the historical losses re ported in 2002 is that they cam e on the heels of the second-m ost profitable year in the history of the FRS. Thus, in view of the apparently tenuous nature of profitability gains in this line of busin ess, it appears that the urgency of the ongoing cos t -cu tting efforts th at ch aracterized th e dom estic refining/m a rketing operations of the FRS comp anies throughout the 1990’s will con tinu e unabated through this decade.

Energ y I n for m at ion A d mi nistra ti on / Perf orma nc e Profiles of Maj o r Energ y Pr od ucers 2002 

## 37

## The change in the profitability of U.S. refini ng/m a rketing operations can easily be explored by exam ining the net refined product m a rgin (net m a rgin ), which is highly correlated with profitability. 66 

## The net m a rgin is the gross m a rgin (refined product revenues m i nus purchases of raw m a teria l s in put to refining and refined product purchases) m i nus out-o f-pocket operating costs per barrel of refined product sold. The net margin m easures before-tax cas h earnings from the production and sale of refined products. 67 

## The $0.19 per barrel net m a rgin of 2002 was th e lowest since 1984 (when the net m a rgin, after adjusting for inflation, was $0.01 per barrel) a nd the second lowest in the history of the FRS (Figure 12), barely surp assing the $0.21 per barrel (also adju sted for inflation) achieved in 1987.

-5 0 5 10 15 20 25 30

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002Percent



### Sour c e : Ener gy I n f o r m at i on Admi ni s t r a t i on, For m EI A- 28 ( F i nanc i a l R epor t i ng Sys t e m)

. 

### Fi gur e 11. R e t u r n on I n vest m e nt i n U

. S

. and For ei gn R e f i ni ng/ M a r ket i ng, and A l l O t her Li nes of B u si ness f o r FR S C o m p ani es, 1980- 2002

U. S

. R e

f i ni ng/ Mar ket i n g A

l l Ot her Li nes of B u si ness For ei gn R e

f i ni ng/ Mar ket i n g



# Lower Pr oduct Price s Re duce Pr oduct Sale s Re ve nue The 7-percent decline in petroleum product sales reve nues (T able 11) was partially due to lower prices received, which fell 4 percent in 2002 comp ared to 2001 (Table 12). Declines in the average price received for motor gasoline (falling 6 percen t) an d dist illate (falling 8 percent) were som e what offs et by sm all gains (6 percent) in the average price for ot her petroleum products. R e venue from other sources (e.g., non-petroleum sales at convenien ce stores) also fell while operating cost increased slightly. The com b ination was disastrous and resu lted in an op er ating los s of $1.5 billion a nd a net loss of $2.2 billion ($1.0 billion excluding unusual item s).
Econom ic growth (2.4 percent), cooler winter weat her (2.2 percent m o re heating degree-days), and warm er summ er weather (11 percent more c ooling degree-days) in 2002 comp ared to 2001 68


## am eliorated the downward trend in prices. However, thes e factors were insufficient to overwhelm the damp ening effect of unusually hi gh end-of-2001 product stock levels (and continuing through the first part of 2002) brought on by events in 2001, incl uding the worldwide econom i c downturn and the impacts of the terror ist attacks of 9/11.

Energ y I n for m at ion A d mi nistra ti on / Perf orma nc e Profiles of Maj o r Energ y Pr od ucers 2002 

## 38

### 0 2 4 6 8 10 12 14

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 20022002 Dollars per Barrel 

### Fi gur e

1 2

. U

. S

. R e

f i ne d P r oduc t M

a r g i n s a nd C o

s

t s

pe r B

a r r e l of P

e

t r

ol e u m P r oduc t S

o l d fo r F R S

C

o m p

an i es, 1980- 2002

No t e : The gr os s m

a r

g i n i s

r

e

f i ned pr oduc t r

e

v

enues l e

s s

r

a

w

m

a

t e r i al c o

s t and pr oduc t pur c has es di v i ded by r

e

f i ned pr oduc t sa l e s v o l u m e

. S our c

e : E ner gy

I n

f o r m at i on A d m i ni s t r

a

t i on, For m E I A

- 28 ( F i nanc i a l R epor t i ng S y

s t em )

. Ne

t M

a r

g i n O

per at i ng C o

s t s 

### G r

o

ss M a r

g i n



### 2001 2 002 Perc en t Change 2001 - 2002 Do me st ic Ref i n i n g /M arket in g O p erat io n s R e fin ed Product Sal e s R e v enue 291,609 27 2,190 -6.7 O t he r R e v enue a 

### 19,301 1 6 ,600 -14.0 O perating Ex pense a, b 

### 294,536 29 0,282 -1.4 O p e r ating Income b 

### 16,374 -1,492 -109.1 N e t In come, ex cludi ng unusual Item s 12,829 -1,011 -107.9 U nus ual Items -878 -1,153

-- Net Income 11,951 -2,164 -118.1


### For e i gn Re fining/M a r k e t ing Op e r a t ions R e fin ed Product Sal e s R e v enue 142,949 14 2,227 -0.5 O t he r R e v enue a 

### 14,249 6,300 -55.8 O perating Ex pense a, b 

### 152,420 14 7,298 -3.4 O perating Income b 

### 4,778 1,229 -74.3 N e t Income, ex clud ing unusual Ite ms 3,239 564 -82.6 U nus ual Items -124 -112

-- Net Income 3,115 452 -85.5 

### T a ble 1 1

. U.S

. a n d For e i gn Re f i ning/M a r k e t ing Fina nc ial Ite m s for F R S Co m p an ies, 200 1- 2002 ( M illion D o llar s )

a Raw m a t e ri al s revenue s are net t ed aga i n s t t o t a l operat i n g ex pens e. b E x c l ud es unus ual i t em s

. S ourc e : E nergy I n f o rm at i on A d m i ni s t ra t i on, Form E I A

- 2 8 (Fi nanc i a l Rep o rt i ng S y s t em ). -- = No t m eani ngf ul

.

Energ y I n for m at ion A d mi nistra ti on / Perf orma nc e Profiles of Maj o r Energ y Pr od ucers 2002 

## 39

### 2001 2002 Percen t Cha nge 2001- 2002 Ref i ned Pr oduc t Sales ( M illion Bar r e ls per Day ) 23.6 23.0 -2 .5
G a s o line Aver age Pr ic e 36.96 34.87 -5 .6 Dis t illate Aver age Pr ic e 32.96 30.49 -7 .5 O t her Pr oduc ts Aver age Pr ic e 26.30 27.81 5.8

All Ref i ned Pr oduc ts Aver age Pr ic e 33.88 32.43 -4 .3 Les s : Raw Mater i als Cos t s and Pr oduc t Pur c has es 26.07 26.16 0.3

Equals : G r os s Ref i ning Mar g in 7.81 6.27

- 19.7 Les s : Dir e c t O per ating Cos t s 5 .09 6 .08 19.5

Equals : Net Ref i ning Mar g in a 

### 2.72 0.19

- 93.0

Res e ller / w holes aler s p r ead ( dealer pr ic e - w holes ale pr ic e) 3.05 2.32

- 24.1 Retailer s p r ead ( c om pany - oper ated pr ic e - dealer pr ic e) 3.16 4.27 35.1 T a b l e 12. Sales, Prices, Co st s, an d M a rg in s in U. S. Ref i n i n g / M a rket in g f o r F R S Co mp an ies, 2001- 2002

( N om inal Dollar s per Bar r e l)

a S ee A ppendi x B , Tabl e B 32, f o r t he c o m ponent s t o c a l c ul at e t h e ref i ned produc t m a rgi n

. S ourc e : E nergy I n f o rm at i on A d m i ni s t rat i on, Form E I A

- 28 (Fi n a n c i al Report i ng S y s t em ). 

## Industry-wide petroleum product st ocks were 9 percent higher in 2002 than in 2001 over the first quarter, falling to 4 percent over the second quarter and 2 percent ove r the third quarter (Figure 13), which exerted substantial (and declining) downward pr essure on petroleum product prices comp ared to a year earlier. 69 

## Industry-wide stocks of motor gasoline al so were higher during the first part of 2002 comp ared to 2001, but were m u ch more sim ilar to the average over the period of 1996 through 2000 (Figure 14 ) than was the case for petroleum products in g e neral. The acco mpanying declin e in m o tor gasolin e prices received by the FRS comp anies also was somewhat sm aller at 6 p e rcent.



# Lower Pr oduct Sal es M a gnif y D o w n w a rd Pre s s u re on R e ve nue The downward pressure on revenues created by lower product prices was m a gnified by lower product sales in 200 2 relative to 2001. Sale s fell a relativ e ly slight 0. 6 m illion barrels per d a y agains t the 2001 level of alm o st 24 m illio n barrels for a 3-percent d eclin e in 2 002 relative to 2001 (Table 12), larg ely due to a 12-percent decline in the sa les of the am orphous category of “other products” (i.e., petroleum products other than m o tor gasoline and distillate) (Tab le 13). Motor gasoline sa les were essentially flat while distillate sales fell a slight 2 percent. Thus, sales of the more highly valu ed products did little to offset the effects of th e product price declines. Meanwhile, ref i nery c a p acity re por te d by the FRS comp anies f e ll sl ightly (less than 1 percen t) 70 

## (Table 14) as sm all expansions in the capacity of m a ny refine ries larg ely offset Precor’s closing of its Hartford, Illinois refinery in October 2002 71 

## and BP’s sale of its Yorktow n, Vi rginia refinery to Giant Industries. 72 

## A few intra-FRS transactions (all of which occurr ed during 2002) shifted a ssets around am ong the FRS comp anies. For example, Tesoro acq uired Valero ’s Golden E a gle refinery , 73 

## Shell purch ased Texaco ’s share of Equilon and subsequently consolidated the Equilon assets, 74 

## and Phillips acquired Conoco via me r g e r
. 75 

## Addition a lly, all of these tra n sactions co ntribu ted to the 25-pe rce n t inc r ease in net inve stm e nt in place between 2002 and 2001. This is because an asset is carried on a comp any’s books at its purchase price less the deprecia tion, depletion, and am ortization (DD&A) reductions taken over a

Energ y I n for m at ion A d mi nistra ti on / Perf orma nc e Profiles of Maj o r Energ y Pr od ucers 2002 

## 40

## num b er of years, but then, when sold, this sam e asset is carried on the new owner’s books at the new purchase price, before the DD&A process begins anew with the purchasing comp any. Further, upgrading of refineries c ontinued to occur during 2002 76 

## and also contributed to the increase.

580 600 620 640 660 680 700 720

F i r s t Q uar t e r S ec ond Q uar ter T hi r d Q uar t e r F our th Q uar terMillion of Barrels 1996- 2000 A v er age

2001 2002

0 

### F

i g u r e 13

. Q u a r t e rl y U

. S

. C o m m e r c i a l P e t r o l eu m P r o d u c t S t o c ks , 19 96 - 2 0 0 0 A v

e r a g e , 20 01 , an d 20 02

S our c e : E ner gy I n f o r m ati on A d m i ni s t r a t i on, P e t

r ol eum S uppl y Monthl y , D O E / E I A

- 0109 ( V ar i ous i s s ues , W a s h i ngt on, D C ) , T

abl e 51.

145 150 155 160 165 170

Fi rs t Quart e r S ec ond Quar t e r T hi rd Quart e r F ourt h Quart e rMillionsof Barrels

0 1996-2000 A v erage

S ourc e : E nergy I n f o rm at i on A d m i ni s t rat i on, P e t r ol

eum S u ppl y M ont hl

y , DOE / E I A

- 0109 (V ari ous i s s ues , W a s h i ngt on, DC), Tabl e 51. Fi gure 14. Quarterl y U. S

. M o tor Gasol i ne S t ocks, 199 6-2000 A verage, 2001, and 2002

20 02

2001

Energ y I n for m at ion A d mi nistra ti on / Perf orma nc e Profiles of Maj o r Energ y Pr od ucers 2002 

## 41

### 2001 2002 Percen t Cha nge 2001 - 2002
G r oss M a rgin 7.81 6.27 -19.7

- M a rketing C o sts 1 .59 1 .57 -1.1 - Energy C o sts 1 .32 1 .21 -8.4 - O t her O perating C o sts 2 .19 3 .31 51.2

= N e t M a rgin 2.72 0.19 -93.0
Product Sales Volume

M o tor G a soline 12,435 12,469 0.3 D i stillate 6,958 6,822 -2.0 O t her Products 4,185 3,701 -11.6

To t a l 23,579 22,991 -2.5 

### T a ble 1 3

. U.S

. Re fine d P r oduc t M a r g ins a nd Cos t s pe r Ba r r e l S o ld a nd P r oduc t S a le s V o lume for F R S Co mp an ies, 2001- 2002

(Do l l a rs p e r B a rre l )

(M illion B a rrels)

S ourc e : E nergy I n f o rm at i on A d m i ni s t rat i on, Form E I A

- 28 (Fi nanc i a l Report i ng Sy ste m )

.



### 2001 2002 Percen t Change 2001- 2002

U.S. Ref i ning Additions to Inves t m ent in Plac e 12.1 15.1 25.1 U.S. Mar k eting Additions to Inves t m ent in Plac e 7 .2 3.8

- 47.4 F o r e ign Ref i ning/Mar k eting Additions to Inves t m ent in Plac e 4 .6 5.0 9.7

U.S. Ref i ning Capac ity 14,682 14,557 -0 .9 U.S. Ref i ner y O u tput 14,936 14,676 -1 .7 F o r e ign Ref i ning Capac ity 5 ,572 5,642 1.3 F o r e ign Ref i ner y O u tput 4,766 4,873 2.2
U

. S. R e f i ner y U t iliz ation R a te 1 

### 95.2 91.0 (2 ) 

### F o r e ign R e f i ner y U t iliz ation R a te 1 

### 83.9 85.2 (2 )

1 Ref i nery ut iliz at ion rat e is c a lc ulat ed by div i ding runs t o s t ills at ow n ref i neries by t he av erage of t he y ear beginning and y ear endi ng c r ude oil dis t illat i on c apac it y

. 2 Not m eani ngf ul

. S ourc e : E nergy I n f o rm at i on A d m i ni s t rat i on, Form E I A

- 28 (Fi nanc i a l Report i ng S y s t em ). 

### T a ble 1 4

. U.S

. a nd For e i gn Re fining Inv e s t me nt a nd Ope r a t ing Ite m s for FRS Co mp an ies, 2001- 2002

( B illion D o llar s )

( T hous and Bar r e ls per Day )

( P er c ent)



# Gross Margin Squeezed As Product Prices Fall Industry-wide gross refining m a rgins in 2002 were cons istently lower than in 2001 for alm o st the entire year and fluctuated around the average level fo r the 1996 to 2000 period (Figure 15) throughout the year. Only over the last quarter of 2002 (when the gross m a rgin collapsed) was the gross refining

Energ y I n for m at ion A d mi nistra ti on / Perf orma nc e Profiles of Maj o r Energ y Pr od ucers 2002 

## 42

## m a rgin sim i l a r to 2001. Higher m o tor gasoline stocks than a year ago (Figur e 14) and higher petroleum product stocks in general (Figure 13) put downward pressu re on the industry-wide gross m a rgins. Meanwhile, U.S. crude oil stock leve ls were at historically high le vels during the first half of 2002 before consistently falling over the la tte r half of the year (F igure 16), resulting in an in creas e in th e price of crude oil 77 

## and putting downward pressure on the gross m a rgin. The overall effect of these (and other) effects was that the industry-wide gross refining m a rgin of 2002 av eraged $8.05 per barrel, a 31–percent decline relative to the 2001 average of $11.59 per barrel. Meanwhile, the gross refining m a rgin received by th e FRS comp anies fell a lesser 20 percen t co mpared to 2001 (Table 13). The average price received f o r petroleum products declin ed $1.45 per barrel (4 percent) while raw m a terials and purchased product costs rose $0.09 pe r barrel (less than 1 percent), which resulted in a $1.54 per barrel d ecline in the gross refining m a rgin. 78


## Successful efforts to increase th e co mplexity of the FRS refineries ov er the last several years 79 

## allo w the FRS co mp a n ies to refine a wide ra nge of crude oils, which has enable d them to use rela tive l y lo w-cost heavy crude oils and transfor m them i n to relatively m o re higher-pri ced, light products. However, during 2002 the price of heavy crude relative to light crud e increased (Figure 17), which put less downward pressure on the price of crude oil paid by the FRS comp anies and contributed to the slight increase in the raw m a terials and purchased product costs of the FRS co mp a n ies. Sim ilarly, the price of light products (represented by the price of m o tor ga soline) fell relative to the pric e of heavy products (represented by the price of residual fuel oil), which tended to incr ease the do wnward pressure on the prices of refined products of the FRS companies (F igure 18). Thus, the revenue side of the net m a rgin was substantially lower in 200 2 than in 20 01. W e will next exam ine the cos t s i de of the net m a rgin.


# Operating Costs Ri se Despit e Low e r E n er gy a n d M a rketi ng Costs

A closer loo k at the op erating co st s that distinguish the gr oss m a rgin from the net m a rgin indicates that these cos t s increas ed 20 percen t, but hardly at a u n if orm rate across the different types of costs (Table 13). Efforts over the last few years by the FRS com p an ies to reduce their energy cos t s appeared to bear fruit in 2002 as energy costs fell $0.11 per barrel, an 8-percent reduction from their 2001 level. Cogeneration projects are one of the m a jor approaches th at th ese comp anies have taken to reducing their energy cos t s over the las t few years. 80 

## However, continued retrenchm e nt of m a rketing opera tions through both selective investm e nt in outlets in profitable areas and sales of m a rginal outlets and of outlets in m a rginal areas 81 

## was less successful in 2002 as m a r k eting costs fell $0.02 per barrel, a 1-percent decline. The decline in m a rketing costs occurred des p ite ex tens iv e cost increases due to s e veral comp a n ies re-branding their marketing outlets. 82 

## However, branded m a rketing outlets direc tly -sup plied by the FRS comp anies con tinu e d to dec line in 2002 (Figure 19), falling to 46,561 ( 14 percent less than the 54,085 re ported in 2001 (Table 15)) and indica tive of the FRS companies’ ef f

o rts to inc r e a se the p r of itability of th is lin e of business by sh if ting to wholesale and direct sales. 83 

## Comp any-operated outlets were re duced by slightly more than 14 percen t while dealer outlets were red u ced by slig htly less th an 14 percen t. These efforts to elim inate m a rginal outlets resulted in increased productivity as the average m onthly volum e through all directsupplied FR S branded outlets increased 7 percen t between 2001 and 2002, with all of the increase achieved through dealer outlets.

Energ y I n for m at ion A d mi nistra ti on / Perf orma nc e Profiles of Maj o r Energ y Pr od ucers 2002 

## 43

### 0 2 4 6 8 10 12 14 16 18 20

J anuar y M ar c h M a y J ul y S ept em ber N o vem ber2002 Dollars per Barrel



### N o t e : The U

. S. gr os s r e f i ned pr oduc t mar g i n i s t he d iffe r e n c e b e t w een t he c o mpos i t e w hol es al e pr oduc t pr i c e and t he c o mpos i t e r e f i ner ac qui s i t i on c o s t of c r ude o il. Sour c e s : Ener gy I n f o r m at i on Admi ni s t r a t i on, Pet r ol

eum M

a r

k

et

i ng M ont hl

y , D O E / E I A

- 0380 ( A pr i l 1996 - M a r c h 2003) , Tabl e 1, Tabl e 4, and Tabl e 5; and Ener gy I n f o r m at i on Admi ni s t r a t i on, M ont hl

y Ener gy

R

e v

i ew , D O E / E I A

- 0380 ( F ebr uar y 1996 - J anuar y 2003) , Tabl e 3- 2b. 

### Fi gur e 15. M ont hl y G r oss R e f i ned Pr oduct M a r g i n f o r U n i t ed St at es, 1996- 2000 A ver age, 2001, and 2002

1996- 2000 Aver age 2001

2002

270 280 290 300 310 320 330

Fi rs t Quart e r S ec ond Quart e r T hi rd Quart e r F ourt h Quart e rMillionsof Barrels

0 1996-2000 A v erage 2002

2001 

### Figur e 16. Q u ar ter l y U

. S. C r ude O il Stocks, 1996-2000 A v er age, 2001, and 2002

S ourc e : E nergy I n f o rm at i on A d m i ni s t rat i on, P e t r ol

eum S uppl y M ont hl

y , DOE / E I A

- 0109 (V ari ous i s s ues , W a s h i ngt on, DC), Tabl e 51.

Energ y I n for m at ion A d mi nistra ti on / Perf orma nc e Profiles of Maj o r Energ y Pr od ucers 2002 

## 440 5 10 15 20 25 30



### 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002Dollars per Barrel(2002 Dollars)

Not e : Li ght c r ude oi l t ends t o s e l l f o r a hi gher pri c e per barrel t han does heavy c r ude oi l

. Thus , t he vert i c al di s t anc e of t he l i ne i n t he f i gure f r om t he hori z ont al ax i s i ndi c a t e s t he prem i u m pai d f o r l i ght c r ude oi l rel a t i ve t o heavy c r ude oi l

. The m o re ex pens i v e l i ght c r ude oi l i s def i ned here as havi ng an A P I gravi t y of 40. 1 or great er and heavy c r ude oi l i s def i ned as havi ng an A P I gravi t y of 20 or l e s s

. S ourc e : E nergy I n f o rm at i on A d m i ni s t rat i on, P e t r ol

eum M

a rk et

i ng M ont hl

y , DOE / E I A

- 0380, Tabl es 27 and 28. 

### Figur e 17. R eal Pr ice D i ffer e nce B e tw een Light C r ude O il and H eav y C r ude O il, 1978-2002

0 5 10 15 20 25 30 35



### 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002Dollarsper barrel (2002dollars) 

### Figur e 18. R eal R esale Pr ice D i ffer e nce B e tw een Motor G asoline and R esidual Fuel O il, 1978-2002

Not e : M o t o r gas ol i ne t ends t o s e l l f o r a hi gher pri c e per barrel t han does res i dual f uel oi l

. Thus , t he vert i c al di s t anc e o f th e l i ne i n t he f i gure f r om t he hori z ont al ax i s i ndi c a t e s t he prem i u m pai d f o r m o t o r gas ol i nel rel a t i ve t o res i dual f uel oi l

. S ourc e : E nergy I n f o rm at i on A d m i ni s t rat i on, P e t r ol

eum M

a rk et

i ng M ont hl

y , DOE / E I A

- 0380, Tabl e 4.

Energ y I n for m at ion A d mi nistra ti on / Perf orma nc e Profiles of Maj o r Energ y Pr od ucers 2002 

## 45

### 0 10, 000 20, 000 30, 000 40, 000 50, 000 60, 000 70, 000 80, 000 90, 000 100, 000

1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002Outlets 

### Figure 19. C o m p any - O p erated and D ealer O u tlets for FR S C o m p anies, 1984-2002

* T he addi t i on of 11 c o m pani es t o t he gr oup of U

. S. m a j o r s i n 1998, t he l a r ges t s i ngl e- year c hange i n t he hi s t or y of t he Fi nanc ia l R epor t i ng Sys t em , r e s u l t i ng i n t he ver t i c al di s p l a c e m ent of t he s e r i es i n 1998. Sour c e : Ener gy I n f o r m at i on Adm i ni s t r a t i on, For m EI A- 28 ( F i nanc i a l R epor t i ng Sys t em )

. 

### *

C o m pany- O per at ed O u t l et s D eal er O u t l et s



### *

2001 200 2 Perc ent Cha nge 2001 -2002

T h ird-Party Volume

W h o l esale 1,955.8 2 ,032.4 3.9 Re ta i l

D e a l er 1,182.1 1 ,133.4 -4.1 C o m pany -O perated 545.1 464.3 -14.8

T o tal R e tail 1,727.3 1 ,597.6 -7.5 D i rec t 777.0 819.8 5.5

T o ta l T h ird-Party Vol u me 4,460.1 4 ,449.8 -0.2 Interse g ment Volume 78.8 101.4 28.7

D ealer O u tlets 4 2 , 705 36,816 -13.8 C o mpa n y - O perated O u tlets 1 1 , 380 9,745 -14.4

T o tal R e tail O u tlets 5 4 , 085 46,561 -13.9 Av erag e M onthly O u tlet Volume D eale r s 96.9 107.7 11.2 C o mp any -O perated 167.7 166.7 -0.6

All D i rect-Supplied O u tlets 111.8 120.1 7.4 S ourc e : E nergy I n f o rm at i on A d m i ni s t rat i on, F o rm E I A

- 28 (F i nan c i al Report i ng S y s t em ). 

### T a ble 1 5

. M o tor Ga soline Dis t r i but ion a nd Number of Dir e c t-S u pplie d Br a nde d O u t l et s f o r F R S Co mp an i es, 2001- 2002

(M illion Barrels)

(Number of Dir ect-Supplied Br anded O u tlets)

(Thousan d G a llons per M onth)

Energ y I n for m at ion A d mi nistra ti on / Perf orma nc e Profiles of Maj o r Energ y Pr od ucers 2002 

## 46

## Productivity increases, though, were offset by a subs tantial increase during 2002 in other operating costs related to refining, which rose by $1.12 per barrel ( 51 percent) relative to 2 001. Howe ver, the change was largely due to data reported by one of the re spondents. Rem oval of that comp any from this particular calculation would elim in ate m o re than half of the appare nt FRS change in refining-related operating co sts between 2001 and 2002. Additio nally, the F R S comp anies involv e d in recen t m e rgers have som e what elevated the cos t stru cture of the FRS comp anies as the s u rviving co mpanies m e rge their operations and corporate cultures. F u rther, environm ental spending to co mply with th e Clean Air Act Am endm ent s of 1990 continues, accounting for som e increase in other operat ing costs. (Although we have no estim ate of the significance of the environm ental spending w ithin 2002 other operating costs, a recen t study exam ined these for the 1 995 to 2001 peri od and is summarized in the Hig h light entitled,

“ Environmental Compliance Partia lly Eclipses Recent Gain s in Profitab ility. ”)
In summ ary, despite the profits of recent years, the year 2002 saw the lo west leve l of prof its f o r refiner/m a rketers in th e history of th e FRS. The net m a rgin was reduced in 2002 by a falling g r o ss m a rgin (and revenues), a circum stance that was w o rsened by higher operating costs, which played a large role in the losses experien ced in 2002. Nonetheless, reduced energy and m a rketing costs in 2002 relative to 2001 m a y give hope for the future domestic refining/m arke ting results of the FRS com p anies because co st-cutting efforts by th ese comp anies over the last several years suggest th at they have reorganized (and continue to fine tune) their operati ons to better withstand the vicissitudes of their industry. 

# Environmental Compliance Partially Eclipses Recent Gains in Pr ofitability

The effect of environm e n tal legi slation on profitability over the 1995 to 2001 period is explored through two avenues in a recent EIA study ( The Impact of Environm ental Compliance Costs on U.S. Refining Profitab i lity, 1995 – 2001 a 

## ): operating costs, and capital expend itures and depreciati on charges. This study updates earlier work that exam i n ed the a pparent effects of envi ronmental comp liance on refining/m a rketing operations’ operat ing costs an d capital exp e nditu res (including depreciation charges) over the 1988 to 1995 period. b 

## The prof itab ility c 

## of the FRS comp a n ies’ U.S. refini ng/m a rketing operations increased from approxim a tely zero in 1995 to m o re than 14 percen t in 2001 (Figure 11). An investigation of the reasons for increas ed pro f itability are comp licated by ta x and other considerations th at affect net incom e and the investm e nt base. However, a m o re straightfo rward approach for an exam ination of prof itability changes is availab l e. The net m a rgin is also closely related to refining /m arketing profitability. Figure 20 shows that when cash earnings per barrel sold (net refined product m a rgin adjusted for price changes) are low, so is ref i ning/m a rketing p r of itability ( r etu r n on investm e nt ). The corre lation b e tween prof itability (m easured by return on net investment in place) and the net m a rgin is 0.93, d 

## which is highly significant by the usual statistical conventions. The net refining m a rgin (net m a rgin) is refined pr oduct revenue m i nus purchase s of raw m a terial inputs to refining and refined product purch ases (gross m a rgin) less out-of-poc ket operating costs per barrel of refined products sold. T h e net m a rgin represents the before-tax cash earnings from production and sale of refined products and excludes anci llary activities such as non-fuel sales from convenience stores. The net m a rgin is an important determ inant of short-term decisions in refining ope rations. Basically, for a given scale and configuration of a refinery, outp u t will tend to be expa nd ed as long as the added output contributes 

## to cash earnings.
Energ y I n for m at ion A d mi nistra ti on / Perf orma nc e Profiles of Maj o r Energ y Pr od ucers 2002 

## 47

## The increase in the net margin ove r the 1995 to 2001 period w a s due to both an increase in the gross m a rgin and a reduction in operating costs. The gr oss m a rgin increased over the 1995 to 2001 period (Figure 12) as low product stocks (especially in 2000 and 2001) led to higher product prices and the increasing sophisti cation of the FRS co m p anies’ 

## refi neri es e 

## allowed the companies to take advantage of price differences between light and heavy crude oil (Figure 17), loweri ng their raw m a t e rials costs. Meanwhile, operating costs generally declined. The FRS companies rou t inely not ed various cost-cutting efforts in their public disclosures for 

## the 1995 to 2001 period (i.e., annual reports and S e curities and Exchange Comm ission Form 10-K f ilings). Although energy costs ac tually increased over the period, reductions in other costs m o re than offset these in creases (Table 16). Am ong these were environm ental operating co sts, which d eclin ed $0.1 5 per barrel (30 percent) due to increased fam iliarity with the production of refor m ulated fuels and the increased s cale of production. Marketing costs were even m o re significan t to the increased 

## net m a rgin as they fell $0.36 per barrel (19 percent) due to the increased use of lower-cost m o tor gasoline distribut ion channels (i.e., wholesale and d i rect sales) and the decreas e d use of higher-cost m o tor gasoline di stribution channels (i.e., directly supplied comp any-operated and dealer-operated outlet sales). Last ly, and m o st i m portant, was the re duction in other refining costs, which fell $0.44 per barrel (19 percen t) due to cost-cutting efforts such as holding low e r stock levels, as cited by num e rous FRS comp anies. Thus, one of the reasons for the growth in profitability of U.S. refining/m a rketing was lower environm ental operating co sts, but it was h a rdly th e m a jor reason as it was surpassed by m a rketing costs and other opera tin g costs in te r m s of the nom inal change. f



## The 

## asset base used to generate the cash earnings discussed above m u st al so be exa m ined. 

## Capita l expenditures and depreciation charges attributable to environm ental requirem e nts are also part of the profitability calculation. Capital spending by the FRS comp a n ies, whic h had steadily declined between 1995 and 1997, surged in 1998 as 11 non-vertically integr ated refiners were added to the FRS group. Capital spending continued to incr ease following 1998 largely due to m e rgers and acquisitions (F igure 21). (Excluding m e rgers and acquis itions, FRS capital spending has been essentially flat at $3.6 billion annually between 1998 and 2001.) Capital spending fo r environm ental compliance fluctuated through the 1990’s and early 2000’s ahead of deadlines established by the Cl ean Air Act Am endm ents of 1990 (CAA A90). 

## The am ount of 

## capital in vestm e nt by 

## the FRS companies was considerably less after 1995 than earlier. The effects of this chan ge we re twofold: depreciation for environm entally

- 

## rela ted as s e ts declin ed from $745 m illion (in 2001 dollars) in 1 995 to $673 m illion in 2 001; and the share of fixed assets accou n ted for by environm ental inves t m e nts decline d 

## (Figure 22) from 38 percent in 1995 (having peaked at 47 percent a year earl ier) to 9 percent in 2001. Thus, the asset base on which the incom e was earned grew m o re due to econom ic reasons and less due to environm ental reasons during the 1995 to 2001 period than had been the cas e during the 1991 to 1995 period.
In summ ary, the financial effects (i .e., operating costs, depreciation char ges, and investm e nt) attributable to environmental comp liance all dim i nished betw een 1995 and 2001, but have they returned to preCAAA90 levels? To address this issu e, actual profitability w a s comp ared with prof ita bility adju sted to rem ove the financial ef f

ects a ttr ibuta b le to env i ro nm ental co mpliance in order to d e te rm ine the ef f

e ct of environm ental comp liance over the 1996 to 2001 period. T h e ratio of incom e (om itting env i ron m entally rela ted ope r a ting co sts a nd deprec iation) to n e t f i xed assets (o m itting the p a rt of the in vestm e nt base attributable to environm ental requi rem e nts) is an accounting m easure of profitability th at excludes the financial effects of e nvironm ental requirem e nts. g 

## Operating incom e is used as the m easure of incom e for both m e a s ures of prof itab ility f o r simp licity. h 

## The average profitability over the 1996 to 2001 period was lower (Figure 23) (by 42 percent) than it w oul d have been in the absence of environm ental requirem e nts, but it still exceeds the 32-perc ent reduction in profitability associa t ed w ith env i ron m ental comp liance over the pre-CAAA90 1988 to 1990 period.
Energ y I n for m at ion A d mi nistra ti on / Perf orma nc e Profiles of Maj o r Energ y Pr od ucers 2002 

## 48a 

### T See En erg y Inform atio n Ad m i n i stratio n , Th e Im p act o f En v i ron m en tal Co m p lian ce Co sts o n U.S. Refin i ng Pro f itab ility, 1 995 – 2 001 (W ash i ng ton , DC, May 20 03)

. Th is r e p o r t can b e f oun d on t h e I n tern et at h ttp ://www.eia.do e .g ov /em e u / p e rfpro / ref-p i 2 /in d e x
. h t m l

. b 

### See E n er gy I n f o rm at i on A d m i ni st rat i on, Th e Impa ct o f

En vironmen t a l Co mp lian ce C o sts o n U.S. Refin in g Pro fitability (Oct o b e r 1 997 ). Th is repo rt can b e foun d on th e In tern et at h ttp ://www.eia.do e .g ov /em e u / p e rfpro / ref-p i / c o n t en ts.h tml .
c 

### Pro f itab ility of lin es of b u s i n ess of t h e FRS co m p an ies is co m p u t ed b y d i v i d i ng t h e n e t i n co m e co n t ribu ted b y th e line of busi n ess by t h e net investm e nt in place associ ated with the line of busine ss. More e xplicitly, net investment in place is t h e su m o f year-end n e t pro p e rty, p l an t, and equ i p m en t an d year-e n d inv e stm e n t s an d adv a n c es to un con s o lid ated affiliates. d 

### The res u l t s f r o m t h e reg r essi on o f t

h e ret u r n on net i nve st m e nt i n pl ace ( R OI) f o r

d o m e st i c refi ni ng/ m a rket i n g o n t h e net m a rgi n (i n 2 0 0 1 dol l a rs ) fo r a l l FR S re fi ner s (i .e., t h ose FR S com p ani e s h a vi n g no n
- zer o val u e s f o r beg i nni n g a n d/ o re ndi ng refin i n g capacity) for t h e years 19 77 t h rou gh 20 01 are as follo w s : M u ltip le R = 0

. 9 3 4 ; R sq uare = 0.872; ad ju sted R squ a re = 0. 86 7; st a nda r d e r r o r o f t h e r e gres si o n = 1. 4 40; a n d ob ser v at i ons = 2 5

. T h e est i m at ed equat i o n i s : D o m e st i c refi ni ng/ m a rke t i ng R O I = - 1

. 1 5 6 [ 0

. 6 5 1 ] + 5. 51 4 [ 0

. 4 4 0 ] * net m a rgi n , whe r e t h e st an dar d e r r o r s of t h e est i m at ed coef fi ci ent s are in brackets.
e 

### See, E n e r gy I n f o rm at i on A d m i ni st rat i on, U pdat e o f Ta bl e s an d Fi g u res f r om U.S. Pet r o l eum R e fi ni ng and Ga sol i n e M a rket i n g In d u st ry ( W as hi n g t on, DC , J une 20 0 2 ) , Ta bl e 6

. T h i s i s a n I n t e rnet

- o nl y p r o duct a n d i s l o c a t e d at h ttp ://www.eia.do e .g ov /em e u / fin a n ce/ u s i&t o /do w n s tream / u pd ate/in dex.ht m l

. f 

### Perce n t a ge ch ange s m a y be m i sl eadi ng bec a use a l a rge p e rcen ta ge ca n occur due of a l a rge no m i n a l ch ang e relativ e to a large base, or because of a sm all nom inal change relative t o a sm all base. Conseque ntly, nom i nal changes a r e als o presented and m a y take precede n ce over pe rcenta ge c h a nge s whe n as cribing si gni ficance to fact ors
. g 

### Howev e r, th i s m easu r e of p r o f itab ility d o e s no t in clud e any esti m a tes o f th e im p acts o n en erg y m a rk et d y n a m i cs (in c lu d i n g 9/ 1 1 ) t h at m i ght ha ve occ u r r e d i n t h e a b se n ce o f e nvi r o nm ent a l re qui rem e nt s on t h e U. S

. re fi ni n g i n d u s t ry
. h 

### W e re n e t i n co m e , th e m o re trad itio n a l m easu r e of i n co m e in p r o f itab ility calcu latio n s , used i n stead of o p e rating in come, th en t h e effects of en v i ron m en tal co m p lian ce o n affiliate in co m e , in co m e ta x e s, and g a in s/ lo sses fro m asset sales wo u l d all h a v e to b e estimated . Th ese ad d ition a l estimates are avo i d e d b y u s i n g op erating i n co m e . Furth e r, retu rn on inv e stmen t calcu lated with n e t in co m e is h i gh ly correlat e d with retu rn o n inv e stm e n t calcu lated with op erating i n come. Con s equ e n tly, the ret u rns on i nve stm e nt that are c o m p ared u s e op erating i n co m e in th e calcu l atio n
.

-4 -2 0 2 4 6 8 10 12 14 16

0 0

. 5 1 1

. 522

. 5ReturnonInvestment(Percent)



### 3 1977- 1987
1988- 2001
R

egr es s i on Li ne

Sour c e : Ener gy I n f o r m at i on Adm i ni s t r a

t i on, For m EI A- 28 ( F i nanc i a l R epor t i ng Sys t em )

. 

### Fi gur e

2 0

. U

. S

. R e

f i ni ng/ M a r k e

t i ng R e

t u r n on I n ve s t m e nt a n d N e t R

e

f i ne d P r oduc t M a r g i n f o r F R S C

o m p an i es, 1977- 2001

N e

t R

e

f i ned Pr oduct M a r g i n ( 2001 dol l a r s per bar r e l )

Energ y I n for m at ion A d mi nistra ti on / Perf orma nc e Profiles of Maj o r Energ y Pr od ucers 2002 

## 49

### 1988 1 995 20 01 Percen t Change 1995 - 2001 Aver a ge Ref i ned Pr o duc t Revenue s 29.36 27.04 33.88 25.3 Raw m a ter i al Ac quis i tion Cos t s an d Ref i ne d Pr oduc t Pur c has es 20.05 20.87 26.04 24.8

G r os s Mar gin 9.31 6.17 7.85 27.2 Energy Cos t s 1.45 0.92 1.37 49.3 Mar k e ting Cos t s 2.14 1.95 1.59

- 18.6 Envir onm ental O p er ating Cos t s 0.36 0.49 0.34

- 29.8 O t he r Ref i ning Co s t s 2.94 2.26 1.82

- 19.4

Ne t Ref i ning Mar gin 2.43 0.55 2.72 397.0
A

v e r age Re fine d Pr oduc t Re v e n u e s Motor G a s o line 33.59 30.26 36.96 22.1 D i s t illa te 27.59 24.70 32.96 33.4 O t her Pr oduc ts 23.20 23.17 26.30 13.5

All R e f i ned Pr oduc ts 29.36 27.04 33.88 25.3
S ourc e : E nergy I n f o rm at i on A d m i ni s t rat i on, Form E I A

- 28 ( F i nanc i a l Report i ng S y s t em ). 

### T a ble 1 6

. Compon e n ts of the G r os s Re fining M a r g in a nd A v e r a g e Re fin e d P r oduc t Rev e n u e s f o r F R S Co mp an ies, 198 8, 1995, an d 2 001 ( 2001 dollar s per bar r e l of r e f i ned pr o duc t s o ld)

0 2 4 6 8 10 12 14

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001Billionsof 2001Dollars T o t a l C api tal E x pendi tur e s f o r U

. S

. R e f i ni ng T

o t a l C api tal E x pendi tur e s E x c l udi ng M & A R e l a ted E x pendi tur e s * E n v i r onm ent al C api tal E x pendi tur e s

1 R

e f o r m ul at ed m o t o r gas ol i ne. * N o te that t o tal c api tal ex pendi tur e s ex c l udi ng m e r ger & ac qui s i ti on r e l a ted ex pendi tur e s onl y c o v e r the per i od 1995 thr ough 2001.

S our c e s : U

. S

. r e f i ni ng c api t a l ex pendi t u r e s - E ner gy I n f o r m at i on A d m i ni s t r a ti on, F o r m E I A

- 28 ( F i nanc i a l R epor t i ng S y s t em ) E n v i r onm ental c api tal ex pendi tur e s - 1990- 1996: A m er i c an P e tr ol eum I n s t i t ute, P e tr ol eum Indus t r y E

n v

i r onmental P

e r f

or

m anc e ( W as hi ngton, D C , M a y 1997) , pp. 47- 48. 1997- 2001: A m er i c an P e tr ol eum I n s t i t ute, U

. S

. O i l and N a t u r a l

G a s Indus t r y ’ s E n v

i r onm ent al E x

pendi tur e s ( W as hi ngton, D C , F ebr uar y 2003) , p. 9. F R S env i r onm ental c api tal ex pendi tur e s ar e pr or ated by s har e of U

. S

. c r ude di s t illa t i o n c apac i t y

. RF G 1 P has e I I , Co m p l e x E m i ssi o n s RF G 1 P has e I , Co m p l e x E m i ssi o n s RF G 1 P has e I , S i m p le E m is s i o n s C l ean A i r A c t A m endm ent s of 1990 

### F

i gu r e 2 1

. U

. S

. R e f i ni ng C a pi t a l E x p e n d i t ur e s f o r F R S C o m p a n ie s , 1 9 8 8 - 2 0 0 1

Energ y I n for m at ion A d mi nistra ti on / Perf orma nc e Profiles of Maj o r Energ y Pr od ucers 2002 

## 500 10 20 30 40 50

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001Percent

S ourc e s : U. S

. ref i ni ng c api t a l ex pendi t u res - E nergy I n f o rm at i on A d m i ni s t rat i on, Form E I A

- 28 (Fi nanc i a l Report i ng S y s t em ) E n vi ronm ent al c api t a l ex pendi t u res - 1988-1989 : A m eri c an P e t r ol eum I n s t i t ut e, P e t r ol

eum I ndus t r y E

n v

i ronm ent al

P e rf orm anc e (W as hi ngt on, DC, M a y 1997), pp. 47-48 and U. S

. Depart m ent of Com m e rc e, B u reau of t he Cens us , P o l l u t

i on A bat em ent Cos t s and E

x

pendi t u res (vari ous i s s ues ) (W as hi ngt on, D. C. ). (E s t i m at es of ex pendi t u res w e re m ade by appl yi ng t he rat i o of t he A m eri c an P e t r ol eum I n s t i t ut e s e ri es t o t he c o rres pondi ng Cens us s e ri es f o r t he 1990-1994 overl ap peri od t o t he Cens us val ues f o r 1988 an d 1989. ) 1990-1996 : A m eri c an P e t r ol eum I n s t i t ut e, P e t r ol eum I ndus t r y E n vi ronm ent al P e rf orm anc e (W as hi ngt on, DC, M a y 1997), pp. 47-48. 1997-2001 : A m eri c an P e t r ol eum I n s t i t ut e, U. S

. Oi l and Nat u ral Gas I ndus t r y’ s E n vi ronm ent al E x pendi t u res (W as hi ngt on, DC, February 2003), p. 9. FRS env ironm ent al c apit a l ex pendit u res are prorat ed by s hare of U. S

. c r ude dis t illat i on c apac it y

. 

### Figure 22. Env i ronmental Capital Expenditures as a Shar e of U

. S. R e fining C a pital Expenditur es for FR S C o mpanies, 1988-2001

0 5 10 15 20 25 30 35

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001Percent Operat i ng ROI ex c l udi ng Fi nanc i a l E f f e c t s of E n vi ronm ent al Requi rem ent s A c t ual Operat i ng ROI

Not e : Operat i ng Ret u rn on I n ves t m ent (A c t ual Operat i ng ROI ) = operat i ng i n c o m e as a perc ent of net propert y , pl ant , and equipm ent ( PP&E). O perat ing R O I ex c l uding f i nanc ial ef f e c t s of env ir onm ent al requirem ent s = operat ing inc o m e les s env ironm ent al operat ing c o s t s les s env ironm ent al deprec iat i on ex pens es as a perc ent of net PP&E les s env ironm ent al net PP&E. S ourc e s : E nergy I n f o rm at i on A d m i ni s t rat i on, Form E I A

- 28 (Fi nanc i a l Report i ng S y s t em ); A m eri c an P e t r ol eum I n s t i t ut e, P e t r ol

eum I ndus t r y E

n v

i ronm ent al

P e rf orm anc e (W as hi ngt on, DC, M a y 1997); A m eri c an P e t r ol eum I n s t i t ut e, U. S

. Oi l and Nat u ral Gas I ndus t r y ’

s E

n v

i ronm ent al

E

x

pendi t u res (W as hi ngt on, DC, February 2003). 

### Figure 23. O p erating Return on Inv estment in U. S. Refining/Marketing for FRS Companies, 1988-2001

Energ y I n for m at ion A d mi nistra ti on / Perf orma nc e Profiles of Maj o r Energ y Pr od ucers 2002 

## 51

# Foreign Refining and Marketing Profitability of Foreign Refining/Market ing Operations At An All-Time Low In 2002, foreign refining/m arketing retu rn on net investm e nt in place achieved an all-tim e low in the 26- year history of the FRS a t 1.3 perc ent, breaking the previous low of 3.3 pe rcent in 1985 (Figure 11). A sm all reduction in refined product revenue relative to 2001 coupled with a 56-percent decline in other revenue and a 3-percent decline in o p erating exp e nse resu lted in a 86- pe r cent dec line in net income (83- percent decline in net incom e exclusive of unusual item s). The FRS companies’ foreign refin i ng/m arketing earnings are derived fr om two sources: unconsolidated af

f iliates an d consolid ated opera tion s . The corp orat e p a ren t of an unconsolida t ed af f ilia te owns 5 0 percen t, or less, of the af f iliate, and d o es not direc tly con t rol the af f iliate ( a join t ventu r e, f o r example is usually an u n consolid ate d af f iliate f r o m the pers pectiv e of at leas t one of the par t ner s 84 

## ). Essentially, the unconsolid ated af f iliate is m o re of a property o rhol ding of the paren t co rporation th an it is a co mpany that the par e nt actu a lly o p erates. Th e ef f

ect on f i nancia l oper a tions of an unconsolid ated af f iliate c a n only be seen on the parent corporation’s incom e statem ent, where the parent comp any’s proportional share of the af f iliate ’s ne t incom e is r e ported. Co nversely, a f u lly conso l idated af f ilia te is direc tly controlled by the parent corpora tion (although it could be owned by seve ral comp anies, with the parent corporation owning m o re than 50 per cent). In addition, all operating fi nancial inform a tion about a fully consolid ated af f iliate (su c h as rev e nu es) is repor ted in the pu blic f i nanc ia l disc losur e s of the paren t corporation.


# Consolidated Oper ations C o ntribut e to N e t Inc o m e Historically, the operations of the FRS comp anies’ unconsolidated foreign refi ning/m a rketing affiliates have been mainly in the Asia-Pacific region. Ch evronTexaco owns m u c h of the FRS Asia-Pacific refinery capacity, m o st of which is unconsolidate d. In fact, about 69 perc ent of FRS unconsolidated foreign refinery capacity was in the A s ia-Pac ific region in both 2001 and 2002 (Table 17). Consolidated FRS foreign refinery capacity is m o s tly located in Europe, fall ing from 51 percent in 2001 to 50 percent in 2002. T h e prim ary reason for the slight decline was BP’s re-assignm ent of two Australian refineries to its U.S. affiliate (an FRS respondent) in 2002, 85 

## which increased the share of consolid ated capacity in As ia and dim i nished it elsewhere, including Europe.
The contrib u tion to n e t incom e from the FRS comp anies’ unconsolidated fo reign refining/m a rketing operations has been sm all for the last several year s (since 1997) (Figure 24). However, in 2002, it reached an all-tim e low with a lo ss o f $331 m illion (after a loss of $4 m illion in 2001 ). Altern atively, consolidated operations have c onsis tently con t r i b u ted m o re to the FRS companies’ f o r e ign refining/m a rketing earnings than have unconsolidated operations over the last seve ral years, particularly since 1996. More to the point, between 1990 and 1996, earnings from unconsolidated operations averaged 44 percent of the contri bution from consolidated operations , peaking at 102 percent in 1996. Since then (over the 1997 to 2002 tim e period), unc onsolidated operations' earnings have averaged 9 percent of consolidated operations' earnings, r eaching a nadir in 2002 by ge nerating a loss, while consolidated operations generated incom e
.

Energ y I n for m at ion A d mi nistra ti on / Perf orma nc e Profiles of Maj o r Energ y Pr od ucers 2002 

## 52

## The FRS companies gave several reasons fo r the disappointing perf orm a nce of foreign refining/m a rketing. These included low m a rgins due to excess refinery capacity and weak dem a nd, lower refinery runs in response to low m a rgins and due to ref i nery outages (which were due to a fire (El Paso) 86 

## and an electrical outage (ConocoPhillips) 87 

## ), and foreign exchange losses.

2001 2 002 2001 2002 Eu ro pe 51. 0 50. 0 18. 0 17. 9 

### As i a 25. 0 29. 0 68. 6 68. 7 

### La tin A m e r ic a 11. 6 9

. 2 0.7 0

. 7 

### Canada 9. 7 9

. 2 0.0 0

. 0 

### Othe r 2. 7 2

. 6 12. 7 12. 7 

### Gr a nd T o ta l 100. 0 100. 0 100.0 100. 0 

### T a ble 1 7

. Re gion a l Dis t r i buti on of For e i g n Re fine r y Ca pa c i ty fo r F R S Comp an ies, 2 001- 2002 (Perc e n t ) Unconsolidated A ffiliates Co n s o l id at ed O p er at io n s

Not e : The regi on den ot ed as " O t her" i n c l udes A f ri c a and t he M i ddl e E a s t

. S ources : Com pany Annual Report s a nd f ilings of U. S. S e c u rit i es an d E x c hange Co m m i s s i on Form 10-K

.

-1 0 1 2 3 4

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002Billion 2002Dollars Figure 24. Foreign R e f i ning/ M a rket ing N e t Incom e f r om C onsolidat ed Operati ons and Unconsol i d ated A ffi l i ates of FRS Com p ani es, 1990-2002

Cons ol i dat ed Operat i ons

U n c o n s o lid a t e d Affilia te s

S ourc e : E nergy I n f o rm at i on A d m i ni s t rat i on, Form E I A

- 28 (Fi nanc i a l Report i ng S y s t em ).



# Asia n-P a cific M a rkets C o ntinue P oor Perform a nc e During 2002, the FRS companies’ un consolid ated aff iliates g e nerated a los s of $331 m i llion, which was a reduction of net income of $327 m illion relativ e to a $4-m illion lo ss in 2 001. The Asian-Pacific refining m a rgins of 2002 (represented by the Singapor e/Dubai gross refining m a rgin) were m u ch lower than those of 2001 over the first half of 2002, but by th e end of the year this circum stance had reversed with the fou r th quarter refining m a rgin of 2002 ex ceeding th at of 2001 (Figure 25) b y $3 per barrel.

Energ y I n for m at ion A d mi nistra ti on / Perf orma nc e Profiles of Maj o r Energ y Pr od ucers 2002 

## 53

## Nonetheless, despite the late rally, the gross re fining m a rgin in the Asian-Pacific region in 2002 averaged $0.09 per barrel less than in 2001.
Consumption of petroleum products in the Asia-P aci fic region (com bining Asian Developing Countries with Australasia and Japan) increased 2 percen t between 2001 and 2002. Ho wever, the increased consumption was insuf f icien t to p r e v ent the FR S comp anies f r om reporting lower re turns f r om their unconsolidated foreign refining/m a rketing operations, which are located in this region. Excess refining capacity and the recent relatively small growth of Asia-Pacifi c petroleum product consumption 88 

## are reasons given in comp any public disclosures for the losses generated by the Asia-Pacific operations of the FRS companies.

-4. 0 0 -3. 0 0 -2. 0 0 -1. 0 0 0. 00 1. 00 2. 00 3. 00

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4Dollars per Barrel 

### Figur e 25. For eign R e fining Mar g ins, 2000-2002

S ourc e s : E nergy I n t e l l i genc e Group, Oi l M

a rk et

I n t e l

l i genc e 2000 : J anuary 2001 and J u l y 2000, p. 12; 2001 : J anuary 2002 and J u l y 2001, p. 12; and 2002 : J anuary 2003 and J u l y 2002, p. 12. 

### 2000 2001 A nnual A v erage 2000 2001 2002 R o tte r d a m /Br e n t - 0 .3 8 - 1 .1 6 - 1 .2 7 S i ngaport / D ubai 0. 02 -0. 76 -0. 6 9 Rot t e rdam / B rent S i ngapore/ Dubai



### 2002



# European Markets Continue to Bols ter Forei gn Refini ng/ M a rketing Res u lts The FRS companies’ co nsolidated o p erations (b otto m line net incom e from foreign refining/m a rketing less in com e from unconsolidated affiliates) p r ovi ded $783 m i llion of net incom e , which was 75-percent lower than the $3.12 billion result achieved in 2001. Lowe r earnings were consistent with the decline in Europe’s consumption of petroleum products (F igure 26), which fell 1 pe rcent between 2002 and 2001 (and increased a scant 0.8 pe rcent between 1997 and 2002). European refining m a rgins (represented by the R o tte rdam /Brent gross refining m a rgin) were $1 to $2 dollars per barrel lower during the first half of 2002 than during the first half of 2001 (Figure 25). However, they rallied in the second half of the year (m uch as they did in th e Asia-Pacific region) and surpassed the 2001 m a rgin in both the third and the fourth quarters of 2002. The ultim a te result was that the average m a rgin for 2002 was $0.07 per barrel great er than the average m a rgin for 2001. Thus, the

Energ y I n for m at ion A d mi nistra ti on / Perf orma nc e Profiles of Maj o r Energ y Pr od ucers 2002 

## 54

## industry-wide story of lower petr oleum product consumption and a negl igible increase in the refining m a rgin provided a background for an equally dism al story for the FRS companies. Among the reasons cited in public disclosures for the FRS comp anies’ decline in earnings from their European operations were an electrical outage (and resulting dim i nished product sales) , lower refining m a rgins, lingering effects of the 9/11 events on product dem a nd, and currency (foreign exchange) losses.

0 5 10 15 20 25

No r t h Am e r i c a OE CD E u r ope FSU & Ea

s t e r n E u r ope As i a n De

vel opi ng C

ount r i es A u s t r

a lia , N e

w

Zeal and &

J apan Lat i n A m er i c a M i ddl e E a s t A f r i c aMillion Barrels per Day 

### 1997 1998 1999 2000 2001 2002

S o u r c e : B P p l c , B P

S

t at

i s t

i c a

l R

e v

i ew

of

W o

r l d E ner gy ( J une 2003)

. p. 9. Fi gur e 26. P e

t r ol eum C

onsum pt i on by R

e gi on, 1997- 2002



# Other Energy
The FRS “other energy” line of business consists of energy operations other than the production of oil, natural gas, or coal. This includ es nonconventional energy operations such as synfuels and renewables, as well as assorted other activit ies including electric power produc tion and supply, transportation of power, energy trading operations, and energy m a nage m e nt services. Measur ed by asset growth, the other energy line of business has grow n m u ch faster in recent years th an all other lines of business of the FRS co mp a n ies (See F i gure 27). T h is is equally true if revenue s are us ed as a m easure ins t ead o f assets. 

# Revenue and Income Dr op Due to E n ergy Tra d ing D e cli n e The story for the FRS companies’ other energy line of business since the m i d-1990’s has been one of trem endous growth, followed by a dram atic reversal of that growth in 2001 and 2002. Much of the growth has been due to increased electric power ge neration and trading in bot h electricity and natural gas by the F R S comp anies. However, a decline in re venues and actual losses in earnings over the last two years has occurred largely due to the downturn in the en ergy trad ing b u si ness following the Enron financial scandal.

Energ y I n for m at ion A d mi nistra ti on / Perf orma nc e Profiles of Maj o r Energ y Pr od ucers 2002 

## 55

## From 1995 until 2000, the FRS companies’ revenues in ot h e r energy g r ew at a brisk annual rate (Figure 27) of 127 percen t. In 2 001, revenu es dropped 1 .4 pe rcen t, as Enron ceased reporting to the FRS. By 2002, the energy trading crash had sp read across the energy industry, l eading to a collapse in other energy revenues of 48 percent from the 2001 level (Tab le 18). The dem i se of El Paso’s trading business 89 

## was the biggest cause of this.
The incom e story is sim ilar to the revenue story. Other energy incom e grew at a 74- percent annual rate over 1995 through 2000. In 2001, incom e dropped 27 per cent over the 2000 level. In 2002, however, incom e collapsed 173 percent as earnings went negative, with m u ch of the declin e due to losses of El Paso and ChevronTexac o’s af f ilia te Dynegy Inc., which had also been ac tive in energ y trad ing. 90


# Nonconventional Energy: Tar Sa nds and G e ot herm al St and O u t Originally, the FRS “other energy” line of busine ss was prim arily intended to cover nonconventional energy, which includes renewable resources (suc h as wind, solar, and geotherm al energy) and hydrocarbons from tar sands, oil shale, coal gasi fication and liquefaction, am ong other sources. Although nonconventional energy was the lion’s share of other energy until the m i d-1990’s, the FRS comp anies’ forays into nonconventional energy were generally unprofitable, and m o st FRS comp anies started to scale back their investm e nt s in nonconventional energy during the 1980’s. Nonetheless, two nonconventional energy projects st and out: Exxon Mobil’s Cana dian tar sands and the Unocal Corporation’s geotherm al energy in Sout heast Asia. Exxon Mobil significantly relies on production from tar sands, and has been extracting o il from Canadian tar sands since the 1970' s. The comp any reports a year-end 2002 total of 800 m i llion b a rr els of Canadian tar sand res e rves, rep r esenting 6.3 percent of its worldwide crude o il and natural gas liquids reserves. 91 

## Gross synthetic crude oil produced from those tar sands was 8 4 m illion barre ls in 2002 , up from 80 m illion barrels in 2001. 92 

## Unocal has over 35 years experience in geothermal energy. It ope rates m a jor geotherm al fields producing s t eam for electricity at Tiwi and Mak- Ban in the P h ilipp i nes, and Gunung Salak and Wayang W i ndu in Indonesia. These four projects supply steam for a total of 1,120 m e ga watts of generating capacity. 93 

## Unocal’s total 2002 geoth e rm al energ y produc tion averaged 13 m illion k ilo watt-hours, the equivalent of 20,000 barrels of oil per day, down from 22,000 barrels per day in 2001. Its net proved geotherm al reserves at year-end 2002 were the equ i va len t of 232 m illion barrels of oil, comp ared to 162 m illion barrels in 2000.

Energ y I n for m at ion A d mi nistra ti on / Perf orma nc e Profiles of Maj o r Energ y Pr od ucers 2002 

## 56

### 0 100 200 300 400 500 600 700 800 900 10001995=100



### Sour c e : Ener gy I n f o r m at i on Adm i ni s t r a t i on, For m EI A- 28 ( F i nanc i a l R epor t i ng Sys t em )

. 

### Figure 27. N e t Inv estm e nt in P l ace in O t her E n ergy and A ll O t her B u sinesses for FR S C o m p anies, 1995-2002

1995 1996 1997 1998 1999 2000 2001 2002 O t her Ener gy

O t her Li nes of Bus i nes s



### Income Components 2000 2001 2002 Percen t Ch an g e 2001- 2002
O per ating Revenue 84,987 83,811 43,243

- 48.4 O per ating Ex pens es 81,948 81,678 43,886

- 46.3 O per ating Inc o m e 3,039 2,133

- 643

- 130.1 Equity Inc o m e 753 902

- 563

- 162.4 Net Inc o m e 2,741 1,993

- 1 ,460

- 173.3 unus ual item s 0 8

- 133

-- Net Inc o m e ex c l uding unus ual item s 2,741 1,985

- 1 ,327

- 166.9 ( M illion D o llar s ) T a ble 18. Income Components for Ot her E n ergy for FR S Companies, 2000-2002

S ourc e : E nergy I n f o rm at i on A d m i ni s t rat i on, Form E I A

- 28 (Fi nanc i a l Report i ng S y s t em ).

Energ y I n for m at ion A d mi nistra ti on / Perf orma nc e Profiles of Maj o r Energ y Pr od ucers 2002 

## 57

# End Notes

54 

### Ene r gy I n f o r m at i on A d m i nist rat i on, Perf o r

man ce Pro files o f

Ma jo r En erg y Prod u c ers 20 01 , DO E/EI A- 020 6( 01) (W ash i ng ton , D C , Janu ar y 20 03) , p
. 34

. 55 

### Exxo n Mob il, 20 0 2 Fi na nci a l & Operat i n g Revi ew , p , 55 an d 200 1 Financia l an d Op eratin g Review, p, 54

. 56 

### Che v ronTexac o, 20 02 Su pp lem e n t t o th e Ann u a l Repo rt, p
. 35 an d 200 1 Su pp lem e n t to t h e Ann u a l Repo rt, p. 2 4

. 57 

### BP, Repo rt to th e S e cu rities a n d Exchan g e Co mmission on Fo rm 2 0 -F, 2 002 , pp . 27 an d 80

. 58 

### BP, Repo rt to th e S e cu rities a n d Exchan g e Co mmission on Fo rm 2 0 -F, 2 002 , pp . 27 an d 35

. 59 

### Maratho n Oil, Repo rt to th e S ecurities a n d Excha n g e C o mmission o n Fo rm 2 0 -F, 200 2, p. F- 44

. 60 

### The levels of dom estic and forei g n production taxes are not co m p arable, because the latter incl udes royalty expenses while the form er doe s not. 61 

### It i s not cl ear why t h e Ot he r West er n Hem i sph e re re gi o n e xpe ri ence d a l a rge i n crea se i n pr o duct i o n t a x e s i n 2 0 0 2

. Howev e r, th e fact th at th is regio n produ ces h eavy oi l s t h at m a y not b r i n g as hi gh a pri ce as l i ght er oi l s m a y be a co nt r i but i n g fact or , a n d s o m e Sout h Am eri can g ove rnm e nt s m a y have i n crease d t h ei r pr o duct i o n t a x e s t o l e vel s hi g h er t h a n i n ot h e r regi ons
. 62 

### See E n er gy In fo rm ati on Ad m i ni st rat i on, St at e E n ergy Se v e ra nce T a xes, 19 8 9

- 1 99 3, D O E/ EI A- TR / 0 59 9 ( W ashi ngt on , DC , Sep t em b e r1995 ). 63 

### Wh ile th e sam e cau sality m a y b e d r i v ing b o th do m e stic an d foreign p r odu ctio n tax p a tt ern s , n o n e is ob v i o u s. 64 

### B o t h an i n di vi dual re gi o n ’s c h an ge i n l i f t i n g cost s a n d i t s a m ount o f pr od uct i o n ha ve an effect on ag g r e g at e l i f t i n g co s t s because the cost changes in i ndi vidual regions are weighted by the production in the region t o obtai n the aggregates. 65 

### Ener gy In fo rm ation Adm i nistration , Perf o r

man ce Pro files o f

Ma jo r En erg y Prod u c ers 20 01 , DO E- EIA- 020 6( 200 1) (W ash i ng ton , D C , Janu ar y 20 03) , p
. 37 . Th is p u b licatio n is av ailab l e on th e I n tern et at h ttp ://to n t o.eia.d o e .gov /FTPR OOT/ f in an cial/0 206 01 .pd f (as of Nov e m b er 1 2 , 2 003 ). 66 

### As h a s b e en men tio n e d nu m e rou s tim es o v e r th e last few y ears, t h e n e t marg i n is h i gh ly co rrelated with return on in v e stm e n t . Th e co rrelatio n was re-estim at ed d u ring t h e sp ri n g of 2 003 with ad d ition a l d a ta ( now co vering th e p e riod 1 977 t h r o u g h 20 0 1 ) and t h e c o rrel a t i on c o ef fi ci ent was f o u n d t o be 0. 93

. See E n er gy I n fo rm ati on A d m i ni st rat i on, The I m

pa ct of En vironm en t a l Co mp lian ce C o sts o n U.S. Refin in g Pro fitability, 1 9 95-2001 (May 20 03), p a g e 4. Th is pu b lication is av ailab l e o n the In tern et at h t t p ://www.eia.do e .g ov /em e u / p e rfp r o / ref_p i 2 / in d e x
. h t ml (as o f No vem b er 12 , 20 03). 67 

### Th e n e t m a rg in ex clud es p e riph eral activ ities su ch as no n-p e tro l eu m p r o d u c t sales at conv en ien ce sto r es. 68 

### Ener gy In fo rm ation Adm i nistration , Sh ort

- T e rm E n er gy O u t l ook (W ash i ng ton , D C , Nove m b er 6 , 20 03 ), Tab l e A1 . This pu blication is a v ailable on the Inter n et at http ://www.eia. d o e
. g ov/ pu b/f o rec a sting/steo/ o ld steo s/n o v 0 3

. p d f (a s N o vem b er 12 , 2 003 ). 69 

### C o m p ari ng t h e st oc k l e vel s o f 2 0 0 2 wi t h t h e avera g e fo r t h e pe ri od o f 19 96 th rou g h 20 00 t e lls a si m ilar sto r y with a sligh tly sm aller diffe re nce in the first qua rter a n d si m i l a r di ffe renc es i n t h e s u b s e que nt qua rt ers
. 70 

### Not e t h at t h e a ppa re nt decl i n e i n t h e n u m b er of FR S w hol l y ow ne d U.S

. r e f i neri es was m o st l y due t o do u b l e co u n t i n g a m ong m e rging c o m p anies. The act ual decl ine wa s two refine ries, B P s o ld its Yo rkt o w n , Vi rgi n ia re fin e ry to Giant I ndu str i es ( a no n- FRS co m p an y) and Pr ecor sh u t do wn its Har t f o rd , I llin o i s r a th er th an m a k e u pgr ad i n g in v e stm e n t s. All ot he r c h an ges are pu rel y d u e t o d o ubl e c o un t i ng. 71 

### See P r em cor I n c., “P rem c or to Close Ha rtf o rd , Ill. Re fine r y in Oct obe r” ( F eb ruar y 2 8 , 2 0 0 2 )

. 72 

### See BP p l c, “Gian t In du stries, In c. An nou n c es Acq u i sition of York t o wn , Vi rg i n ia Refin e ry fro m BP” (Feb ru ary 12 , 20 02 ). 73 

### Teso ro Pet r ol eum C o rp orat i o n, “ T eso r o Pet r ol eum C o rp o r a t i on An n o u n ce s R e vi se d Te r m s for G o l d en Eagl e Acq u i s i t i on” ( M ay 6 , 200 2)

. 74 

### Sh ell O il C o mp an y, pr ess r e l ease ( F ebr u ar y 12 , 20 02)

. 75 

### Ho ust o n C h r

o ni cl e , “Merg e r fin a lly a don e d eal, C o no co Ph illip s now cou n t ry's larg est refin e r” (Aug ust 31 , 20 02 ). 76 

### Seve ral FR S c o m p ani e s m e nti one d up g r adi n g pr o j ect s i n t h ei r p u b l i c fi na n c i a l di scl o s u res
. T h ese i n cl u d e d: C h ev ro nTe x ac o (C he vr o n Tex aco, 20 02 Su pplem en t to th e An nua l Rep o r t , p
. 40 ), Cono coPh illip s (C on oco P h illip s Petro l eu m Co m p an y, 2002 Ann u a l Rep o rt , pp . 18 and 19 ), Ex xon Mob i l ( E xxo n Mob i l Co rp or ation , 20 0 2 A n nu al R e po rt , p. 1 5 a n d 2 002 Fin a n c ia l an d Op era ting Revi ew , p
. 63 ), Am erada Hes s ( A m e rada Hess C o r p orat i o n, 200 2 An nua l Repo rt , p
. 2) , Lyond ellC I TG O R e fi ne ry LLP (Ly o n d e l l C h em i cal Cor p orat i o n, 2 0 0 2 U

. S. Sec u ri t i es an d E x cha n ge C o m m i ssi on F o rm 1 0

- K F i l i ng, p. 5 4 ) , M a rat h on C o rp o r at i o n (M arat ho n C o rp orat i o n, 2002 Ann u a l Rep o rt , p. 23 and 2002 U.S. Sec u rit i es and E x cha n ge Co mmissio n Fo rm 1 0 -K Filing , p
. 47), Premco r In c., (Premco r In c., 200 2 U.S. Secu rities and Ex ch ang e Co mmissio n Fo rm 1 0 -K Filing , p
. 50 ), Teso ro Petro l eu m Co rp oratio n (Tesoro Petro l eu m Co rp oration , 20 02 U.S. Secu rities and Ex ch ang e Co mmissio n Fo rm 1 0 -K Filing , p
. 46), and Valero Corp oratio n (Valero Co rp oration , 20 02 U. S. Securities an d Ex ch an g e Co mmissio n Fo rm 1 0 -K Filing , p
. 41). 77 

### Ener gy In fo rm ation Adm i nistration , A n nual Ener gy Review 2002 , DO E/EIA

- 0 384 (20 02) (W ash i ng ton , D C , O c tob e r 24 , 2 003 ), Tab l e 5-19 . Th is p u b l icatio n is av ailab l e on t h e In t e rn et at h ttp ://www.eia.do e .go v / em eu /aer/petro .h tm l (as o f No vem b er 12 , 20 0 3 )

.
Energ y I n for m at ion A d mi nistra ti on / Perf orma nc e Profiles of Maj o r Energ y Pr od ucers 2002 

## 5878 

### A $1 .5 0- pe r- barrel decl i n e see m s l e ss si gni fi cant w h e n c o m p are d t o a base o f al m o st $3 4 per barrel t h an whe n i t i s co m p ared t o a b a se o f sligh tly less th an $ 8 per b a rrel. 79 

### See E n er gy I n f o rm at i on A d m i ni st rat i o n , “U pd ate of Tab l es an d Figur es f r om U.S

. Petro l eu m Refin ing and Ga so lin e Marketing Industry ,” Tab l e 6. Th is is an In t e rn et-on l y prod u c t t h at is av ailab l e at h ttp ://www.eia.do e .g ov /em e u / fin a n ce/ u s i&t o /do w n s tream / u pd ate/in dex.ht m l (as o f Nove m b er 1 2 , 2 003 ). 80 

### See for exam ple, E n ergy In f o r m at i on A d m i nist rat i on, Perf o r

man ce Pro files o f

Ma jo r En erg y Prod u c ers 20 01 , DO E/EI A0 206 (20 0 1 ) (W ash i ng ton , DC, Janu ar y 2003 ), p
. 4 3 ( T h i s p u b licatio n is av ailab l e o n th e I n tern et f r o m a lin k at h ttp ://www.eia.do e .g ov /em e u / fin a n ce/ h i stlib .h tm l (as o f Nov e m b er 12 , 200 3).) an d Ex xon Mob il Corpo r atio n , 20 02 Fina n c i a l and Operati n g Review , p. 66. 81 

### Am erada Hes s adde d 2 5 Hess Ex press co n v e n i e nce st ore s d u ri ng 2 0 0 2 ( A m e rada Hess C o r p orat i o n, 200 2 An nua l Repo rt , p. 1 2 ). Cono coPh illip s reco rd ed ch arg e s fo r t h e im p a ir m e n t o f assets asso ci ated with retail ou tlets th at wi ll b e so ld du ring 2 003 (Con o c o P h illip s, 200 2 An nua l Repo rt , p
. 72). Ex xon Mob il id en tified fou r k e y areas fo r its fo cu s: “co s t redu ction s , no n p et r o l e um incom e gr o w t h , sel ect i v e an d di sci p l i n e d ne w i n vest m e nt s, an d hi g h

- g ra di ng ser v i ce st at i ons ( E x x onM o b i l Co rp oration , 20 02 Annu a l Rep o r t , p
. 17 ).” Marath on con s o lid ated Speedway Su p e rAmerica op eratio ns b y ex itin g sout heastern States in whic h it has a m i nim u m market pres en ce, ref o c u si n g on i t s M i dwe s t op eration s
. (Marathon Oil Co m p an y, 2002 Ann u a l Rep o rt , p
. 23 ). Val e ro i n vest ed i n “ t op -pe r f o rm i n g st ore s ” a n d cl ose d m a rgi n al one s ( V al er o Co rp oration , 20 02 Annu a l Rep o r t , p. 15). 82 

### For e x am pl e, B P i s t r a n sf or m i ng m a ny Am oco out l e t s i n t o B P out l e t s , b u t co nt i n ui n g t o of fer Am oco- bra n ded m o tor g a so lin e (see B P p l c, “BP Unv e ils Ch icag o’s Gas Statio n of th e Fu tu re” (May 1 4 , 2 002 ) at h ttp ://www.b pa m o co .co m /ce n tres/press/ p

_ r_ d e tail_p

. asp ? i d =895 (a s o f No v e m b er 12 , 20 03)). Also, Sh ell is transfo r min g m a ny Texac o out l e t s t h at we re f o rm erl y part of Eq ui l o n i n to Sh ell-b r an d e d o u tlets (see Sh ell Oil Co m p an y, “Sh e ll Bran d Po ised for Majo r Exp a n s ion in U

. S. ” (Feb ruar y 8, 2 002 ) at h ttp ://www.p iersystem

. co m / e x tern al/fin al_V iew.cfm ? pressID=552 7&CID=6 9 (as o f Nov e m b er 12 , 200 3)). Add itio nally, BP h a s i n stalled ph o t o v o ltaic p a n e ls at m a n y o f its ou tlets, wh ich ar e asser t ed to su pp ly about “2 0 p e r c en t of th e site’ s o v e r a ll en erg y n eed s” (see BP p l c, “Co mmited to Clean er Env i ron m en t, BP Begin s Selling Ultra Low Su lfur Diesel in Califo r n i a; Co nv erts ARC O Sites t o So lar” (Jun e 14 , 200 2) at h ttp ://w ww.bp a m o co .co m /cen tres/p ress/p

_ r_d e tail_p.asp ? i d =903 (as of No vem b er 12 , 20 0 3 ) )

. 83 

### Thi s c ont i n ues a rece nt t r e n d di scuss e d el sewhe r e, part i c u l arly two En ergy Inform atio n Ad m i n i stratio n pu b lication s : Perfo r man ce Pro files o f

Ma jor En erg y Pro d u cers 20 00 , DO E/EIA

- 02 06(2 000 ) (W ash i ng ton , D C , Januar y 200 2) , p
. 44 (av a ilab l e on t h e In tern et at http ://to n t o
. eia.do e.g o v / FTPR OOT/fin a n c ial/02 060 0.pdf (as o f No vem b er 13 , 20 03)) and Rest ruct uri n g : The C h an gi n g Fa ce o f Mo to r Ga so lin e Marketin g (Oct obe r 20 0 1 ) , a n I n t e r n et

- onl y pr od u c t at h ttp ://www.eia.do e .g ov /em e u / fin a n ce/sp top i cs/d own s trm 0 0/in d e x.h t m l (as of Nov e m b er 1 3 , 2 003 ). 84 

### Th e Caltex jo i n t v e n t ure was an u n c on so lid ated affilia te for bo th of its p a ren t s, C h evro n an d Tex aco. 85 

### The refi neries are the 69,800 barrels pe r day Bulwar Islan d refine ry a n d th e 1 5 8 , 5 0 0 bar r e l s per day K w i nana refi nery
. 86 

### El Paso Corporatio n , 20 02 U.S. Securities an d Ex ch ang e C o mmissio n Fo rm 1 0

- K filin g, p
. 60

. 87 

### Co no co Ph illip s Co m p an y, 2 0 0 2 An nua l Repo rt , p. 43. 88 

### B e t w een 1 9 9 2 and 1 9 9 7 A s i a
- P aci fi c (c om pu t e d by c o m b i n i n g Asi a n De ve l opi n g C o unt ri es an d A u st ral i a , Ne w Zeal an d, and Japan ) pet r ol eum pr od uct con s um pt i on i n crease d 2 8 pe rcent

. Ho we ve r, bet w ee n 1 9 9 7 a n d 2 0 0 2 A s i a -Paci fi c pet r ol eum product c o nsum ption inc r eas ed 9 perce n t. Thus, t h e growth ove rthe last fe w y ears has failed to m a tch the pace over t h e earlier period , wh ich seem s to b e th e m a jor reason t h at com p anies speak of ex cess refinery cap acity in th is reg i on
. 89 

### El Paso Cor poratio n , pr ess r e lease (N ov em b e r 8 , 20 02 ). 90 

### Dyn e g y In c., 20 02 Securities an d Ex ch ang e Co mmissio n Fo rm 1 0 -K, p p
. F-73 , F-74

. 91 

### Ex xo n M obi l C o r p o r at i o n, 2 0 0 2 Fi n anci a l an d O p erat i n g Revi ew , p. 57. 92 

### Ex xo n M obi l C o r p o r at i o n, 2 0 0 1 Fi n anci a l an d O p erat i n g Revi ew , p. 35. 93 

### Uno cal C o rp oratio n , 20 02 Secu rities and Exch ang e C o mmi ssio n Fo rm 1 0 -K, pp
. 18 -19

.

Energ y I n for m at ion A d mi nistra ti on / Perf orma nc e Profiles of Maj o r Energ y Pr od ucers 2002 

## 59Energy Information Administration/Performance Profiles of Major Energy Producers 2002 

## 61 

# 4. Resource Development Trends

This chapter of Performance Profiles addresses the costs of finding oil and natural gas and other resource development issues. While the costs of adding oil and gas reserves (finding costs) do not directly affect the current-year bottom line of the FRS companies (see Chapter 3), they are important in guiding the scale and scope of the companies' current and future resource development strategies. Accordingly, this chapter also discusses the ge ographical areas of most importance to the FRS companies' current resource development initiatives. Specifically, this chapter presents four analyses ("Special Topics") that discuss:

• Variations in regional finding costs
• Development in the Gulf of Mexico
• Natural gas production in the United States
• The Mackenzie pipeline and implications for the U.S. natural gas market



# SPECIAL TOPIC : Finding Costs Increased in Most Regions

Average finding costs rose worldwide, boosted by in creases in six of the ni ne FRS regions for the 2000 to 2002 period, with Canada again experiencing the highest costs as it had for the 1999 to 2001 period (Table 19). Compared to the sec ond-most-costly region, Canada’s cost s increased from $3 per barrel of oil equivalent for the 1999 to 2001 to $5.51 for the 2000 to 2002 period and had the largest absolute increase for the 2000 to 2002 fi nding costs for any FRS region. Finding costs are the costs of adding oil, including crude oil and natura l gas liquids, and dry natural gas proven reserves via exploration and development activities.

P a

P 

## They are measured for oil and gas on a combined basis in units of dollars per barrel of oil e quivalent (BOE). Idea lly, finding costs would include all the costs incurred (no matter when these costs were incurred or actually recognized on a company's books) in finding any particular proven reserves (not including the purchases of already discovered reserves). In practice, finding costs are actually measured as the ratio of exploration and development expenditures (excluding the expenditure s on proved acreage) to proven reserve additions (excluding net purchases of proven rese rves) over a specified period of time.

P b

P 

## Finding costs are generally measured in Performance Profiles as a weighted average over a period of three years to accommodate leads and lags in data reporting, and, if several years of data are presented, they are usually reported in constant dollars to facilitate comparisons over time. Other prominent changes in regional finding cost s for the FRS companies for the 2000 to 2002 period include the largest proportional increase in finding co sts in OECD Europe and a notable increase in the U.S. Onshore (Table 19). The large increase in OECD Europe (predominantly the North Sea) raised that region to the second-highest region for finding costs, while the increase in the U.S. Onshore pushed it into virtual tie with the U.S. Offshore (predominan tly the Gulf of Mexico) for the third highest-cost region. The large decrease in finding costs for th e FRS companies in the Mi ddle East for the 2000 to 2002 period is of little significance becau se, with the unfavorable investme nt climate in the Middle East,

## this region is usually the one with th e sm allest am ount of reserve add itio ns through the drill bit for the FRS co mp a n ies.

Reg i o n 1999- 2001 2000- 2002 Percen t Chan g e Un it ed St at es O n s hore 6 .01 7 .62 26.7 O f f s hore 6 .99 7 .59 8 .6 T o tal United States 6.39 7.61 19.1 For e i gn Canada 10.70 14.83 38.6 O E CD Eur ope 5.51 9.32 69.3 F o r m er Soviet Union and Eas t er n Eur ope 3.26 3.10

- 4 .9 Af r i c a 3.68 3.68 0.0 Middle Eas t 7.66 5.94

- 22.5 O t her Eas t er n Hem i s pher e 4 .07 4 .63 13.7 O t her W e s t er n Hem i s pher e 6 .22 5 .14

- 17.5 T o tal Foreign 5 .25 5 .92 12.6
Wor l dw i d e 5.78 6.70 16.0 Not e s : The above f i gures are 3-year w e i ght ed averages of ex pl orat i on and devel opm ent ex pendi t u res (c urrent dol l a rs ), ex c l udi ng ex pendi t u res f o r proven ac reage, di vi ded by res e rve addi t i ons , ex c l udi ng net purc has es of res e rves

. Gas i s c onvert ed t o barrel s of oi l equi val ent on t he bas i s of 0. 178 barrel s of oi l per t hous and c ubi c f eet of gas

. S ourc e : E nergy I n f o rm at i on A d m i ni s t rat i on, Form E I A

- 28 (Fi nanc i a l Report i ng Sy ste m )

. 

### T a ble 1 9

. Finding Cos t s by Re gion for FRS Compa n ie s , 1999- 2001 an d 2000- 2002 ( D ollar s per Bar r e l of O il Equivalent)



## In order to understand the basis for finding cost increases or decr eases, one m u st look at its two components -- finding rates and expenditures per well. Finding rates are the average amount of proved reserves added by the drill bit (thr ough extensions and disc overies, improved recovery, and revisions to previous reserves estim ates) per well drilled. Ideally, reserve addition s pe r well are m easured as the av erage of the res e rves add e d by each well during its lif e tim e (no m a tter th e date that the well was comp le ted or the reserves added). In practice, additions to reserves p e r well are actually m easured as th e ratio of total proven reserv e additions (excluding net purchases) to the num be r of wells completed (incl uding dry holes) during a specified period of tim e, with no atte mpt to link r e serve incr e a ses to indiv i dual wells. c


## Sim ilarly, expenditures per well are ideally m easured as th e average of the exploration, development, and unproved acreag e ex penditu res associated with each well during its lifetim e. In practice, expenditu res per well are the to tal ex penditu res o n exploration, developmen t, and unproved acreage divided by the num ber of wells completed during a particula rtim e perio d, with no attemp t to link expenditures to individual wells. These two ratios are gen e rally m easured in Performance Profiles as a weighted average over a period of three years (in part, to compensate for the imperfect way they are m easured), and, if several years of data are presented, expenditures are usually reported in constant dollars (to fac ilitate co mparisons o v er

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 62

## tim e). Finding costs a r e then the exp e nditu res ( t o f i nd additio nal res e rve s ) per well co mpleted div i ded by the finding rate (proven reserve additions per well comp leted). Worldwide finding rates and expenditures per well for the FR S comp anies both fell for the 2000 to 2002 period (T able 20). However, the increase in worldw ide finding costs, as shown in Table 19, resulted f r om f

i nding rates f a lling f a ster th an expenditu res per well. d 

## In other word s, the re la tiv ely la rger d e cline in the wor l d w ide f i nding rate was the sole re ason that finding costs rose. In Canada, the region with the largest absolute increase in fi nding costs for the 2000 to 2002 peri od, a 13-percent decline in the expenditures per well was m o re than offset by a 37-pe rc ent de cline in the f i ndi ng rate. Finding costs in OECD Europe rose so m u ch because the finding rate th ere fell while expen d itures per well rose (b oth of which resulted in increased finding costs). For the U.S. Onshore, expenditures per well changed little while the fin d ing rate fell. In each of these instan ces, the fall in finding rates was the more prom i n ent contributor to increa sed finding costs.

1999- 2001 2000- 2002 Percen t Cha nge 1999- 2001 2000- 2002 Percen t Cha nge Un it ed St at es O n s hor e 354 293

- 17.2 2 ,128 2,232 4.9 O f f s hor e 2 ,258 2,293 1.5 15,782 17,391 10.2 T o tal United States 522 437

- 16.3 3 ,332 3,322

- 0 .3 For e i gn Canada 162 102

- 37.4 1 ,738 1,508

- 13.2 O E CD Eur ope 6,087 4,185

- 31.2 33,519 39,024 16.4 F o r m er Soviet Union and Eas t er n Eur ope 10,067 13,913 38.2 32,776 43,068 31.4 Af r i c a 6,715 6,057

- 9 .8 24,687 22,263

- 9 .8 Middle Eas t 438 831 89.7 3 ,358 4,940 47.1 O t her Eas t er n Hem i s pher e 1 ,728 1,338

- 22.6 7 ,034 6,193

- 12.0 O t her W e s t er n Hem i s pher e 2 ,127 1,721

- 19.1 13,240 8,836

- 33.3 T o tal F o r e ign 1 ,084 817

- 24.6 5 ,696 4,836

- 15.1
Wor l dw i d e 723 582

- 19.6 4 ,180 3,900

- 6 .7 E x pe nditur e s P e r We ll ( T hous and Dollar s per W e ll) T a ble 2 0

. Finding Ra te s a nd E x pe nditur e s pe r We ll by Re gion for FRS Compa n ie s , 1999- 2001 an d 2000- 2002

Not e s : The above f i ndi ng rat e s are 3-year w e i ght ed averages of res e rve addi t i ons , ex c l udi ng net purc has es of res e rves , di vi d ed by num ber of w e l l s c o m p l e t ed, and t he above ex pendi t u res per w e l l are 3-year w e i ght ed averages of ex pl orat i on and devel opm ent So u r ce : E nergy I n f o rm at i on A d m i ni s t rat i on, Form E I A

- 28 (Fi nanc i a l Report i ng S y s t em ). 

### Re gion Finding Ra te s ( T hous and Bar r e l of O il Equivalent per W e ll)



# Finding C o st s for M a ny Re gions S h ow Consist e nt P a tter n s Si nc e Early 1 9 9 0 ’s Regional finding costs vary substantially across the FRS regions in any particular period and in any particular region from period-to-p eriod (Table 19). From the 1990’ s until 2002, the highest and lowest regional fin d ing costs y ear have d i ffered from each other by $3.60 per barrel of oil eq uivalen t (bo e ) to $11.90 per boe in constant 2002 dollars (Figure 28). The relatively high vari ance in regional finding costs is ind i cated by the extent that the range between the m a xim u m and m i ni m u m fi nding costs has exceeded th e lowest fin d ing cost in every year except one. In a ddition, the gap betw een m a xi m u m and
Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 63

## m i ni m u m fi nding costs has been widening in recent years, largely b ecau se the m a ximum finding cost has increased m u ch m o re than th e minim u m one. Nonetheless, when examining regional finding cost s over a long period of tim e, m a ny of the regions have had relatively consistent find ing cost levels. (In this discu ssion of regional finding cost trends, five-year periods are being used to damp en extrem e values and facilitate comp arisons.) The regions can, som e what arbitrarily, be separated into groups w ith high costs, low costs, and varying costs for the years 1990 through 2002 (Figure 29). The regions that have had high finding costs are Canada, the U.S. Offshore (largely the Gulf of Mexico), and OECD Europe (largely the North Sea). Moreove r, som e of the largest finding cost increases in recen t years have been in curred in these region s. W ith one of the lowes t e xpenditu res per well of any region, Canada m i ght be expected to have low finding costs. However, most of Canada’s oil and gas reserv es ten d to be in s m aller pockets som e what nea r to th e surface, re sulting in a m a jority of the wells in Canada being relatively shallow wells that are less costly to drill but also account f o r sm aller reserve additions. T h erefore, the low reserve additions per well results in Canada havi ng one of the highest regional finding costs for the FRS companies. OECD Europe reserves are m o stly offshore. Offs hore exploration and developm ent tends to be relatively m o re expensive, with larg er fields found and lower lifting costs. This is pa rt of the reason that the U.S. Offshor e and OECD Europe are among the regions with the highest expenditures per well. The low-cost regions from 1990 through 2002 are Africa, the Other W e stern Hem i sphere, and the Other Eastern Hem i sphere (Figure 29). All three regions fa ll in the m i ddle rang e of th e am ount of exploration and developm ent activity, both in spending and rese rves added over the period. These regions differ from the other FRS regio n s because they are no t as well dev e loped as the U.S. Onshore and Offshore, Canada, and OECD Europe regions a nd generally have not restricted investm e nt by U.S. comp a n ies as much as the two regions of the Mi ddle East and the Form er Soviet Un ion and Eastern Europe. The three low-cost regions also have had som e of the m o st st able finding cost levels of any of the FRS regions.
The rem a ining regions, the U.S. Ons hore, the Middl e East, and the Former Soviet Union and Eastern Europe, exhibit cost patterns that are not as consis tent as the other FRS regions (Figure 29). Finding costs for the U.S. Onshore had rem a ined rath er s t able and low, but they have incr eased substantia lly in both of the last two five-year peri ods, indicating the possibility that this region m a y be com e one of the high-cost ones. e 

## Finding costs for the FRS comp anies in the Middle East have followed a “U-shaped” pattern, from high to low to high ag ain, with inc r eases in th e last f our f i v e -yea r per i o d s (a to tal tim efram e of eight years ) . The cost estim ates for this region are probably th e m o st uncertain, because, as previously explained, the Midd le East has had less exploration and developm ent spending by the FRS comp anies than any other region by a large m a rgin. Th e region of the Form er Soviet Union and Eastern Europe had high finding costs in the m i ddle of the period, but has e xperienced dram atic declines in eight-year period comp rised by the last four five-year periods, as exploration and developm ent activities has ramp ed up from very low levels in the early and m i d-1990’s. f

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 640. 00 2. 00 4. 00 6. 00 8. 00 10. 00 12. 00 14. 00 16. 00

1990-1992 1992-1994 1994-1996 1996-1998 1998-2000 2000-2002Constant Dollars (2002) per BOE

Not e : Fi ndi ng c o s t s are w e i ght ed averages of t he annual f i ndi ng c o s t s f o r t he t h ree years s pec i f i ed. The l abel s us ed on t h e hori z ont al ax i s ref l ec t t hat t he val ues pl ot t ed on t he f i gure are 3-year averages

. S ourc e : E nergy I n f o rm at i on A d m i ni s t rat i on, Form E I A

- 28 (Fi nanc i a l Report i ng S y s t em ). 

### Figur e 28. Maximum and Minimum Thr ee-Year Weighted A v erage Regional Finding Costs for FR S C o mpanies, 1990-1992 to 2000-2002

0. 00 2. 00 4. 00 6. 00 8. 00 10. 00 12. 00

1 9 9 0

- 1 9 9 4

1 9 9 2

- 1 9 9 6

1 9 9 4

- 1 9 9 8

1 9 9 6

- 2 0 0 0

1 9 9 8

- 2 0 0 2 1 9 9 0

- 1 9 9 4

1 9 9 2

- 1 9 9 6

1 9 9 4

- 1 9 9 8

1 9 9 6

- 2 0 0 0

1 9 9 8

- 2 0 0 2 1 9 9 0

- 1 9 9 4

1 9 9 2

- 1 9 9 6

1 9 9 4

- 1 9 9 8

1 9 9 6

- 2 0 0 0

1 9 9 8

- 2 0 0 2Constant Dollars (2002) per BOE 

### Figur e 29. Fiv e -Year Weighted A v er age R e gional Finding C o sts for FR S C o mpanies, 1990-1994 to 1998-2002

Not e : Fi ndi ng c o s t s are w e i ght ed averages of t he annual f i ndi ng c o s t s f o r t he f i ve years s pec i f i ed. The l abel s us ed on t he hori z ont al ax i s ref l ec t t hat t he val ues pl ot t ed are 5-year averages

. Fi ndi ng c o s t s f o r t he Form er S o vi et Uni on and E a s t ern E u rope are not avai l abl e bef ore 1992-1996 due t o c onf i dent i a l l y requi rem ent s

. S ourc e : E nergy I n f o rm at i on A d m i ni s t rat i on, Form E I A

- 28 (Fi nanc i a l Report i ng S y s t em ). C a nada

U

. S. Of f s hore OEC D Europe Other E astern H e m i sphere Other W estern H e m i sphere Af r i c a

Form e r Soviet U n ion & E astern E u ro p e U

. S. Onshore M i ddl e E ast 

### High-Cost Regions Low -Cost Regions Mixed-Cost Regions

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 65

# Finding Cost s Are Rising , But So Are Prices Overall, finding costs have been rising above their lows of the m i d-1990’s, both dom es tically and abroad (Figure 30). However, U.S. Offshore finding costs, which had surged beginning in the three years of 1994 to 1996, have fallen back to m eet the ri sing U.S. Onshore costs, while foreign costs have stayed lower than cos t s in the United States for th e two m o st recent three

- year periods

. However, trends in finding costs m u st be considere d, am ong other things, in th e context of oil and gas prices. F i nding costs are expect ed to move in concert with cr u d e oil and n a tura l gas p r ices. g 

## Higher crude oil and natural gas prices m ean that crude oil and natural gas are worth m o re than they had been, so profit-seeking comp a n ies should be spending more to find them

. The prices of crude oil and natural gas declined through m o st of the 1980’s, followed by a level period for natural gas and a slight d ecline for crude oil (Figure 31). h 

## However, both have been rising in recent years. The trend in worldwide finding costs for th e FRS comp anies has ex hibi ted a sim ilar pattern. Worldwide finding costs declined in the 1980’s thr ough m i d-1990’s, but then began rising. They have increased 42 percent since their low in the 1994 to 1996 period; over the sam e period, dom e stic crude oil prices rose by 39 percent and na tural gas prices by 72 percent.

a 

### Al t e rnat i v el y , fi n d i n g c o st s ar e t h e ex pl o r at i o n an d de vel o p m ent cost s of r e pl aci ng res e r v es rem oved t h r o u g h pr o duct i o n. b 

### One i n here nt l i m i t a t i on o f m easuri n g fi ndi n g c o st s t h i s wa y i s th at th e exp e nd itures an d th e reserv e ad ditio n s recog n i zed in a p a rticu l ar in terv al do no t usu a lly co rrespo n d ex actly with each ot he r. Ex pe ndi t u res ar e us ual l y reco g n i zed i n t h e pe ri o d t h at the paym ent actually occurre d. Prove n rese rves a r e us ually rec o gnized when the r e is reas ona ble ce rtainty that they ca n be produce d ec onom i ca lly. There is no reas on that these m u st o ccur i n th e same ti m e p e rio d (o il and g a s wells are often ope rat e d o v er a l o n g t i m e per i od ), s o t h at s o m e expe ndi t u r e s m a y not be recognized in the sam e ti me p e riod th at t h eir corres ponding reserves a r e re cogn ized. On e way to m o d e rate th is li m itat i o n is to in crease th e leng t h o f th e ti m e p e riod ov er whi c h fi n d i n g cost s a r e m easure d , al l o wi ng reser v e a d di t i ons a n d e xpl orat i on a n d devel o pm ent expe n d i t u res t o m a t c h up m o re cl osel y
. Ho we ver , t h e l o n g e r t h e t i m e peri od o v er w h i c h fi ndi ng cos t s are m easure d , t h e m o re out o f dat e t h ey b ecom e , because they i n clude olde r a n d ol der expe nditures and res e rves , a n d costs and tec h no logy are constant ly changing. T h e only way t o sol v e t h e co rres p on de n ce p r o b l e m wo ul d be t o cal c u l a t e an a v era g e fi n d i n g c o st f

o r al l o f t h e oi l a n d ga s pr od uce d by a well after it is p e rm an en tly sh u t in . Bu t t h en m a n y co sts in clu d e d wo u l d b e far ou t of d a te.
c 

### As with finding c o sts, m easure m ents of rese rve a dditions pe r well are lim i t e d b ecause the reserves a d ded and the wells com p leted duri ng a particular interval of time do not necessarily corres pond exactly with each other. (For fu rt her discussion, see pr ev i o us no te.) d 

### If find ing rates and exp e nd itu res eith er rise o r fall b y t h e sa m e p e rcen tage, th en find ing co sts will n o t ch ang e
. (See Fo rm er So vi et U n i o n a n d East er n E u r ope Ta bl es 1 9 and 2 0

. )
e 

### Ev er y year , on e year is add e d an d on e year is d r op p e d f r om th is calcu latio n. Th e abov e r e su lt r e g a rd ing f i nd ing co sts f o r th e U

. S. O n sho r e reg i on m ean s that an nu al U

. S. O n sho r e f i n d i ng co sts w e r e h i g h e r i n 2 001 that in 199 6, an d h i gh er in 200 2 th an in 199 7. f 

### Fi ve-y ear fi nd i ng c o st s f o r t h e re gi o n s of t h e Fo rm er So vi et Uni o n an d E a st ern Eu ro pe bef o re t h e 1 9 9 2 t o 1 9 9 6 pe ri o d cannot be disclose d because of da ta confi d e n tiality requi re ments. g 

### Techn o l o gi cal cha nge i s a not her fact o r i n de t e rm i n i ng fi nd i n g costs; it is no t con s i d ered i n th is d i scu ssion

. h 

### Th e p r ices u s ed to con s tru c t t h ese i n d i ces are do m e stic p r ices. Wh ile t h e d o m estic p r ice o f cru d e o il is si m ilar to th e world pri ce, t h e d o m e st i c pri ce of n a t u ral gas i s n o t . H o weve r, w o rl dwi d e nat u r a l gas pri ces ha ve m oved i n si m i l a r di rect i o n s si nce t h e m i d-19 9 0 ’s . See BP St at i s t i c al Revi ew of Worl d E n er gy, ( L o ndo n, U n it ed K i ng do m , Ju n e 200 3) , p. 29

.

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 664 8 12 16 20

1979 - 1981 1982 - 1984 1985 - 1987 1988 - 1990 1991 - 1993 1994 - 1996 1997 - 1999 2000 - 2002Constant Dollars (2002) per BOE

Not e : Fi ndi ng c o s t s are w e i ght ed averages of t he annual f i ndi ng c o s t s f o r t he t h ree years s pec i f i ed. The l abel s us ed on t he

hori z ont al ax i s ref l ec t t hat t he val ues pl ot t ed on t he f i gure are 3-year averages

. S ourc e : E nergy I n f o rm at i on A d m i ni s t rat i on, Form E I A

- 28 (Fi nanc i a l Report i ng S y s t em ). 

### Figure 30. U.S. O n shore, U.S. O ffshore, and Foreign Three-Year Weighted A v er age Finding C o sts for FRS Com p anies, 1979-1981 to 2000-2002

U. S

. Of f s hore

U. S

. Ons hore For e i g n

20 40 60 80 100 120 140

1979-1981 1982-1984 1985-1987 1988-1990 1991-1993 1994-1996 1997-1999 2000-2002Index (1979-1981 =100) Dom esti c Natural Gas P r i ce I ndex Dom esti c Crude Oi l P r i ce I ndex W o rldw ide Finding C o st Index 

### Figur e 31. Indices of Thr ee-Year A v er age D o mestic R eal Pr ices of C r ude O il and N a tur a l G as and Wor l dw ide Finding C o sts for the FR S C o mpanies, 1979-1981 to 2000-2002

Not e s : A v erages are unw ei ght ed. Real pri c es are i n c ons t ant 2002 dol l a rs

. Crude oi l pri c e i s t he c r ude oi l dom es t i c f i rs t purc has e pri c e, and nat ural gas pri c e i s t he dom es t i c w e l l head nat ural gas pri c e. The l abel s us ed on t he hori z ont al ax i s ref l ec t t hat t he val ues pl ot t ed on t he f i gure are 3-year averages

. S ourc e : Dom e s t i c nat ural gas pri c e i ndex and dom es t i c c r ude oi l pri c e i ndex : E nergy I n f o rm at i on A d m i ni s t rat i on, M ont hl

y E

nergy Rev i ew

Oc t ober 2003, DOE / E I A

- 0035(2003/ 10) (W as hi ngt on, DC, Oc t ober 2003), Tabl es 9. 1 and 9. 11. W o rl dw i de f i ndi ng c o s t i ndex : E nergy I n f o rm at i on A d m i ni s t rat i on, Form E I A

- 28 (Fi nanc i a l Report i ng S y s t em ).

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 67

# SPECI A L TOPI C : The Gulf of Mexico – Do Technology and Recent Economics Favor Oil Reserves Over Natural Gas?

Exploration and developm ent in the Gulf of Mexi co comm enced over fifty years ago when the KerrMcGee corporation discovered Ship S hoal 32, about 10 m iles off the Louisian a coast in 18 feet of water. By the m i d-1980’s, alm o st 1,000 fields had been disc overed and m a ny industry analysts were convinced that the Gulf was in decline. a 

## Som e even referred to the Gulf as the “Dead Sea.” b 

## Starting with Shell Oil’s discov ery of the 22 0-m illion-barrel d eepwater Auger field in 1987, th is view has been rep l aced with the recognition that th e Gulf still has trem endous potential. W h at has been especially striking about the deepwater fields are the high productivity rates of the wells . For example, a typical shallowwater oil well flows at just over 100 barrels of oil per day, whereas oil wells at the deep water Ursa field each produce about 30,0 00 barrels of oil per day. c 

## Sim ilarly, a single well at the d eep water Mens a field produces ab out 100 m illion cubic feet of gas per day, which is about fifty tim es the flow rate for a typica l sha l low-water ga s well. d 

## In the shallow-water portion of the G u lf, i.e. that portion of Gulf wher e the water depth is less than 200 m e ters, the industry over the period o f 1993 through 2002 replaced approx im ately 80 percen t of the roughly 7.4 billion of crude oil equivale nt that was produced over the period. e 

## As a result, crude oil equivalent reserves in the shallow Gulf were approxi m a tely 33 percent lower at the end of 2002 than in 1993. Fortu n ately, this has been m o re than offset by the deepwater where reserve ad ditions ov er the 1993 through 2002 period were m o re than 2.5 times the level of production. For the Gulf as a whole, over 12 billion barrels of crude oil equivalent were produced over the period 1993 through 2002 while reserves at the end of 2002 were approxim a tely 2.5 b illion barrels of oil equivalent higher than at the beginning of the period. f 

## W ith respect to rem a ining undiscovered resources, the 2000 resource assessment perform e d by the U.S. Departm e nt of Interior’s Minerals Managem e nt Service (M MS) indic a tes tha t the r e are app r oxim a tely 71 billion b a rr els of oil equiva lent yet to be added to reserves. g 

## Not surprisingly, the vast prop ortion of the rem a ining undiscovered resources are in the d eep water. MM S estim ated that the split between oil versus natural gas resources is approxim a tely fifty-fifty. h


## Som e of the more notable d eepwater discoveries include:
Thunder Horse . This field (previously known as Crazy Hors e) is believed to contain between one and three billion barrels of recoverabl e crude oil equivalent, which m a kes it the largest field ever discovered in the Gulf o f Mexico. i 

## This field gives new m e aning to the noti on of a deep field in that it lies over 25,000 feet below the ocean floor which in turn is 6,000 feet below the surface of the Gulf. The fi eld also typifies the long lead-tim e a ssociated with offshore exploration and developm ent. Lead tim es can be long because production requires pi peline infrastructure that m a y onl y be econom ic when there are a num b er of fi elds to be brought onstream

. For example, in the case of Thunder Horse, the fiel d was leased in 1988 but the first discovery well was not drilled u n til 1999. Initial produ ction is expected to commence in 2005 , 17 years af ter the lease was acquired. j 

## It is expected to be worth the wait giv e n that the field will b e produced usin g a 250,000- barre ls-of-o i l-equ i valen t -per-day fl oating production facilit y. Partners in the fi eld are BP (with a 75- percent ownership share) and Exxon Mobil (with a 25-pe rcent ownership share). The field also typifies
Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 68

## the oil-prone nature of the deep water discoveries to date based on the planned production facilities, approxim a tely 87 percent of the produc tion (on an oil equivalent basis) is expected to be accounted for by crude oil as comp ared to natural gas. k 

## Mad Dog. Discovered in 1998, the Mad Dog oi l field developm ent is planned to have 14 wells tied back to a spar. The facility is designed to process 87,000 barrels of oil equivalent per day. l 

## Approxim a tely 92 percent of the pr oduction is expected to be oil. m 

## The fir s t production of oil is expected by early 2005. Partners in the project are BP (with a 60.5-percent ownership share), BHP Billiton (with a 23.9-percent owners hip share), a nd Unocal (with a 15.6-percen t ownership sh are).
Na Kika. T h is project is located 140 m iles southeast of New Orleans. It consists of five distinct fields with water depths of 5,800 to 7,000 feet. n 

## In part because of a lack of pip e line infrastructure, the fields (while d i sco v ered in the 1980s) are o n ly now being developed. The field s will be p r o duced using 10 wells tied back to a cen trally locat ed floating production platf o rm . Th e pl atform is a sem i -subm e rsible unit equipped with drilling and production equipm ent. It is anchored in place or can be dynam i cally position e d u s ing thru sters. The facility is des i gne d to proces s 190,000 barrels of oil eq uivalen t per day with approx im ately 57 percen t of the production being accou n ted for by oil. o 

## Production is expected to commence in early 2004. Partners in the project ar e BP and Shell Oil. T h e partners have equal ownership interests in four of the five fields . B P has a m a jority stake in the fifth field.
Atlantis . T h is field is located 125 m iles south of New Orleans in 4,400 to 7,100 feet of water. p 

## The f i eld will b e developed w ith a m oored sem i -subm e rsib le produ ction f acility with a des i g n capacity o f around 180,000 barrels of oil equi valent per day. Less than 20 percen t of the output is expected to be natural gas. BP is the op erato r and h a s a 56-pe rcent ownersh i p interes t . BHP Billito n accounts f o r the rem a ining 44-percent ownership share.
All of the ab ove projects will m a ke use of the $1- b illion Mardi Gras tran spo r tation sys t em which upon comp letion will cons ist of five pipe lines stretching m o re the 450 m iles ac ross the Gulf. This system will have the cap a bility of transporting ov er 1 m illion ba rrels per d a y and 1.5 billion cubic feet day of crude oil and natural gas, respectively. q 

## Other recent significan t discoveries includes Vortex (Kerr-M cGee, BHP Billiton, and Ocean Energy), Tahiti (Chev r onTexaco, PanCanadian Energy, an d Enterp rise), Deim os (Shell Oil and BP), and Great White (Shell Oil, BP, and ChevronTexaco). Only Vortex is known to be prone to natural gas. r 

## The oil-p r on e nature of these recen t discoveries does not appear to be consistent with what one would expect based on MMS’s fifty-fifty oil to natural gas resource asse ssm ent in 2000. It is also not consistent w ith th e m o st recen t 2003 MMS resource assessm e nt which (according to The Wall Stre et Journal ) significantly raised their esti m a te of the am ount of undiscovere d natural gas resources left in the Gulf

. s


## It m a y be the oil-prone nature of the projects cu rrently be ing developed in the Gulf is a legacy of the industry’s previous focus on finding and developing oil resources. Alternatively, this outcom e could be attributed to the fact that m a ny of the undiscovered gas prospects have a vertical dril ling depth greater than 15,000 feet where the seism i c im aging is poor relative to shallower drilling depths. In any event, the relatively m o re oil versus na tural gas being developed in the Gulf has m a jor implications for dom e stic crude o il and natural gas supplies. Buoyed by these and other discoveries, the FRS comp a n ies have replaced over 100 percen t of their offshore oil pro duction in eight out of th e past

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 69

## ten years (Figure 32). F o r the period as a whole, the comp anies have replaced 145 percent of their offshore crude oil p r odu ction. In co ntrast, the n a tural gas reserve replacem ent rate h a s exceed ed 100 percen t in o n ly thr ee of the pas t te n years. For the period as a whole, the natura l gas r e serve replacem ent rate was a disappointing 87 percent. t 

## Additiona lly, this s itu ation has deteriorated fu rth e r in recen t years. Over the 1998 through 2002 period, na tural gas reserve additions were only about 70 percent of the am ount of natural gas that was pr oduced. Fortunately, continued impr ovem e nt in seism i c technology (in conjunction with the cu rrent price en vironm ent) s hould eventually y i eld the discovery of additional natural gas.

0. 0 0. 5 1. 0 1. 5 2. 0 2. 5 3. 0

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002Reserve Replacement Ratio 

### Oi l Na

t u r a l G a

s F

i g u r e 32. R e s e r v e R e p l ace m e n t R a

t i o s f o r t h e F R

S Co m p an i e s i n t h e U

. S

. O f f s h o r e , 1993- 2002

S

our c e : E ner gy I n f o r m at i on A d m i ni s t r a t i on, F o r m E I A

- 28 ( F i nanc i a l R epor t i ng S y s t em )

.

a 

### Kallau r , Carolita, 

## “T h e Deep water Gu lf of Mex i co —Lesso n s Learn e d , ” In stitu te o f Pet r o l eu m's In ternatio n a l Conferen ce o n D e epw a ter Exp l o r ation and Pr odu ction i n A s so ciatio n w ith O G P, Febr u ar y 22 , 200 1 Lond on , UK

. Lo cated on t h e Internet at http://www. gom r .m m s .gov/ hom epg/ offs hore/deepwat r /lessons_learned. htm l (as of Decem ber 15, 2003). b 

### Ibid

. c 

### Ibid

. d 

### Ibid

. e 

### Ener gy I n fo r m at i on A d m i nist rat i on, “A d v a n ced S u m m a ry U. S. C r u d e Oi l, Natu ral Gas, and Nat u ral Ga s Liq u ids Rese rve 2 002 A nnu al R e p o r t ,” DO E/EI A- 021 6( 2002 ) Ad v a n ce Su m m ar y, O c tob e r 2 003

. f 

### M i neral s M a n a gem e nt Servi ce, “ Ou ter C o ntin en tal Shelf Petro l eu m Assessm en t 2 0 0 0 ,” Se pt em ber 2 0 0 3

. L o cated on the Internet at http://w ww.mm s
. g ov/re v aldi v/RedNat Assessm ent. htm (as of Decem ber 15, 2003). g 

### Ibid

. h 

### Ibid

. i 

### BP plc, “ U pst r eam Build Projects,” Ja nu ar y 2 003 . Lo cated o n the Internet at h ttp ://www.b p.co m / liv eassets/b p_ in tern et/g l o b a lbp / STAGING/ g l ob al_ a ssets/d o wn l o ad s/ U/Up stream

_ b u ild _proj ects.pd f (as of Decem ber 15, 2003). j 

### Ibid

. k 

### Ib id. Based o n th e repo rted desig n cap acities and t h e co nversion facto r of 0

. 17 8 m c f o f natu ral g a s p e r barrel o f cru d e oil. l 

### Ibid

. m 

### Ib id . Based on th e repo rted d e sign cap acities and t h e co nv ersi o n fact o r o f 0.178 m c f of n a tu ral g a s p e r b a rrel of crude o il.
n 

### Ibid

. o 

### Ib id. Based o n th e repo rted desig n cap acities and t h e co nversion facto r of 0

. 17 8 m c f o f natu ral g a s p e r barrel o f cru d e oil. p 

### Ibid

. q 

### Ibid

. r” 

### BHP Billito n Discov ers Natu ral Gas with Vortex-1 W e ll in Deepwater Gu l f o f Mex i co ,” Oil & Gas Jo urn a l On lin e, (Decem ber 13, 2002). Locate d on the Internet at h ttp ://o gj .p en nn et.co m /article s/web_ article_d isp l ay.cfm ? S ectio n = Arch iv es&Article_ C ateg ory=Exp l D&ARTICLE_ID=163 7 72 &K EY WO R D =v ort e x (a s of Decem ber 15, 2003)
s 

### Go l d , R u ssell, “ Gu lf of Mexico May Ho ld Mo re Natural-Gas Sup p l y,” The W a ll Street Journal ( N ove m b er 19 , 20 0 3 )

. t 

### Ener gy I n fo rm ation Adm i nistration , F o rm EIA-28 (Financi al Reporting Syste m ). Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 70

# SPECI A L TOPI C : Natural Gas Supply -- A New Paradigm?

Throughout most of the 1990’s, m a ny natural gas analys ts were of the view that technological progress would enable the North Am erican natural gas supply industry to m eet growing dem a nd at m oderate to low prices. According to the Energy Inform a tion Adm i nistration, the natural gas price in 1999 a 

## was $2.19 per thousand cubic feet while the natural gas price for 2003 b 

## was projected (in Decem ber 2003) to be $4.97 per thousand cubic feet, a 127-percent increas e over the period. However, despite these higher prices, natural gas production in 2003 was projected (in December 2003) to be only about 3.6 percent higher than in 1999. c 

## This seem ingly inelastic response of pr oduction with respect to price has led som e to question whether technology advances will in fact be robust enough to keep natural gas prices at moderate to low levels. In other words, is a ne w natural gas supply paradigm – one of higher prices being needed to m eet projected demand – em ergi ng? For instance, the National Petroleum Counc il (NPC) has recently concluded that current No rth Am erican p r oducing areas and those under developm ent will b e una ble to m eet projec ted de m a nd over the next 20 y ears. d 

## At first glance, the NPC’s concerns appear to be m i splaced. Producer s s u ch as the F R S comp anies have responded to the increase in the price of natural gas by substantially increasing th eir level of drilling for natural gas (Figure 33). Dom e stic gas well comp leti ons by the FRS comp a n ies a ttained an all-tim e high in 2001. While comp letions were off in 2002, they were nevertheless almost thr ee tim e s their level in 1999.

0. 0 0. 5 1. 0 1. 5 2. 0 2. 5 3. 0 3. 5 4. 0 4. 5

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002Pricein Constant Dollars(2002)per thousand cubic feet (MCF)

0 1, 000 2, 000 3, 000 4, 000 5, 000 6, 000 7, 000Number of Completions C o m p let i ons Pr ic e 

### Figur e 33. The D o mestic Wellhead Pr ice of N a tur a l G as and the N u mber of D o mestic G a s Well C o mpletions by the FR S C o mpanies, 1990-2002

S ourc e s : E nergy I n f o rm at i on A d m i ni s t rat i on, Form E I A

- 28 (Fi nanc i a l Report i ng S y s t em ) and E nergy I n f o rm at i on A dm i n i s t r at i on, Nat u ral Gas M ont hl

y , DOE / E I A

- 0130(2003/ 10) (W as hi ngt on, DC, Oc t ober 2003).



## The possibility of a paradigm shift becom e s m o r e apparent if one exam ines the volume of gas added to reserves by the average successful gas well. Ov er the period of 1990 through 2000, the FRS comp a n ies drilled 23,36 7 gas wells in the onshore United States. This d r illing y i eld e d approxim a tely 54,903 b illion
Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 71

## cubic feet of reserve additions (extensions and di scoveries plus reserve ad ditions asso ciated with improved recovery plus reserve revisions), whic h m eans that the averag e o n shore gas well added approxim a tely 2.3 billion cubic feet of natural gas to proved reserves. e 

## In sharp contrast, reserve additions per well in 2001 and 2002 were about 1 billion cubic feet (F igur e 34). A portion of the decline can be attrib uted to a ch ange in the type of wells drilled. Ap proxim a tely 90 percent of the onshore gas wells that the FRS comp anies drilled over the pe riod of 1990 through 2000 were developm ental wells. f 

## Relative to exploratory wells, developm ental wells do not add m u ch to reserves bu t instead ex tra c t gas out of already proved reserves. In the 2000 throu gh 2001 time period, the share of wells classified as developm ental was ove r 95 percen t. W h ether this shif t in the m i x of drilling explain s the entire dec line in reserves added per we ll is the f und am ental natural gas sup p ly question

.

0. 0 0. 5 1. 0 1. 5 2. 0 2. 5 3. 0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002Billion CubicFeetper Well 

### Figur e 34. N a tur a l G as R eser v e A dditions per Well for FR S C o mpanies in U

. S. O n shor e, 1990-2002

Not e s : The num erat or of res e rves addi t i ons per w e l l i n c l udes revi s i ons , i m proved rec o very, and ex t ens i ons and di s c o veri es

. The denom i nat or i n c l udes bot h ex pl orat ory and devel opm ent al s u c c e s s f ul gas w e l l s

. S ourc e : E nergy I n f o rm at i on A d m i ni s t rat i on, Form E I A

- 28 (Fi nanc i a l Report i ng S y s t em ).


## Nonetheless , the NPC’s concern abo u t the ad equ acy of the natural gas supply becomes alm o st impossible to dism iss if one exam ines the reserve repla cem ent rate. This statistic is th e ratio of res e rve additions to production. (A ratio greater than one indicates that exploration and developm ent efforts are adding m o re to reserves than the fi rm s are withd r awing from reserv es. g 

## A ratio less than one indicates that the exploration and developm en t efforts are adding less to reserves than the am ounts that the f i rm s are produ cin g from reserves. h 

## ) The dom e stic na tural gas res e rve rep l ace m e nt rate for the FRS comp anies over the period of 1990 through 2002 was less than 1.0 in 9 out of the 13 years (F igure 35). For the en tire period, the comp anies replaced on ly about 90 percent of pro duction. Fo r the industry as a whole, the situation is less grim . The dom e stic na tural gas reserve replacem e nt rate for the industry over the period of 1990 through 2002 was greater than 1 in 9 out of the previous 13 years. i 

## For the period of 1990 through 2002 as a whole, the industry has repla ced 108 percent of produc tion. While this latter statistic does provide som e grounds for natural gas supply optim is m , it should be understood within the context of a declini ng extraction rate. The extraction rate, which is the ratio of production to reserves, increased ove r the early part of the 1990’s for both the FRS comp anies and the industry as a whole (Figure 36). Over the past few years,

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 72

## however, the ratio has declined fo r both groups. Indicative of the si gnificance of th e decline, the dom e stic natural gas production of the FRS comp anies in 2002 would have been 616 billion cubic feet higher had the production to reserves ratio in 2002 b een equal to its 1999 value. For the industry as a whole, production would have been 1.8 trillion cubic feet higher.

0. 0 0. 2 0. 4 0. 6 0. 8 1. 0 1. 2 1. 4 1. 6

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002Reserve Replacement Ratio Indust r y FR S C o m p anies

S ourc e s : E nergy I n f o rm at i on A d m i ni s t rat i on, Form E I A

- 28 (Fi nanc i a l Report i ng S y s t em ) and E nergy I n f o rm at i on A d m i ni s t rat i on, A dv anc ed S u m m a ry U. S

. Crude Oi l , Nat u ral Gas , and Nat u ral Gas Li

qui ds

Res e rv e 2002 A nnual Repor t , DOE / E I A

- 0216(2002) A d vanc e S u m m a ry (W as hi ngt on, DC, Oc t ober 2003). 

### Figur e 35. The D o mestic N a tur a l G as R eser v e R e placement R a tio for the FR S C o mpanies and the D o mestic Natural G as Su pp l y Industr y as a Whole, 1990-2002

0. 080 0. 085 0. 090 0. 095 0. 100 0. 105 0. 110 0. 115 0. 120

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002Ratio of Production to Reserves

Indust r y FR S C o m p anies 

### Figur e 36. The R a tio of N a tur a l G as Pr oduction to Pr ov ed N a tur a l G as R eser v es for the FR S C o mpanies and the D o mestic N a tur a l G as Supply Industr y , 1990-2002.

S ourc e : S ourc e s : E nergy I n f o rm at i on A d m i ni s t rat i on, Form E I A

- 28 (Fi nanc i a l Report i ng S y s t em ) and E nergy I n f o rm at i on A d m i ni s t rat i on, A d v anc ed S u m m a ry U. S

. Crude Oi l , Nat u ral Gas , and Nat u ral Gas Li

qui ds

Res e rv e 2002 A nnual Report , DOE / E I A

- 0216(2002) A d vanc e S u m m a ry (W as hi ngt on, DC, Oc t ober 2003). 

### 0.0



## The recen t d eclin e in th e production to reserv es ratio can b e partly attribu t ed to an increase in nonproducing reserves as firm s comme nce drilling in areas where ther e m a y be a lack of pipeline infrastructure (such as in frontie r areas of the Rocky Mountains). Another factor contributing to the decline is the increased emphasis on unconventional gas sources such as coalbed m e thane, tight sands, and gas shales. j 

## As recently as 1996, less than 40 percen t of onshore reserve additions were accounted
Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 73

## for by unconventional sources; the comparable figure fo r 2000, the latest year for which reliable data are available, is 67 percen t. k 

## As comp ared to conventional natural gas wells, unconventional wells typically have lower daily production rates, w h ich translat e into a sm aller am ount of production for a given reserve base. For example, in 2000, the extraction rate fo r tight gas was alm o st 25 lower per unit of reserves as comp ared to conventional gas. l 

## Given that unconventional gas is expected to becom e an even larger component of gas supply in the future, m 

## the lower extrac tion rate that bo th the FRS comp anies and the industry as whole have experienced over the past few years m a y becom e a perm anent fixture in the gas supply paradigm

.

a 

### Ener gy I n fo r m at i on A d m i nist rat i on, N a tu ra l Ga s Annu a l 1 999 , D O E/ EI A- 01 3 1 ( 9 9) ( W as hi n g t o n D C , Oct obe r 20 0 0 )

. b 

### Ener gy I n f o r m at i on A d m i nist rat i on, Short-Term Ener gy Outlook , Dece m b er 2003, http://www.eia .doe.gov/em e u/st eo/pub/conte nts.html (as of Decem ber 16, 2003).
c 

### Ibid

. d 

### Th e NPC report is av ailab l e at h ttp ://n p c .org e 

### Ener gy I n fo r m at i on A d m i nist rat i on, F o rm EIA

- 28 (Fi n an ci al R e port i ng Sy st em ). f 

### Ibid

. g 

### Re m a in in g reserv es rise as a resu lt, wh ich en ab les pr odu ctio n to also rise (fo r a g i v e n ex tractio n rate). h 

### Re m a in in g reserv es d ecline as a resu lt, wh ich allows p r od uctio n to also d e clin e (for a g i ven ex traction rate). i 

### Ener gy I n fo rm at i on Adm i ni st rat i o n , A d va nc ed Su m m ar y U

. S. C r u d e Oi l , N a t u r a l Ga s, an d Na t u ra l Gas Liquids Rese rve 20 0 2 A n nu al R e po rt , D O E /EIA -0 216 (20 02) A d v a n ce Su mmar y , O c tob e r 2 003

. j 

### Fo r add ition a l in fo rm atio n on th e p r od u c tion of n a tu ral g a s as co al b e d m e t h an e, see En erg y In form at io n Ad m i n i stratio n , Perfo r man ce Pro files o f

Ma jor En erg y Pro d u cers 20 00 , DO E/EIA

- 02 06(2 000 ) ( J anu a r y 20 02 , W a sh i n g t on , D C ), p p . 7 9 -8 3. Available on t h e Internet at http ://to n t o
. eia.do e.g o v / FTPROOT/fin a n c ial/02 060 0.pdf (as of Decem ber 16, 2003). k 

### Speci al com p i l a t i on by t h e E n er gy I n fo rm ati on A d m i ni st rat i on, O ffi ce of Int e grat ed A n a l y s i s and Fo rec a st i ng. l 

### Ibid

. m 

### Energy I n f o r m at i on A d m i nist rat i on, A n nu al E

n ergy O u t l ook 2 0 0 4 , D O E/EI A- 038 3(20 04) (W ash i ngto n D C , Janu ary 2 004 ).



# SPECI A L TOPI C : Canada’s Mackenzie Delta -- One Part of Future Natural Gas Supply ?

Natural gas prices are now over twice what they were in the late 1990’s a 

## . Som e , such as Federal Reserve Chairm an Alan Greenspan, see im ported liquefied na tura l gas (LNG) as th e solution to this prob le m. b 

## While not dism issing the importance of LNG, others point out that North Am erica has a substantial quantity of stranded gas reserves -- g a s that could be m a rketed if there were a low-cos t m e chanism of transpo r ting the gas to market. For instance, the Mackenzie Delta in Can a da’s North w est Territo ries contains over 10 trillion cubic (tcf) f eet of known recoverable natural gas. c 

## This is the volum e of gas that had been booked as reserves during the 1970’s ; however, like the natural gas on Alaska’s North Slope, this g a s was never produced b ecause of a lack of pipeline infrastructure that cou l d m ove the gas to m a rket. In 1994, the Mackenzie Delta gas reserv es were written off the books (by those comp anies owning the gas) when the price of gas in Canada sold for an equivalent of approxim a tely $1.50 (U.S.) per thousand cubic feet (Mcf). d 

## A year earlier, over 14 tcf of ga s loca ted in Canada’s Artic I s land s (located northeast of the Mackenzie Delta) was also written off given its rem o te location. e

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 74

## Recently, Imperial Oil (Canada’ s largest o il co mpany, 69.6-percent ow ned by the F R S comp any Exxon Mobil), ConocoPhillips, Exxon Mobil, and Shell Cana da (a w holly owned subsidiary of the British Royal Dutch Shell) have for m ed the Mackenzie Gas Producers Group with th e aim of developing the natural gas f i elds and constructi ng a pipeline system along the Mack enzie Valley. This system would delive rthe g a s to North w estern Alb e rta whe r e e x isti ng pipelines could then m ove the gas to other parts of Canada as well as to the United States. f 

## The goal is to have the natural gas m oving through the pipeline by 2010. The pipeline is p l anned to have a 1.2-billio n-cubic-feet-per-d ay (bcf/d) initial capacity that cou l d b e expanded to 1.9 bcf/d by adding ad dition a l comp ression stations. The o v erall cos t o f the project including the construction costs of the pi peline, the gathering system, and required field developm ent is estim ated at $4 to 5 billion (in Ca nadian dollars), which is approxim a tely $3 to 3.8 billion (in U.S. dollars). A large portion of the gas for the pipeline is e xpected to com e from three m a jor fields: Taglu. This field has estim a ted recoverable natural gas resources of 3 tcf. Imperial Oil Lim ited has a 100-percent interest in the fi eld. Imperial will also have an intere st in the gathering lines as well as in the pipeline system

. Parsons Lake. This field has estim a ted recoverable natural ga s resources of 1.8 tcf. Pa rtners in this field are the FRS comp anies ConocoPhill ips (with a 75-percent ownershi p share) and Exxon Mobil (w ith a 25-percent ownership share). Nglintgak. This field w a s discovered in 1973 and has es tim a ted recoverable natu ral gas resources of approxim a tely 1 tcf. The field is ow ned by Shell Ca nada. Because of the high productivity of the wells in term s of output per day, it is be lieved that the field can be deve loped using only about 6 to 10 wells. In addition to the Producers Group, the Aborigin al Pi peline Group (APG) will also have an in terest in the pipeline portion of the project. T h e APG was for m ed in 2000 to represent the interests of the aboriginal people of the Northwes t T e rritor i es in the pro j ect. Th e APG ha s signed a “Mem orandum of Understanding” with the Mackenzie Gas Producers Group that gives APG the right, depending on the throughput of the pipeline, to own up to one-third of it. Also, as part of the Mem o randum , TransCanada (a Canadian pipeline co mpany) will lend approx im ately $80 m illion (i n Canadian do llars), which is approxim a tely $60 m illion in U.S. dollars to the AP G to fina nce APG’s share of the p r oject plann i ng costs. The APG expects to finance the vast proportion of its share of the pipeline construction costs by borrowing against its share of future pipeline revenues. However, it is far from clear that these loans will be sufficient to fund the enti re amount of APG’s commi tm ent.
Other comp anies activ e in the M ack enzie Delta in clude Devon Energy and Petro-Canada (a m a jor Canadian in tegrated oil a nd gas comp any), which t ogethe rhold leases on more than 1 m illion acre s of land. Over the last two winters, the two firm s dr illed three u n successf ul exploratory we lls -- Kurk M-15, Tuk B-02, and Kugpik L-46. W h ile hydrocarbons we re encountered at T uk B-02, the well was subsequently determ ined to be uneconom i c. More re cently, the partners have announced that a fourth exploratory well, Tuk M-18, has yielde d significant gas flows. The well is estim a ted to have a reserve potential of 200 to 300 bcf with a sust ained deliverability of 60 to 80 m c f/d. h



## W h ile it is increas ingly like l y tha t th e Mackenz i e Delta pro j e c t will beco m e a reality, it is f a r f r om clear how m u ch of the gas will ultim a tely reach U.S. m a rket s. It m a y be that much of the gas will b e u s ed by Canada’s expanding oil sands (synthetic crude) industry. The in situ oil sands projects in Canada use natural gas to create steam that en ables the bitumen hydrocarbons to flow to the surface. According to

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 75

## Canada’s National Energy Board, one of the m o st prom ising in situ technologies, S t eam Assisted Gravity Drainage (SAGD), requires 1 m c f o f gas for every barrel of bitumen that is produced. i 

## Given these gas requirem e nts, it is no t su rp rising that o n e study has recen tly co ncluded th at the increm ental gas dem a nd from the oil sands projects could equal or even exceed the initial planned capacity of the MacKenzie Delta pip e line.

a 

### Ener gy I n fo r m at i on A d m i nist rat i on, N a t u r a l

G a s Mo nt hl

y, DO E/EI A- 01 30( 200 3 / 1 0 ) (O ctob er 200 3, W a sh ing t on , DC)

. b 

### “Natural Gas Outlook Worri es Greenspa n ,” New York Ti mes , ( Jun e 11 , 20 03) , p
. C4

. c 

### C a nadi a n Ass o ci at i on o f Pet r ol e u m Prod uc ers, S t a tistica l H

and boo k for Ca nad a's U p st rea m Petro l eum Ind u stry, 200 2, Tabl e 2- 13 A. d 

### Ib id..Tab le 5

- 0 6 A.
e 

### Ibi d . Ta bl e 2- 13 A. f 

### C a nadi a n Ass o ci at i on o f Pet r ol e u m Prod uc ers, “C a n a d i a n Nat u ral Gas O v er vi ew ,” Ap ri l 20 0 3

. Th is d o c u m en t is av ailab l e i n th e In tern et at 

## http://www.capp.ca/Pandell_Docs_File_Strea mer/Indepe ndantFileRelay D irectF r omDocs.a s p? XXX=1&do cty p e= NTV&docnum b e r=56189 ( as of Decem ber 15, 2003). g 

### Th is inform ati o n is b a sed on th e pro j ect ’s p r eli m in ary in fo r m at i on pac k a g e w h i c h i s av ai lable on the Int e rnet at h ttp ://www.m a c k e n z ieg a sp roject.co m /th eProj ect/regu l ator yProcess/p i p S ub m i ssio n / Do cumen t s/Vo lu m e%20 2 % 20 PIP.p d f ( as of Decem ber 15, 2003). h 

### “Expl orat i o n and De vel o pm ent : C a na da ,” Oil & Ga s Jo urn a l On lin e, Jan u ar y 2 4 , 2 003. Av ailab l e on th e In tern et at 

## http://ogj.pennnet.com / arti cles/web_article_display

. cf m ? Section=Archives&Arti cle_Category=ExplD&ARTICL E_ID=16683 0&KEYWORD=Tuk% 20M% 2 D18 ( as of Decem ber 15, 2003). i 

### ”No Relief from Mack en zie g a s: Leh m an Bro t h e rs rep o rt says Delta Ga s will lik ely all g o to Oil Sand s,” Petroleum N e ws, Sept em ber 1 4 , 20 0 3

.

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 76Energy Information Administration / Performance Profiles of Major Energy Producers 2002 

## 77 

# 5. Emerging Issues
This chapter of Performance Profiles analyzes new developments and emerging directions of the larger energy industry. FRS data are combined with additio nal information from company annual reports, press releases, and other energy company public disclosu res so as to expand the scope of energy industry financial analyses presented in this report. Specifi cally, this chapter presents three analyses ("Special Topics") that discuss:

• 

## The level of activity of the U.S. major energy companies in energy production from renewable energy sources • The level of success of mergers a nd acquisitions by the U.S. majors as a strategy in replacing their oil and natural gas reserves
• The role of the U.S. majors in the developing liquefied natural ga s market in the United States



# SPECIAL TOPIC: FRS Company Production From Renewables

Even though renewable energy sources constitute a small part of the U. S. energy mix, some of the large U.S. major energy companies reporting to EIA’s Financial Reporting System (FRS) have become involved in renewables energy produc tion. Specifically, in referring to the term “renewables,” we are confining our discussion to geothermal, solar, and wind energy sour ces. Biomass is not significant in any FRS company’s energy production. In addition, hydroelectric power has more than a hundred-year history in the United States and is beyond th e scope of what can be addressed here. Despite strong governmental and public interest in renewables, of the three renewables being discussed here only wind energy production has grown in th e 1998 to 2002 period, by 242 percent from 0.031 quadrillion Btus to 0.106 quadrillion Btus.

T P a

P T 

## Production from geothermal and solar has essentially remained steady over that period. Together, these th ree energy sources compri sed just under one-half of one percent of total U.S. energy consumption in 2002.


# Geothermal Energy Geothermal energy chiefly is electric power th at is derived from heat within the earth.

T P b

P

T 

## More specifically, geothermal energy comes from precipitati on that over the eons has seeped deep into the ground and has been warmed by the na tural heat of the earth. These heated geothermal fluids occur where magma has pushed close enough to the surface th rough fractures in the earth’s crust. These heated fluids have been found and developed in reservoirs up to 9,800 feet deep. Wells are drilled to recover these fluids to the surface. There the fluids are converted into steam, and if necessary scrubbed to remove impurities, with excess fluids being return ed to the reservoir. Th e scrubbed steam is then delivered by pipeline to a power plant. The power plant uses the steam to dr ive turbines to generate electric power.

## Geotherm al energy’s environm ental properties are considered benign: geotherm al emissions consist mostly of water, and geotherm al energy production re quires no cooling water fr om the surrounding area. The geological cond itio ns necessary for harnessing ge otherm al energy have been found m a inly in the Pacific Rim , particularly in the Philippines and Indonesia. The Unocal Corporation is the on ly F R S comp any active in geotherm al energy. It has been producing geotherm al energy for over 30 years. Unocal’s geot herm al operations are in the Philippines, at Tiwi (330 m e gawatts of generating capacity) and Ma k-Ban (426 megawatts of generating capacity), c 

## and in Indonesia, at Gunung Salak (330 m e gawatts of ge nerating capacity) and Wayang W i ndu (110 m e gawatts of generating capacity). d 

## The two Philipp i nes p l a n ts have be e n operating over th irty y ears and p r o v ide 15 percen t o f the electricity required by Luzon, th e Philipp i nes’ largest is land. Unocal began geotherm al operations in Indonesia in 1982. Together, these four proj ects supply steam for al most 1,200 megawatts of generating capacity. Unocal’s total 2002 g e otherm al energy produ ction av erag ed 13 m illion kilowattho urs, the equ i valent of 20, 000 barrels of oil per day, down fr om 22,000 barrels per day in 2001. e 

## Its net proved geotherm al reserves at year-end 20 02 were the equivalent o f 232 m illio n barre ls of oil, comp ared to 162 m illion barrels in 2001.


# Wind Energy

W i nd energy is the harnessing of the wind to generate power. By turning like a pinwheel in the wind, wind turbines convert the energy in the wind into m echanical power. This m echanical power can be used directly for such things as grinding grain or pump ing water or can be c onverted into electricity.
Environm entally, wind energy is cons idered a very clean source of power. The prim ary environm ental concerns with wind are noise from the rotors, the visu al aesth etics of wind far m s, and potential harm to wildlife. Objections have been raised to proposed wind energy installation both inland and offshore. Europe has the largest base of installed wind power capacity, at ove r 20,000 m e gawatts, particularly in Germ any, Spain, and Denm ark. The United Stat es follows at 4,685 m e gawatts at year-end 2002. f 

## Regions in the United States with an average annu al wind speed of at least 13 m iles per hour, a speed considered the threshold for undertaking a wind pow er project, are found along the E a st Coast, the Appalachian Mountains, the Great Plains, the Pacific Northwest, and California. g


## A for m er FRS comp any, Enron, was active in w i nd pow er, but has divested its wind generating assets due to Enron’s bankruptcy. Enron was active both in m a nufa c turing wind power equipm ent and in developing wind far m s. Both General Electric C o. and Am erican Electric Power have purchased Enron wind assets.
Another FRS comp any, Shell Oil, has a parent (R oya l Dutch/Shell) that has a m odest wind energy program . Royal Dutch/Shell subsidia ry Shell WindEnergy Inc. is building its largest wind far m to date near Lubbock, Texas, in a 50/50 percent joint venture with Padom a W i nd Power. h 

## This 160-m e ga watt project was scheduled be com p leted by year-end 2003. Shell W i nd Energy first entered the U.S. wind power m a rket with its purchase of a 50-m e gawatt facility in Wyom ing in 2001. The comp any also develops and operates wi nd parks in Europe.

Energ y I n for m at ion A d mi nistra ti on / Perf orma nc e Profiles of Maj o r Energ y Pr od ucers 2002 

## 78

## One other F R S comp any, BP Am eri ca, has a parent comp any (BP plc of the United Kingdom ) with one wind project. i 

## This is its jointly owned Nerefco oil refi nery near Rotterdam, where it has nine wind turbines, with the power sold through the national power grid. Although wind power represents a sm all part of the U. S. electric power generation m i x, this renewable energy source has recen tly been growing faster, beginning in 1999. This is in part due to technological innovations improving perform a nce and cost and al so to a Federal tax credit of 1.5 cents per kilowatthour for electricity generated by wind turbines . This credit expired at year-end 2003. Although there h a d been two retro activ e rene w a ls of the tax credit in the pa st, it was not renewed a third tim e. Despite the recent g r owth in generation from wind, th ere is n o t as yet a big presence b y FRS comp anies in this renewable power source. N on-FRS companie s are th e m a rket leaders in wind power in th e United States. FPL Energy is the nation’s larges t generator of wind power, with 24 wind far m s. Am erican Electric Power is anoth e r b i g presen ce in wind power. Also, the Federal governm e nt’s Bonneville Power Adm i nistration has increased its pres ence as a suppl ier of electric p o wer from wind energy. 

# Solar Energy Solar energy refers to the harnessing of the power of the sun. Passive solar is a m e ans of reducing energy consumption. As for actual energy production, there are prim aril y two types of solar energy: photovoltaic, which uses the sun’s rays to generate elec tricity, and therm a l, in which the sun’s heat is concentrated and used directly for such applications as heating water or other liquids. W o rldwide, m o st solar energy production is from the use of photovoltaics. Solar energy is considered environm entally benig n, with essentially no harm ful e m issions, and it also can be used for power generation. T h ere seem to be fewer objections about solar’s visual aesthetics than wind’s, perhaps since solar collec tion facilities tend to be located rem o tely and not on high ground. However, s olar power s t ill repres ents a sm all part of the U.S. energy m i x. Two FRS companies, Shell Oil and BP Am erica, have parent comp anies (Royal Dutch/Shell and BP plc) activ e in th e solar en erg y business. They are prim arily activ e in the sola r equipm ent and f a cilitie s m a nufacturing end of the business, not in solar powe r production itself. This m a y be in part because solar has been used m a inly in sm aller, decen tralized app lications and m u ch less in central sta tion electric power generation. Shell Solar is active in the photovol taic but not the therm a l portion of the solar m a nufa c turing business, m a nufacturing solar components as we ll as comp lete solar system s. Th e comp any reports a total yearly m a nufacturing capacity of 60 m e ga watts of solar panels, with facilities in the United States and Europe. j 

## Shell Solar acquired S i em ens Solar in 2002 k 

## and reports a global m a rket share of 13 percent. l 

## BP is active in solar equi pm ent m a nufacturing, with nearly 30 year s of experience in the United States and elsewhere. m 

## BP reports being the largest user of sola r energy in the world, employing solar power at BP service stations, plants, and offices. n 

## BP Solar, headquartered in Maryland, does own and operate one sm all solar field in P a ulsboro, New Jersey, for supplying electric pow er to the grid, a 350,000- kilowatthour per year field, enough for 50 hom es. o 

## ChevronTexaco, with a f l edgling solar program , ha s also begun operating a solar facility outside Bakersfield, California

. p

Energ y I n for m at ion A d mi nistra ti on / Perf orma nc e Profiles of Maj o r Energ y Pr od ucers 2002 

## 79

# Concl u si on Interest in renewable energy resources has increas ed over tim e , due to both environm ental and energy security con s ideration s . Renewables are cons idered m o re environm enta lly benign than other fuels, with little to no air em issions or local water use. They are also viewed as enhancing energy security both by diversifying the portfo lio of energy we use and by relying on re sources that are dom estically abundant. The FRS companies producing renewa ble energy m a y be involved in th ese energy sources in part to keep up with potential advances in energy producti on technologies and perhap s also to enhance their environm ental im age. q 

## However, there is no ind i cation tha t r e newable en ergy will co nstitu te a substantial portion of the energy produced by FRS comp anies in the near future.

a 

### Ener gy I n fo r m at i on A d m i nist rat i on, Re ne w abl e E n er gy An nu al 20 0 1 , DOE/ E I A

- 0 6 0 3 ( 2 00 1) ( W as h i ngt o n , DC , N ovem b er 21 , 20 0 2 ) , Ta b l e 1. W e b a d dr ess: h ttp ://w ww .eia.do e .g ov /cn e af/so l ar.ren ew ab les/p a g e /rea2002 .p df b 

### Ot her t y pes of ge ot he rm al energy i n cl u d e g e ot he rm al heat p u m p and en h a nced ge ot h e r m al recove ry ( hot d r y r o ck ), whi c h i s a po ten tial techn o l o g y
. c 

### Un ocal C o r p o r at i o n , M a rc h 20 0 2 di scus si o n on “P hi l i ppi n e Ge ot he rm al .” W e b a d dres s: h ttp ://www.u no cal.co m /g eopo wer/pg i.h t m d 

### U n o cal Corp or atio n, Ju ly 200 3 d i scu ssi o n o n “Unocal Ge othe rm al Indonesia.” Web address: h ttp ://www.u no cal.co m /g eopo wer/ug i.h t m
. e 

### Uno cal Corp oratio n, 2 002 Secu rities and Exch ang e C o mmi ssio n Fo rm 1 0 -K, p
. 18

. f 

### Uni t e d St at es Depart m e nt of Ener gy , di sc us si on o n Wi n d Ener gy . W e b add r ess: h ttp ://www.eere.en erg y .g o v / wind poweri n ga m e rica/p d f s/ wp a/ wp a_u p d a te.p df g 

### U.S. Dep a rtmen t of En erg y , d i scu ssi on o n W i nd En erg y
. Web address: h ttp ://www.eere.en er g y .go v / wind poweri n ga m e rica. h 

### Ro yal D u tch Sh ell, p r ess r e l ease ( J u l y 23 , 2 003 ) i 

### BP p l c, d i scu s sio n on “Ren ewab le En er g y .” W e b add r ess: h ttp ://www.bp

. co m / en v i ron_ social/en v i ron m en t/ren ewab le.asp j 

### R o y a l Dut c h S h el l , Se pt em ber 20 0 3 di scussi on o n “ S hel l R e newa bl es.” Web ad d r ess: h ttp ://www.sh e ll.co m/h o m e/F r am ewo r k ? siteId =sh e llso l ar &FC1 =&FC2 = %2 FLeftHandNav%3 FLeft N av State%3D1%2 C0&F C3 =%2Fshellso l ar%2 Fh tml%2 F iwg e n % 2 F ab ou t_sh ell%2Ff act_ f i g _n ew _0 129 112 9.h t m l &FC4 =&FC5 = k 

### R o y a l Dut c h Shel l , pres s rel ease (Ja n uary 23 , 20 0 2 )

. l 

### Ro yal Du tch Sh ell, press re lease ( S ep tem b er 11 , 20 03)

. m 

### B P pl c, Sept e m ber 20 0 3 di scussi o n o n “R e n ewa b l e E n er g y
. ” W e b a d dre ss: h ttp ://www.b p.co m / en v i ron

_ s o c ia l/en v i ron m en t/ren ewab le.asp
n 

### B P pl c, Sept e m ber 20 0 3 di scussi o n o n “B P Gas , P o wer & R e ne wa bl es. ” W e b a d dres s : http://www.bp.com / bp_busi n e sses/transition_pa ge.a sp ? i d= 39
o 

### BP plc, press release (April 22, 2003). p 

### Ch evr o n T ex aco C o rp or ation, pr ess r e lease ( J un e 5 , 200 3)

. q 

### News wee k M a gazi ne, Se pt e m ber 22 , 20 0 3 , ad vert i s em ent by S h el l Oi l aft e r page 1 0 : "One o f ou r g o a l s i s t o m a ke s o l a r e n er gy c h eaper
.. . It ' s pa r t of o u r com m itm ent t o sust ai nabl e de vel o p m ent , bal a nci n g eco no m i c p r ogress with env i ro n m en tal care an d so cial respo n s i b ility."

Energ y I n for m at ion A d mi nistra ti on / Perf orma nc e Profiles of Maj o r Energ y Pr od ucers 2002 

## 80

# SPECI A L TOPI C : Recent Upstream Mergers: A Tradeoff Between Growth and Profitability ?

In order to s u rvive, o il a nd natura l g a s comp anies need to r e p l enish their oil a nd natural gas resources as they are produced, even if dem a nd for those fuels is stab le. B u t with th e dem a nd for natural gas and petro l eum forecas t to g r ow sharply over the co m i ng decade, continu i ng the trend of recen t years, the question arises all the m o re prom inently: what stra tegies do comp anies employ to obtain the natural gas and petroleum they intend to supply? To shed ligh t on this q u estion, two choices comp anies face w e re exam ined: to find an d develop th e reserv es th em selves in areas th ey have m i neral rights to, or to acqui re reserves already discovered by others through m e rgers and acquisi tions. This was term ed the “m ake-or-buy” choice. Reasonable hypotheses were then developed to explain why comp anies choos e one strategy or the other.
The universe of comp anies exam ined to test thes e hypotheses was the set of comp anies responding to EIA’s FRS that held oil or natu ral gas reserves in the United St ates during the 1997 to 2002 period. More particularly, these comp anies are: TotalFin aElf USA, Shell Oil Comp any, Burlington Resources Inc., ConocoPhillips Company, Inc., Marathon O il, Corp., Exxon Mobil C o rporation, Am erada Hess Corporation, Anadarko Petroleum , Inc., Unocal Co rporation, Apache Corporat ion, EOG Resources, Inc., Devon Energy Corporation, Kerr-McGee Corporation, BP Am erica, Inc., W illiam s Comp anies, Inc., Occidental Petroleum Corporation, ChevronTexaco Corporation, Dom i nion Resources, Inc., El Paso Corporation, and XTO Energy, Inc. The 1997 to 2002 period of study was chosen because, while there were rela tively few m e rgers among the FRS companies in the first part of the 1990’ s, around 1997 a wave of m e rgers began, continuing through 2002 (Figure 37). What goes into a comp any’s decision on how to obt ain the n a tura l gas an d petro l eum it in tends to supply? Since it is costly to find oil and natural gas resources that will yi eld successfully producing wells and s i nce the FRS comp anies are profit seekers, it is natural to exam ine oil and gas finding costs as an explanatory factor. A comp any’s finding cost is its averag e cost of finding a unit of reserves. Other things being equal, one would expect that comp an ies which faced higher findi ng costs for oil and gas resources would tend to be buyers of reserves, wh ereas comp anies with lower finding costs would tend to be “m akers” of reserves (that is, develop their own reserves in ar eas where they had m i neral rights). To test these explana tion s , the FRS data was exa m ined. In fact, the data revealed a tendency f o r comp anies with higher finding costs to buy their reserves rather than “m ake” them . As e xpected, for comp anies with higher finding costs, buying reserves is the strategy that en tails r e latively lo wer cost (T a b le 21). Ho wever, the s t atis tic al s i gn if icance of these resu lts was below the threshold of significance. Consequently, the data hint at th e ten d ency jus t d e scrib e d, but are not strong enough to warrant a defin ite conclusion on this score.

Energ y I n for m at ion A d mi nistra ti on / Perf orma nc e Profiles of Maj o r Energ y Pr od ucers 2002 

## 810 10 20 30 40 50 60 70

1981 1984 1987 1990 1993 1996 1999 2002Percent

Not e : S o l i d l i ne i n c l udes U. S

. res e rves added i n B P -A m o c o (1998), E x x on-M obi l (1999), B P A m oc o-A R CO (2000), Chevron-Tex a c o (2001), and E l P a s o -Coas t a l (2001) m e rgers as purc has es i n addi t i on t o al l ot her t r ans ac t i ons

. Thes e m e rgers w e re ac c ount ed f o r us i ng t he " pool i ng of i n t e res t s " m e t hod, w h i c h does not rec o rd res e rves ac qui red i n a bus i nes s c o m b i nat i on as purc has ed res e rves

. For m e rgers i n i t i a t ed af t e r J une 30, 2001, t he Fi nanc i a l A c c ount i ng S t andards B oard (FA S B ) no l onger al l o w s t he us e of t h i s m e t hod of ac c ount i ng i n bus i nes s c o m b i nat i ons

. Das hed l i ne ex c l udes t he ef f e c t s of ac c ount i ng f o r " m ergers as purc has es

. " S ourc e : E nergy I n f o rm at i on A d m i ni s t rat i on, Form E I A

- 28 (Fi nanc i a l Report i ng S y s t em ). 

### Figur e 37. Shar e of FR S C o mpanies' D o mestic O il and N a tur a l G as R eser v e A dditions due to Mer g er s and A c quisitions, 1981-2002



### U.S

. Finding Cos t Re tur n on Inv e s t me nt (Do l l a rs P e r B a rre l o f Oi l E q u i v a l e n t ) ( P er c ent)
M akers 6.83 12.71 Buy e rs 7.88 10.25

S ourc e : E nergy I n f o rm at i on A d m i ni s t rat i on, Form E I -28 (Fi nanc i a l Report i ng S y s t em ). 

### 1997- 2002 Company T y pe T a b l e 21. A v erag e F i n d i n g Co st an d Ret u rn o n In v est men t f o r F R S Co mp an ies, 1997- 2002

Not e s : I n c l uded are t hos e 20 c o m pani es t hat w e re FRS res pondent s i n 2002 and had oi l or nat ural gas res e rves (t hi s , f o r ex am pl e, ex c l uded FRS res pondent s w ho are onl y ref i ner/ m ark e t e r c o m pani es ). Ret u rn on i n ves t m ent i s net i n c o m e as a perc ent of net propert y , pl ant , and equi pm ent

.


## An interesting finding was that comp anies having a hi gher “p urchase ratio”, that is, the ratio of reserve additions th at were pu rchased to res e rve add itio ns that were developed b y the comp any, tended to have higher grow th in reserves. One possible explanation for this m i ght be that thes e comp anies adop ted a strategy of fast growth, and the way for them to achieve that was to buy reserves rather than the slower process of developing their own.
The rate of return on investm e nt was also exam ined for both the “m ake” comp anies and the “buy” comp anies (Table 21). It turns ou t th at “m akers” tended to have a higher return on investm e nt than “buyers.” F u rtherm ore, unlike the result for finding cost s, this result was statis tically significant. One possible exp l anation for this outcome is th at “m ak ers” m a y have been focusing on m a xim i zing profits while “buyers” were focusing on growing fast.

Energ y I n for m at ion A d mi nistra ti on / Perf orma nc e Profiles of Maj o r Energ y Pr od ucers 2002 

## 82

## Another possibility is that the initial endowm e nts of these two t ypes of comp anies, their starting position s , were dif f

e rent. This m a y have led to dif f

e re nt str a tegies and consequently dif f

e rent o u tcom es in profitability. Specifically, comp anies tending toward the strategy of “m aking” their own reserves, relative to comp anies electing to bu y reserves, m a y have be en endowed with m o re lucrative assets: nam e ly, a base of reserves tending to be relatively rich and productiv e. W h ether having a relatively fortunate initial position stem s fr om good fortune or shrewd decision- m a king in the past is an open question. T hus, although the level of finding costs that an FRS comp any experiences is one of the factors th at a comp any would examine, it evidently does not, by itself, determ ine the choice of reserve acquisition and repl acement strategy.

a 

### Ener gy I n fo r m at i on A d m i nist rat i on, Financia l Asp ects o f th e U.S. O il and G a s Ind u s try in th e 198 0’ s , D O E /EIA -0 524 (W ash i ng ton , D C , May 1 989)

.



# SPECI A L TOPI C : LNG -- A Future for the FRS Companies ?

There appears to be steadily incr easing interest in LNG as an ener gy source in the United States, as alternative sources are being sought to satisfy the an ticipated growth in dem a nd for natural gas. The FRS comp anies play a m a jor role in the United Stat es’ LNG m a rket: they own two of the four LNG import facilities and the sole expor t facility in the United States. a


## While FRS comp any investm e nt in LNG is clearly an impor tant part of supplying U.S. energy needs, the discussion below indicates that FRS comp any ac tivity in LNG was m i xed in 2002: som e FRS comp anies expanded the i r LNG activ ities wh ile o t hers con t racted in that area.


# Domestic Facilities: Cove Point, Elba Island, and Alaska’s Kenai Peninsula. In Septem ber 2002, Dominion Resou r ces bought the Cove Point LNG facility in Lusby , Maryland, for $225 m illio n from The W illiam s Comp anies (an o ther FRS comp any). b 

## The purchased assets include an LNG i mport facility, an LNG storage facility, an d an approxim a tely 85-mile na tura l g a s pipe line f eeding into an established natural gas m a rket in the m i d-A tlantic region. Dom i nion repor ts that capacity at the Cove Point facility is fully booked. c 

## The El Paso Corporation also held rights to capacity at the Cove Point LNG regasification facility. However, in the f ourth quarter of 2002, El Paso sold that capacity (along with its position in the LNG purchase and sale agreem ent at Cove Point) to Norway’s Statoil for $210 m illio n. Serving th e natura l gas m a rket in th e southeas te rn Un ited States is a f acility which El Paso still o w ns, the LNG term inal and regasification facility at E l ba Island, G e orgia. This facility began receiving deliveries in Decem ber 2001. d 

## In August 2002, Marathon acquired capacity rights for 22 years for delive r ing L NG to the Elba Island f a c ility. e 

## This would provide a poten tia l outlet f o r Marathon -o wned
Energ y I n for m at ion A d mi nistra ti on / Perf orma nc e Profiles of Maj o r Energ y Pr od ucers 2002 

## 83

## natural gas resources located near the comp any’s proposed L NG plant in Equatorial Guinea, where the natural gas would be liquefied and shipped to Elba Island for regasification a nd subsequent distribution to the U.S. southeaste rn natura l gas m a rket. f 

## There is only one LNG export facili ty in the United States, located on the Kenai Peninsula in southern Alaska. At present, it is entirely dev o ted to serving the Pacific Rim natural gas m a rket. g 

## Phillips built this 230-m i llion-cubic-feet-pe r-day export facility in a joint venture with Marathon. h 

## ConocoPhillips, the result of the recent m e rg er of Conoco and Phillips, owns a 70-pe rcent share and is the operator of the facility, while Marathon owns the other 30 percent. Export began in 1969, under a 15-year contract to supply LNG to Tokyo Electric and T okyo Gas. Sh ipping to those two utilities has continued uninterrupted since then. As with the investm e nt in the Kenai Peni nsula L NG export facility, m u ch of FRS comp a n ies’ investm e nts in LNG projects abroad is intended for th e Pacific Rim m a rket, with som e also aim e d a t portions of the European m a rket.



# Investments in LNG Facilities Abroad: Qatar and Austr a lia The Exxon Mobil Corporation has been involved with LNG for m o re than thirty years, and, through its subsidiaries, has had a pr esence in Qatar s i nce 193 5, i 

## where Exxon Mobil owns interest in two LNG projects: j



## - Qatargas, in which Exxon Mobil has a 10-percent interest, with m o st of the LNG going to Japan and Spain.

- RasGas LNG facilities, in which Ex xon Mobil h a s a 25-percent in terest, with m o st of the LNG going to Korea. Exxon Mobil also has a 28.5-percen t interest in the two additional R a sGas LNG trains currently under constructi on, each with a planned capacity of 4.7 million m e tric tons per year, intending to supply India and E u rope. The ChevronTexaco Corporation holds a one-sixth interest in the North West Shelf Venture in Australia. k 

## About 60 percent of the natural gas f r om this ve nture is sold in the form of LNG to Japanese utilities, with the rem a ining natu ral g a s being so ld in the Aus t ra lian dom estic m a rket. l 

## A project to increase th is LNG capacity by about 50 percen t is curren tly un der construction, and a condition a l 2 5

- year agreement was signed with China in October 2002 to supply the proposed Guangdong LNG Term inal Project. m 

## ConocoPhillips also has ownership in m a jor natural gas production vent ures in the Bayu-Undan field in the Tim o r Sea off Australia, and is in development pha se of a planned liquefacti on facility near Darwin, Australia. n 

## To m a rket this LNG, in March 2002 ConocoPh illips signed an agreem ent with the sam e two utilities it has been supplying, Tokyo Electric an d Tokyo Gas, for the sale of LNG for 17 years. o



# Financial Distress Causes Retr enching in LNG: El Paso During 2002, El Paso felt the effects of the downtur n of the energy trading and m e rchant services businesses that began with the dem i se of Enron in 2001. p 

## Contributing to its financ ial pressures, E l Paso suffered from a $67-m i l lion decline in the fair valu e of its LN G supply contract derivatives in 2002 comp ared to a $86-m illion increase in the fair value of those contracts in 2 001. q 

## El Pas o stated that the signif i can t c a pita l and c r edit require m e nts associated with th e LNG business were in excess of its curren t financial capacity. r

Energ y I n for m at ion A d mi nistra ti on / Perf orma nc e Profiles of Maj o r Energ y Pr od ucers 2002 

## 84

## El Paso responded to these developm ents by initiati ng a series of actions to wind down its involvem ent in non-core businesses including ener gy trading and petroleum m a rkets, as well as the capital-intensive business of LNG operations. s 

## In particular, in February 2003 El Pa so extricated itself from obligations to charter fo ur LNG tankers, in ex change for paym ents by El Paso totalin g $24 m illio n. t



# What Next? There are many proposals by FRS and other companies to build LNG fa cilities, with varying degrees of prom ise. Som e proposals m a y be intended as strate gic m ove s by a comp any considering investing in a particular L NG m a rket, designed to discourage other comp anies from entering that m a rket. However, actual inves t m e nt in LNG facilities, particularly in liqu e faction, requi res large comm i t m e nts of capital. Not all comp anies are currently in a strong enou gh fi nancial position to risk undertak ing such projects. Nonetheless, given the ever-increasing dem a nd for natural gas, involvem e nt by the FR S comp anies in the LNG m a rket warrants continued watching.

a 

### Th e t w o do m e stic i m p o r t LNG facilities in wh ich th e FR S co m p an ies hav e n o own e rsh i p are i n Lak e Ch arles, Lo u i sian a and Ev erett, Massach u setts. b 

### Do m i n i o n Reso urces, In c., 2 0 0 2 Secu rities an d Ex ch ang e C o mmissio n Fo rm 1 0 K , p
. 3.
c 

### Dom i ni on R e s o u r ces, I n c. , 2 0 0 2 An nua l Repo rt , p. 12. d 

### El Paso Corporatio n, 2 002 Secu rities an d Exch ang e C o mmi ssio n Fo rm 1 0 K, p
. 5.
e 

### Marath on Oil Co rp oration , 20 02 Securities an d Ex ch ang e Co mmissio n Fo rm 1 0 K, p. 1 9

. f 

### Marat h on Oil Co rp oration , 20 02 Annu a l Rep o r t , p. 3. g 

### Ph illip s Petro l eu m Co m p an y, Press Release (Sep tem b er 1 4 , 20 00). h 

### Mar a th on O il Co rp or ation , Pr ess Release ( F eb ru ar y 28 , 200 2)

. i 

### Ex xon M o b il Co rp or ation , Pr ess Release (A pr il 4, 2 001 )

. j 

### Ex xon M o b il Co rp oration , 2 0 0 2 Fi n anci a l & Operat i n g R evi ew , p. 4 8 k 

### Ch evr o n T ex aco C o rp or ation, 200 2 An nua l Repo rt , p. 1. l 

### C h ev ro nTe x ac o C o r p o r at i o n, 20 0 2 A n nu al R e po rt , p. 23.
m 

### Ch ev r o n T ex aco C o rp or ation, 200 2 An nua l Repo rt , p. 23.
n 

### Co no coPh illips, 200 2 An nua l Repo rt , p. 17.
o 

### Co no coPh illips, 200 2 An nua l Repo rt , p. 14. p 

### El Paso Corporatio n, 2 002 Secu rities and Exch ang e C o mmi ssio n Fo rm 1 0 K, pp
. 1

- 2

. q 

### El Paso Corporatio n, 2 002 Secu rities and Exch ang e C o mmi ssio n Fo rm 1 0 K, p
. 60

. r 

### El Paso Corporatio n, 2 002 Secu rities and Exch ang e C o mmi ssio n Fo rm 1 0 K, p
. 22

. s 

### El Paso Corporatio n, 2 002 Secu rities an d Exch ang e C o mmi ssio n Fo rm 1 0 K, p
. 2. t 

### El Paso Corporatio n, 2 002 Secu rities and Exch ang e C o mmi ssio n Fo rm 1 0 K, p
. 23

.

Energ y I n for m at ion A d mi nistra ti on / Perf orma nc e Profiles of Maj o r Energ y Pr od ucers 2002 

## 85Energy Information Administration / Performance Profiles of Major Energy Producers 2002 

### 87 

# Appendix A The Financial Reporting System (FRS) The legislation establishing the Financial Reporti ng System (FRS) requires the reporting of individual company financial and operating data to be on a "uniform and standardized basis" so that the data can be aggregated and comparisons can be made acr oss companies and groups of companies. The legislation also required the Energy Informati on Administration (EIA) to consult with the U.S. Securities and Exchange Commission in an effort to be consistent with other Federal financial accounting practices. Accordingly, the FRS reporting form (Form EIA-28) necessarily incorporates a number of specific energy financial accounting principles and conventions. Details on thes e financial accounting concepts and principles can be found on th e EIA Worldwide Web site at http://www.eia.doe.gov/emeu/perfpro/appenda.html. In pa rticular, the interested re ader is referenced to the following subheadings:

• Survey Format (see

H T U 

### http://www.eia.doe.gov/emeu/perfpro/appenda.html#rptfrmt

U T H 

## ),
• Petroleum Segment Overview (see

H T U 

### http://www.eia.doe.gov/emeu/perfpro/appenda.html#petovw

U T H 

## ),
• Selection of Reporting Companies (see

H T U 

### http://www.eia.doe.gov/emeu/perfpro/appenda.html#criteria

U T H 

## ),
• Financial Analysis Guide (see

H T U 

### http://www.eia.doe.gov/emeu/perfpro/appenda.html#faguide

U T H 

## ),
• Accounting Practices (see

H T U 

### http://www.eia.doe.gov/emeu/perfpro/appenda.html#acctpr

U T H 

## ).

# Appendix B
Detailed Statistical Tables

O p erat in g St at ist i cs 1996 1997 199 8 1999 2000 200 1 2002
Pet r o l eum an d N a t u ral G as

Net P r oduc tion C r ude O il and N a t u r a l G a s Liquids ( m illion bar r e ls) FRS Co m pani es 1,532.4 1 , 458 .8 1,388.8 1 ,305.7 1 , 267 .9 1,363.2 1 ,346.4 U

. S

. Ind u stry 1 3,023.0 3 ,002 .0 2,824.0 2 ,848. 0 2 ,801 .0 2,805.0 2 ,759.0 FRS as a Per c ent of U.S

. In dus tr y 50.7 4 8.6 49.2 45.8 4 5.3 48.6 48.8 N a tur a l G a s ( b illion c u bic f eet) FRS Co m pani es 8,191.6 8 , 299 .1 8,395.9 7 ,994.1 8 , 340 .1 8,838.0 8 ,712.5 U

. S

. Ind u stry 1 18,861.0 19,21 1.0 18,720.0 18,928. 0 19,21 9.0 19,779.0 19,353.0 FRS as a Per c ent of U.S

. In dus tr y 43.4 4 3.2 44.8 42.2 4 3.4 44.7 45.0 N e t Im por t s C r ude O il and N a t u r a l G a s Liquids ( m illion bar r e ls) FRS Co m pani es 565.7 5 7 1 .1 634.7 474.9 3 2 4 .1 716.1 630.5 U

. S

. Ind u stry 1 2,946.6 3 ,191 .0 3,358.5 3 ,366. 4 3 ,527 .0 3,620.1 3 ,523.2 FRS as a Per c ent of U.S

. In dus tr y 19.2 1 7.9 18.9 14.1 9 .2 19.8 17.9 Ref i n e r y Capac ity ( t hous and bar r e ls per day ) FRS Co m pani es 10,477.0 9 , 410 .0 14,277.0 14,158.0 14, 42 4.0 14,682.0 14,557.0 U

. S

. Ind u stry 1 16,031.8 16,12 8.7 16,567.0 16,787. 0 17,17 7.4 17,367.4 17,338.9 FRS as a Per c ent of U.S

. In dus tr y 65.4 5 8.3 86.2 84.3 8 4.0 84.5 84.0 Ref i n e r y O u tput 2 ( t hous and bar r e ls per day ) FRS Co m pani es 10,954.0 10,03 0.0 14,929.0 14,639.0 14, 49 9.0 15,022.0 14,761.0 U

. S

. Ind u stry 1 16,800.7 17,23 4.3 17,499.6 17,493. 1 17,76 3.2 17,688.9 17,654.5 FRS as a Per c ent of U.S

. In dus tr y 65.2 5 8.2 85.3 83.7 8 1.6 84.9 83.6 C o a l P r od uc tio n ( m illion t ons ) FRS Co m pani es 169.4 1 6 3 .3 73.9 44.0 3 5.5 33.0 29.3 U

. S

. Ind u stry 1 1,063.9 1 ,089 .9 1,117.5 1 ,100. 4 1 ,073 .6 1,127.7 1 ,093.3 FRS as a Per c ent of U.S

. In dus tr y 15.9 1 5.0 6 .6 4.0 3 .3 2.9 2 .7

FRS c o m panies ' data

- E ner gy Inf o r m ation A d m i ni str a tion, For m E I A

- 28 ( F ina n c i al R epor ti ng S y stem )

. 

### T a ble B 1 . Select ed U

. S. O p er at ing Stat ist i cs f o r FR S C o m p a n ies a n d U

. S. In du str y , 1996- 2002

Note: T he d a ta f or t o tal U. S . pr oduc tion o f c r ude oil and natur al g a s liqu i ds an d natur al gas ( dr y ) utiliz ed in this r epor t ar e t a k en f r om E ner gy Inf o r m ation A d m i nis t r a tion , F o r m EIA- 2 3 ( A nnual Su r v ey of Dom e s t ic Oil and Gas Res e r v es ) ; s ee U.S. C r ude Oil, Natur a l G a s , and Nat u r a l G a s Liq u ids Res e r v e s 200 2 Annual Repor t No vem ber 2003)

. T h is s our c e is utiliz ed in or der t o pr es er v e c ons istenc y b e tw een pr oduc tion r epor te d in th e c ontex t of oil and gas r e s e r v es and r e s e r v e additio n s and pr odu c t ion r epor ted els e w her e in this r epor t. How e ve r , the of f i c i al E ner gy Inf o r m ation A d m i n i s t r a tion U.S

. totals f o r c r ude oil a nd natur al gas pla nt pr oduct i on ar e 2, 93 6 m illion bar r e ls in 2 002 an d 2,940 m illio n bar rels in 2001. (See En er gy Inf o r m a t ion Adm i nist r a tion, Pet r ol e um S upply A nnual 2002, V o lum e I ( J une 20 03) , p. 2. ) For dr y natur al gas pr o duc tio n , the of f i c i al E ner gy Inf o r m ation A d m i n i s t r a tion U.S. totals are 19,047 billion c ubic f eet in 2002 and 1 9 , 676 billion c ubic f eet in 2001. ( S ee Ener gy I n f o r m ation Adm i nis t r a t i o n, Natur a l G a s Monthl y , S eptem ber 2003, T able 1.)

S our c e s : Indus tr y data

- P e tr ole u m net pr odu c t ion: Ener gy Inf o r m ation Adm i nis t r a tio n , F o r m EI A-23; s ee U.S

. Cr ude Oil, Natur a l Gas , and Natur a l Gas Liquids Res e r v es , 2002 A nnual Repor t ( N o v em ber 2003)

. Net im por ts : data c o m p iled f o r the In ter national E ner gy A genc y by

the Petr oleum Suppl y Division, O f f i c e of Oil and Gas , E ner gy Inf o r m ation A d m i n i s t r a tion. Ref i ner y capac ity an d r e f i nery outpu t: E ner gy Inf o r m atio n A d m i nis t r a tion, For m s E I A- 820 ( A nnual Ref i ner y R epor t) and E I A

- 810 ( M onthly Re f i ner y Report) ; s ee P e tr ole u m Su pply A nnual, 2001 and 2002. Coal pr oduc tion: 1996- 2000

- - E IA, C oal Indus tr y Annua l , annual r epor ts ; 2001- 2 002 - E I A , An nual C oal Re por t, a nnual r epor ts

. 1 U.S

. ar ea is def ined to inc l ude the 50 S t ates , Dis t r i c t of Colum b ia, U.S

. Vir g in Is lands , and P uer to Ric o

. 2 For F R S c o m pan ies , inc l udes r e f i nery outpu t at ow n r e f i n e r i es for ow n ac c ount and at other s ' r e f i ner ies f o r ow n ac c o unt.

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 89

### 200 1 2 002 20 01 2002
Income S t a t eme n t

O per a t ing Reve nue s 80 3. 7 6 9 8

. 9 4 , 8 41. 0 4 ,70 3

. 8 O per a t ing Ex pen se s - 7 3 5

. 6

- 6 5 9

. 7 -4 ,3 80. 5

- 4 , 20 6. 2 O per a t ing I n c o m e 68 .1 39

. 2 46 0

. 5 4 97 .6 In te re s t E x pe n s e - 9

. 1

- 1 0. 7

- 1 14. 0

- 9 8

. 2 O t her In co m e 1 

### 6. 3 6

. 7

- 1 48. 5

- 24 6. 1 In c o m e T a x e s -2 7. 7

- 1 4

. 6

- 1 11. 7

- 12 7. 1 Ne t In c o m e 3 7

. 7 2 0 .6 86. 4 2 6. 2 C a s h Fl ow s fr om Ope r ati o n s 2 

### Ne t In c o m e 3 7

. 7 2 0 .6 86. 4 2 6. 2 O t her It em s , Ne t 3 

### 51 .9 54

. 4 50 2

. 1 5 56 .3 Ne t Cas h F l ow f r om O p e r a t ions 89 .6 75

. 0 58 8

. 5 5 82 .5 C a s h Fl ow s fr om I n ve sti n g A c ti vi ti e s 2



### Ad dit i o n s t o Pr ope r t y , Pla n t & Equipm ent

- 1 0 0

. 3

- 9 0. 5

- 3 60. 8

- 29 0. 3 O t h e r I n v e s t m e nt A c t i v i ti e s , Ne t 4 

### 6. 0 3 6.4

- 1 28. 3

- 10 3. 7 Ne t Cas h F l ow f r om I n ve s t ing Ac tivit i es -9 4. 3

- 5 4

. 1

- 4 89. 2

- 39 4. 0 C a s h Fl ow s fr om F i na n c i n g A c ti vi ti e s 2



### Pr o c e eds f r om Lon g- T e rm Deb t 55 .0 34

. 1 53 9

. 7 4 60 .1 Pr o c e eds f r om Equity Se cu r i t y O f f e r i ngs 6. 3 4

. 9 72. 5 3 3. 8 D i vid end s t o Shar eh old e r s -1 7. 1

- 1 7

. 7

- 98. 7

- 9 5

. 4 R educ t i o n s in Lon g- T e rm Deb t -3 4. 3

- 2 7

. 9

- 3 70. 1

- 33 6. 4 St oc k Repu r c h a s e s - 7

. 5

- 4 .7

- 1 10. 9

- 10 8. 9 O t her Financ ing Ac tivit i es , Net 3. 8

- 7.1

- 60. 1

- 8 5

. 2 Ne t Cas h F l ow f r om F i n anc in g Ac tivit i es 6. 2

- 1 8

. 4

- 27. 5

- 13 2. 0

Ef f ect o f Exc h a n g e Rat e Ch an ges o n Ca sh

- 0

. 3 0. 6

- 2. 8 4

. 9 I n c r eas e ( D ecreas e) i n C ash a n d C ash Eq ui v a l e n t s 1. 3 3

. 0 69. 0 6 1. 4

F R S co m p anies ' da ta

- Ener gy I n f o r m at ion Adm i n i s t r a tion, Fo rm EIA- 2 8 ( F in anc ia l Rep o r t ing Sy s t em )

. 

## T a b l e B 2 . Sele ct ed F i n a n c ial It ems fo r t h e F R S C o mp an ies a n d t h e S& P Indust r ials, 2001- 2002 ( B illi on D o llars)

1 

### "O th er I n c o m e " in clude s ot he r r e ve nue a nd ex pen s e (e x c l uding in te r e s t ex pe ns e) , d i s c ont in ued ope ra tions , ex tr a o r d in ar y it em s , and a c co unt in g ch ang es

. 2 

### I t e m s th at a dd to c a sh a r e pos it ive , and ite m s t hat u s e c a sh a r e sh ow n a s ne gat ive va lues

. 3 

### "O t h e r I t e m s , Net " in c l ud es : De pr ec ia tion, D eplet ion & Am o r tiz a t i on , de f e r r e d t a x e s , dr y hole ex pen se , m i nor ity inte r e s t , r e c ogn iz e d u ndis t r i b u t ed ear n i ng s / ( l o s se s ) of unc on so lidat ed af f i lia te s, ( gain) /los s o n dis p os it ion o f Pr oper t y , Plan t & Eq uip m e n t , c han ges in ope r a t i ng as s e ts and liabilities , an d ot her nonc a s h i t e m s, e xcl ud i n g ne t ch an g e in sho r t

- te rm d e b t; ot he r cash it em s, ne t.

4 

### "O t h e r I n ves t m ent Ac t i vities , Ne t" inc l udes ad dit i o n s t o in ves t m e n t s and a d vanc e s an d pr oc eed s f r om dis p os als of PP&E.

S o u r ce s: St and ar d & Po or 's ( S&P) I n d u s t r i als dat a ar e ex t r ac t ed f r o m th e S&P 5 00 In dex , e x cluding t he Finan cial, Ut ilit ies , and T r a n s por t a t i o n , s e c t or s - Co m p us ta t PC Plus , a s e r v ic e of St and ar d & Po or 's

. FR S C o m p an ie s S &P I n d u s t ri als S e le cte d F i n a n c ia l Ite m s

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 90

### 20 01 2 0 0 2 20 01 2 0 0 2
Bala nc e Shee t Ass e ts Cu rren t Asset s 1 4 7

. 5 1 56 .3 1 , 44 1.2 1 ,5 10 .2 No ncurrent Ass e ts Prop ert y , Pl an t, a n d Equ i p m en t (PP& E) Gro s s 8 0 6

. 0 8 26 .3 3 , 22 2.8 3 ,1 78 .6 Accum u lat ed Dep r ecia tio n , Dep l et ion , an d Am ort i z a tio n (DD&A) -3 73 .6 -3 79 .6 -1 ,45 7 .0 -1,4 79 .9 Net PP&E 432.4 4 46.6 1,765.8 1 ,698.7 Inv e stm e nts a n d Ad va nces 57 .3 53 .9 15 5.3 1 35 .3 Othe r No ncurre nt Ass e ts 97 .9 1 1 5

. 7 2 ,93 3 .4 2,9 1 0

. 4 Su bto t al Non c urre nt Ass e ts 5 8 7

. 5 6 16 .2 3 , 30 8.3 3 ,1 36 .1 T o tal Ass e ts 7 3 5

. 0 7 72 .5 6 , 29 5.6 6 ,2 54 .5 Lia b i lit ies a n d Sto c k h ol ders Equ i ty L i ab ili tie s Curre nt Li abi lit ies 1 5 9

. 8 1 56 .7 1 , 09 8.3 1 ,0 87 .4 Lon g-T e rm De bt 1 3 2

. 0 1 54 .0 1 , 39 7.2 1 ,4 93 .7 Othe r L ong -T erm Item s 1 4 4

. 0 1 56 .1 1 , 56 8.7 1 ,6 53 .1 Mi nority Int e re s t 15 .5 11 .0 8 2 .9 75 .5 Su bto t al Li ab ili tie s and Oth e r Ite m s 4 5 1

. 3 4 77 .8 4 , 14 7.1 4 ,3 09 .8 Sto c k hol de rs' Equ i ty Reta in ed Earn in gs 2 0 9

. 7 2 06 .1 1 , 15 0.9 9 62 .0 Othe r Eq uit y 74 .0 88 .7 99 7.6 9 82 .7 Su bto t al Sto c k h ol de rs ' Equ i ty 2 8 3

. 7 2 94 .7 2 , 14 8.5 1 ,9 44 .7 T o tal Li ab ili tie s a n d Sto c k hol de rs' Equ i ty 7 3 5

. 0 7 72 .5 6 , 29 5.6 6 ,2 54 .5 Fi n a nc i a l R a ti os Ne t In c o m e / S tock h o ld ers' Eq ui ty 13 .3 7

. 0 4 .0 1

. 3 Ne t In c o m e plu s In tere st/T ota l I n v e sted Ca pit a l 1 1

. 3 7 .0 5.7 3 .6 Div i d e n d s/Ne t Ca s h Fl ow f r om O p erati ons 19 .1 23 .7 1 6 .8 16 .4 L ong -te r m De bt/ S tock h o ld ers' Eq ui ty 46 .5 52 .3 6 5 .0 76 .8

FRS co m p a n ie s' da ta - Ene r g y In f o rm ati o n Adm i ni s t rati on , Fo rm EI A-28 (Fina n cia l Re po rtin g Sy stem ). S o urces: Standar d & Poor 's ( S&P ) Indus t r i al s data ar e ex tr ac ted f r om the S&P 50 0 Index , ex c l uding the F i nanc i a l, Uti l i t i e s, an d T r a n spo r ta ti o n , s e ctors - Com p us ta t PC P l us, a service of Sta n d a rd & Po or's. 

## T a b l e B 3 . B a lan ce S h eet It em s an d F i n a n c ia l R a t i o s f o r F R S C o m p an ies a n d S& P In d u st ri als, 2001 - 200 2
FRS Co mp a n i e s S &P In du str i als

( b ill ion doll ar s )

(pe r cent )

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 91Ba l a n c e S h e e t I t e m s 1 99 6 1 99 7 1 99 8 1 99 9 2 00 0 2 00 1 2 00 2
A s s e t s C u r r e n t A s s e ts

C a s h & M a r k e t a b l e S e c u r i ti e s 1 3 .4 1 2 .2 8

. 1 1 2

. 2 1 8

. 7 1 8

. 6 1 9

. 5 T r a d e A c c o u n ts & N o te s R e c e i v a b l e 5 6 .2 5 1 .2 4 7 .8 6 8 .1 9 8 .6 7 1 .4 7 8 .7 I n v

e n t o r i e s R a w M a te r i a l s & P r o d u c ts 2 2 .7 2 1 .4 2 1 .6 2 3 .3 2 5 .6 2 3 .4 2 3 .2 M a t e r i a l s & S u p p l i e s 3

. 8 3 .7 3

. 8 3 .9 4

. 4 7 .3 7

. 6 O t h e r C u r r e n t A s s e ts 1 2 .1 1 2 .4 1 2 .9 1 3 .4 4 9 .1 2 6 .7 2 7 .4 T o t a l C u r r e n t A s s e t s 1 0 8

. 2 1 0 0 .9 9 4 .2 1 2 1

. 0 1 9 6 .5 1 4 7

. 5 1 5 6 .3 N o n - c u r r e n t A s s e ts

Pr o p e r t y , Pl a n t & Eq u i p m e n t ( P P &E)

Gr o s s P P & E 6 3 5

. 0 6 3 6 .9 6 7 1

. 0 7 0 8 .0 7 5 7

. 2 8 0 6 .0 8 2 6

. 3 A c c u m u la t e d De pc r e c i a t io n, D e p l e t i o n , a n d A m o r ti z a t i o n - 3 3 1 .6

- 3 3 3 .3

- 3 3 4 .5

- 3 5 5 .5

- 3 5 1 .6

- 3 7 3 .6

- 3 7 9 .6

N e t P P&E 3 0 3

. 4 3 0 3

. 6 3 3 6

. 5 3 5 2

. 5 4 0 5

. 5 4 3 2

. 4 4 4 6

. 6 I n v

e s t m e nt s & A d v a nc es t o Un c o ns olid at ed A f f i lia t e s 3 2. 3 4 4. 2 5 3. 9 5 8. 2 6 2. 3 5 7. 3 5 3. 9 O t h e r N o n - c u r r e n t A s s e ts 2 6 .8 3 5 .2 3 5 .8 3 9 .6 8 6 .9 9 7 .9 1 1 5

. 7 T o t a l N o n - c u r r e n t A s s e t s 3 6 2

. 4 3 8 2 .9 4 2 6

. 3 4 5 0 .3 5 5 4

. 8 5 8 7 .5 6 1 6

. 2 Tot a l A s s e t s 47 0. 6 4 8 3

. 8 52 0. 4 5 7 1

. 3 75 1. 2 7 3 5

. 0 77 2. 5 Li a b il it ie s & S t oc k holde r s ' E qui t y Liabilit i e s

C u r r e n t L i a b i l i ti e s

T r a d e A c c o u n ts & N o te s P a y a b l e 6 1 .4 5 7 .7 6 2 .8 7 9 .4 1 0 2

. 4 9 0

. 6 9 1

. 8 Ot h e r C u r r e n t L i a b i l i ti e s 4 8 .8 4 9 .2 5 1 .1 5 1 .9 9 6 .4 6 9 .2 6 4 .9 L o n g - T e r m D e b t 7 0 .9 7 3 .4 9 4 .6 1 0 4

. 0 1 2 0 .0 1 3 2

. 0 1 5 4 .0 D e f e r r e d I n c o m e T a x C r e d i t s 4 5 .5 4 6 .3 4 9 .0 5 3 .1 6 8 .2 7 7 .0 7 6 .1 O t h e r D e f e r r e d C r e d i t s 1 9 .2 1 8 .8 1 8 .4 1 8 .8 3 4 .1 2 3 .3 2 7 .9 O t h e r L o n g - T e r m I t e m s 4 0 .6 4 1 .6 3 9 .7 4 2 .6 4 1 .2 4 3 .7 5 2 .1 M i n o r i ty I n te r e s t i n C o n s o l i d a t e d A f f i l i a t e s 6

. 6 8 .2 1 0 .4 1 5 .2 1 7 .1 1 5 .5 1 1 .0 T o t a l L i a b i l i ti e s 2 9 2

. 9 2 9 5 .1 3 2 6

. 0 3 6 4 .9 4 7 9

. 5 4 5 1 .3 4 7 7

. 8 S t o c k h o l d e r s ' E q u i ty 1 5 6

. 3 1 6 0 .8 1 6 5

. 8 1 7 0 .6 1 9 9

. 2 2 0 9 .7 2 0 6

. 1

R e ta i n e d E a r n i n g s 2 1 .4 2 7 .9 2 8 .7 3 5 .7 7 2 .5 7 4 .0 8 8 .7 O t h e r E q u i t y T o t a l S t o c k h o l d e r s ' E q u i ty 1 7 7

. 8 1 8 8 .7 1 9 4

. 4 2 0 6 .3 2 7 1

. 8 2 8 3 .7 2 9 4

. 7 Tot a l Lia b ilit ie s & S t o c k holde r s ' E quit y 47 0. 6 4 8 3

. 8 52 0. 4 5 7 1

. 3 75 1. 2 7 3 5

. 0 77 2. 5

C u m u l a t i v e a t Y e a r E n d 1 .2

- 2 .7

- 2 .3

- 2 .7

- 3 .0

- 5 .1

- 2 .0

f o r

t h e Cu r r en t Y e ar - 0

. 4

- 3

. 9 0. 0

- 0. 3

- 2. 1

- 1. 0 3

. 1 S o u r c e : E n e r g y I n f o r m a t io n A d m i nis t r a t i on , F o r m E I A

- 2 8 ( F in an c i al Rep o r t in g S y s t em )

. 

### T a b l e B 4

. C o n s o l i d at ed B a l a n ce S h ee t f o r F R S C o m p an i e s, 199 6- 2002 ( B il lio n D o l l a r s )

M e m o : F o r e ig n Cur r e n c y T r ans lat i on A d ju s t m e n t

F o r e ig n Cur r e n c y T r ans lat i on A d ju s t m e n t

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 92I n co me St at em en t I t em s C o n s o l id a t ed El im in a t i o ns & No n t rac eab l e s P et ro l e u m C o al Ot her En erg y Nonen erg y Ope r a t i ng Re v e nue s 69 8,8 8 4

- 33, 320 642 ,12 6 737 43, 243 4 6 ,0 98 Ope r a t i ng E x pe nse s G ener al O per at i n g E x pens es 59 8,9 7 2

- 32, 595 547 ,48 1 572 41, 706 4 1 ,8 08 D epr ec iat i on, D eple t ion, & Allowanc e 45 ,52 9 780 41 ,56 1 W 878 2,2 3 9 G ener al & Ad m i nis t r a tiv e 15 ,16 1 2, 202 10 ,02 1 W 1 , 302 1,6 1 7 T o tal O per a t ing Ex pe ns es 65 9,6 6 2

- 29, 613 599 ,06 3 662 43, 886 4 5 ,6 64
O p erat in g I n c o me 39 ,22 2

- 3 , 707 43 ,06 3 75

- 643 4 3 4 O t h e r R e v e n u e & ( E xp en se )

Ea r n ings of U n c ons o l i d ate d A f f ili a t es 4 , 10 3

- 294 4, 714 W

- 563 2 4 4 O t h e r D i vidend & I n te r e s t I n c o m e 2 , 61 4 2 , 614

- - - - G a in/ Los s on D i s p os ition of Pr op er t y , P l a n t, & Eq uipm ent 1 , 37 4

- 295 1, 024 W W 6 4 6 I n t e r e s t Ex pens e s & F i nanc ial C har g e s - 1 0 , 74 8

- 10, 748

- - - - Mi n o r i t y In t e re st i n In co m e - 1 ,0 68

- 1 , 068

- - - - F o r e ign C u r r enc y T r ans lat i on Ef f e c t s 19 7 197

- - - - O t h e r R e v e nue & ( E x pen s e ) 47 7 477

- - - - T o t a l O t he r Re v e nue & (E x p e n se )

- 3 ,0 51

- 9 , 117 5, 738 W

- 565 8 9 0
Pret ax I n co me 36 ,17 1

- 12, 824 48 ,80 1 78

- 1 , 208 1,3 2 4 I n co me T ax Exp e n s e 14 ,56 6

- 5 , 381 20 ,02 3 21 15

- 1 12 Di sc ontinue d Ope r a t ions -82 8 -8 1

- 9 6 8 W W W E x t r a o rdi n ar y Item s a nd C u mul a tive E f f e c t of A c counti ng Cha nge s - 1 85

- 112 8 2 W W W Ne t Inc o me 20 ,59 2

- 7 , 636 27 ,89 2

- 4 6

- 1, 460 1,8 4 2 

### Ta bl e B 5

. Co n s ol i d a t in g St a t e m en t o f In co me f o r FR S Co mp an ie s, 2 002 (Million Do llars )

- = N o t a v ailable. W = D a t a w i th held to avoid dis c l os ur e

. Sou r c e : En er gy I n f o r m at i o n A d m i nis t r a tion , F o r m EI A- 28 ( F ina n c i al R e p o r t ing Sy s t em )

.

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 93Cons olid a t e d P ro du c t io n Refin i ng/ Ma r k e t i n g Pip e line s Cons olid a t e d P ro du c t io n Re fining/ Ma r k e t i n g Int'l Ma r i n e
O p er a t i ng Re v e nue s R a w Ma te r i al Sa les 12 6, 77 1 7 1 , 13 8 1 09 , 0 6 7 1, 6 2 5 8 7 , 42 4 6 1, 4 0 5 6 3 , 58 2 0 Ref i ne d P r od uc t s Sa l e s 2 6 7 , 9 7 4 W 27 2,1 9 0 W 14 1,7 4 2 W 14 2,2 2 7 0 T r a n s p or t a ti on R e ve nu es 11 ,1 15 1,0 8 5 2 ,5 62 9 , 56 1 1 ,6 98 37 6 W 2 , 64 3 Ma na ge m e nt an d Pr oc e s s i n g F e es 1, 49 1 W 1 , 25 7 W 1 , 96 8 W W W Othe r 1 4 , 1 6 1 96 8 1 2 , 78 1 4 16 4 , 59 8 5 29 4 , 05 1 W T o tal Ope r ati n g Re ve nu es 42 1, 51 2 7 3 , 97 4 3 97 , 8 5 7 1 1 , 8 10 2 3 7 , 43 0 6 3, 9 3 2 2 12 , 1 0 9 2, 6 8 1
O p e r atin g E x pens es Gen e ral Ope r ati n g Expe nses 36 8, 64 5 3 4 , 30 4 3 90 , 0 3 7 6, 4 3 3 1 95 , 6 5 2 2 6 , 6 94 2 0 7 , 55 9 2 , 6 91 D e pr e c i a t i o n , D e pl et io n, & Al lo w a nc e 24 ,9 35 1 8 ,2 68 5,6 1 7 1 ,05 0 1 6 ,6 26 14 ,57 9 2,0 1 1 W Gen e ral & A d m i ni s t ra ti ve 7, 76 0 1 , 6 5 3 3 , 69 5 2 , 4 12 2 , 26 1 9 45 1 , 31 0 W T o tal Ope r ati n g Expe nses 40 1, 34 0 5 4 , 22 5 3 99 , 3 4 9 9, 8 9 5 2 14 , 5 3 9 4 2 , 2 18 2 1 0 , 88 0 2 , 7 33 O p e r ating Inc o me 20 ,1 72 1 9 ,7 49 -1,4 92 1 , 91 5 2 2,8 9 1 2 1 , 71 4 1 ,2 29 -5 2 O t he r Rev e nue & (E x p ens e ) Ea rni n g s o f Unc o nsol id at ed Af f i l i a t es 1, 94 4 1 , 0 4 1 61 3 2 90 2 , 77 0 3 , 0 82

- 3 3 1 W Gai n (L os s) on Di s p o s i t i on o f

Prop erty , P l a n t, & E q u i p m e n t 99 6 3 1 2 36 7 3 17 2 8

- 7 3 7 W T o tal Oth e r Re ve nu e & (Ex p en s e ) 2, 94 0 1 , 3 5 3 98 0 6 07 2 , 79 8 3 , 0 75

- 2 9 4 17 Pr eta x I n come 23 ,1 12 2 1 ,1 02 -5 12 2 , 52 2 2 5,6 8 9 2 4 , 78 9 9 35 -3 5 Inco me T a x E x pe nse 7, 48 1 6 , 2 7 4 34 6 8 61 12 , 5 4 2 1 2 , 0 38 50 1 3 Disc ontinue d Oper a t ions -1 ,1 39 W W W W W W 0 Ex t r ao rd i n ary I t em s a n d C u m u la t i v e E ffec t of A c cou n ting Cha nge s 68 W W W W W W 0 Contr i bution T o Net I n com e 14 ,5 60 1 5 ,0 30 -2,1 64 1 , 69 4 1 3,3 3 2 1 2 , 91 8 4 52 -3 8 W = Da ta w i thh e l d t o a v oi d d i s c l osure. So urce: E n e r gy In f o rm ati o n Ad m i n i strati on , F o rm EIA

- 28 (Fin an c i al Rep o rti n g Sy stem ). 

### Table B6. Con s olidat ing St a t ement of Incom e f o r F R S C o mp anies, U

. S. and Fo reign Pet r oleum Segm ent s , 2002 (Mi l l i on Doll ars)

I n co m e St at e m en t I t em s U.S

. P e tr ol eum For ei gn P e tr ole u m

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 94Ne t P P & E In v e stm e n t s & Ad v a n c e s A d ditio ns t o PP&E A d ditio ns t o In v e st m e n t s &

A d v a n c es D D&A Pe t r ole u m Uni t ed Sta t es

Produ c t i o n 13 7, 933 4 ,77 3 29, 1 91 8 6 3 1 8 , 26 8 Re f i n i ng /Ma r k e ti ng Ref i ni n g 5 3 ,1 09 4 , 43 9 1 4, 644 4 51 3 , 71 0 M a rk eti n g 15 , 1 2 4 9 5 9 1 ,4 52 43 0 1 , 1 71 Ref i ni n g /M ark e ti n g T r an sport

Pi pe l i n e s 2 , 41 0 7 74 7 4 0 6 8 2 50 Ma r i ne 1,2 6 5 W 53 0 W 29 6 O t her 1,1 1 3 W 23 9 W 19 0 T o ta l U.S. Re f i n i ng /M ar k e ti n g 7 3 ,0 21 6 , 54 5 1 7, 605 1 ,2 59 5 , 61 7 Ra te Re gul a t e d P i pel i n es Ref i ne d P r o ducts 1 , 96 5 6 32 92 15 1 4 5 Natu r a l Gas 21 , 7 6 7 3, 6 0 4 2 ,0 49

- 1 0 3 8 1 7 Cr u de Oi l an d L i qui d s 4,3 3 5 5 5 3 35 2 1 95 18 8 T o ta l Rate Regu l a te d Pi pe l i n e s 28 , 0 6 7 4, 7 8 9 2 ,4 93 24 3 1 , 0 50 T o tal U.S

. P e trol e u m 23 9, 021 1 6 , 10 7 4 9, 289 2 ,3 65 24 ,93 5 Forei g n

Produ c t i o n 12 4, 225 1 5 , 73 8 3 0, 138 3 ,5 54 14 ,57 9 Re f i n i ng /Ma r k e ti ng 27 , 9 9 8 W 4 ,0 55 W 2 , 0 11 Int e r n ati o na l M a r i n e 52 9 W 10 W 3 6 T o tal F o r e i gn Pet r ol e u m 15 2, 752 2 2 , 03 8 3 4, 203 4 ,5 27 16 ,62 6 To t a l P e t r o l e u m 39 1, 773 3 8 , 14 5 8 3, 492 6 ,8 92 41 ,56 1 Coa l Forei g n 0 0 W 0 Uni t ed Sta t es 52 2 W W 0 71 To t a l C o a l 52 2 W 23 0 7 1 Ot her Energy Forei g n 2,6 4 0 2 ,85 8 1, 15 4 3 04 7 4 Uni t ed Sta t es 14 , 0 3 8 1, 8 0 0 1 ,7 59 47 7 8 04 T o ta l O t he r E n e r gy 16 , 6 7 8 4, 6 5 8 2 ,9 13 78 1 8 78
No nener g y Forei g n Che m i c al s 7,0 5 7 2 ,65 0 54 4 3 36 57 8 U.S

. Chem i c al s 19 , 4 8 5 4, 7 2 3 1 ,6 08

- 1 6 6 1, 5 3 1 Forei g n Oth e r No ne ne r g y W 2 , 1 38 W

- 39 3 W U.S

. Othe r No nen ergy W 7 6 3 W 1 8 3 T o ta l No ne ne r g 0

W y 2 8 ,7 99 10 ,27 4 2, 77 6

- 40 2 , 23 9 Nont ra ce able 8 , 87 7 7 74 1 , 2 6 5

- 10 4 7 80 Consolidated 44 6, 649 5 3 , 87 3 9 0, 469 7 ,5 29 45 ,52 9 W = Da ta w i th hel d to av oi d di sc l o s u r e

. S o u r ce: E n e r g y In f o r m ati o n A d m i ni str a ti o n , Form EIA

- 2 8 (F i n anci a l Re po r t i n g S y stem )

. 

### Tabl e B7. Ne t Property , Pl ant, a n d Equi pmen t (P P&E), A dditions to PP&E , Inv estments a n d A d v a nces, and Depreci at ion, Deple t ion, a n d A m ortization ( DD&A ), by Lines of B u sines s fo r FR S C o mpanies, 2002 (Mil lio n Do ll a r s)

Y e ar E n d Bal a nce A ctiv it y During Y e a r

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 952 0 0 1 20 02 20 01 200 2 2 00 1 2 00 2 2 0 0 1 200 2

Pe t r o l eu m 1 2 .2 6.5 1 2

. 5 8 .0 11 .8 6.3 1 2.2 2 .7 U.S. Petr oleum 1 3 .1 5.7 1 2

. 7 7 .3 12 .7 5.7 1 4.5 2 .6

O i l and G a s Pr od uc tion 13 .1 10 .5 12. 3 1 2. 8 1 4.0 1 0

. 4 1 3

. 3 6 .1 Re f i ni ng /M ark e tin g 14 .5

- 2 .7 16. 7

- 3. 3 1 0.9

- 2

. 8 1 5

. 1

- 2

. 0 Pi pelines 9.7 5 .2 8.2 5 .7 11 .0 3.0 2 5.7 1 3.6 F o r e ign Petr oleum 10.9 7.6 12. 3 8 .6 9.0 8 .0 7.7 2 .9

O i l and G a s Pr od uc tion 11 .2 9

. 2 13. 0 1 1. 4 9 .3 8

. 3 7 .9 2

. 9 Re f i ni ng /M ark e tin g 9.5 1 .3 10. 0 1 .1 5.7 3 .3 5.7 3 .2 Int e r n ational Mar i ne 25 .9

- 6 .2 24. 9

- 5. 6 W 0

. 0 0 .0 0

. 0 Coa l 9.0

- 8.5 5 .1 -33

. 6 3 4

. 4 W W W Other E n er gy 9.0

- 6.8 1 5

. 2

- 31 .9 5

. 7 6 .5 2.8 1 0.5
None ner g y -6.6 4.7 2 .9 4

. 6

- 33 .9 0.8

- 1.3 1 3.1 W = D a ta w i thh e ld t o a v oid d i s c l os ur e. Note: Retur n on i n v e s t m e nt m e as ur ed as c o nt r i bution to net i n c o m e /net inves t m e nt in plac e. So ur c e : Ene r gy In f o r m ation Ad m i n i s t r a tion , F o r m EIA

- 28 ( F in an c i al R e p o r t ing Sy s t em )

. 

### Ta bl e B8

. Re tu r n on I n v e stme n t for Li ne s of Bu si n e s s fo r FRS Co mpa n i e s Ra n k e d b y To ta l Ener gy A s sets, 2001-2002 ( P er cen t)

A l l FRS T op Fou r Fiv e thr o ugh T w e l v e A l l O t he r Li ne of Busi nes s

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 9619 96 1997 199 8 1 999 200 0 2 001 2002
S o u r c e s o f R & D Fund s Fede r a l Gove r n m ent W W W 2 7 W W W I n ter n al Com pany 2,6 7 5 2 ,841 1,66 8 1 ,377 1,31 6 1 , 542 1,742 Oth e r S o u r ces W W W 2 0 W W W T o t a l S our ces 2,7 1 7 2 ,885 1,70 7 1 ,424 1,32 6 1 , 570 1,753
Br eakdo w n o f R& D E x pen d it u r es Oi l & Ga s R e c o ver y 4 8 2 585 60 6 430 45 3 592 464 Oth e r P e trol eum 4 3 2 380 36 5 345 32 7 376 656 Co al Gasi f i cati on/ Li que f a c t i on W W W W W 0 0 Oth e r Coa l W W W W W 0 W Nu c l e a r an d Othe r E ner g y 51 54 W W W W 59 No nene r g y 1,6 1 7 1 ,738 61 6 538 45 2 526 517 Un ass i g ned 1 2 7 120 8 5 W W W W T o t a l E x p endi tur e s 2,7 1 7 2 ,885 1,70 7 1 ,424 1,32 6 1 , 570 1,753 

### T a b l e B 9

. R e s ear c h a n d D e v e lo pm en t Ex pen d i t ur e s f o r F R S C o mp an ies , 19 96 - 2 0 0 2 ( M il li on Dol l ars )

W = Data w i thh e ld to avoid disclosur e. S o u r ce: E nergy Inf o rm ati on A d m i nistr a t i on, For m E I A-28 ( F inan c i a l Reporting S y stem )

.

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 97

### Line of Busine ss T op Four Fiv e thr o ugh T w elv e A ll O t h e r A l l FRS
Pet r o l eu m 51

. 5 29

. 4 19

. 1 10 0

. 0

U n ite d St ates 41

. 9 36

. 5 21

. 6 10 0

. 0 Prod uc ti on 41

. 8 38

. 6 19

. 6 10 0

. 0 Ref i ni ng /Ma r k e ti ng 34

. 1 33

. 8 32

. 1 10 0

. 0 Ref i n i n g 28

. 7 36

. 1 35

. 2 10 0

. 0 M a rk e t in g 56

. 0 15

. 3 28

. 8 10 0

. 0 Rate R e gul at ed P i p e l i ne s 6 1 .1 3 4 .1 4.9 1 00.0 F o rei gn 65

. 6 19

. 0 15

. 4 10 0

. 0 Prod uc ti on 59

. 9 22

. 2 17

. 8 10 0

. 0 Ref i ni ng /Ma r k e ti ng 8 8 .2 6.2 5 .5 1 00.0 Int e rnat io nal M a rin e 10 0.0 0 .0 0.0 1 00.0 Coal 5 3 .1 3.9 4 3.0 1 00.0 Other E n er gy 3 5 .0 6 3 .4 1.7 1 00.0 Nonene r g y 63

. 2 24

. 5 12

. 3 10 0

. 0

C h em i c al s 60

. 0 26

. 6 13

. 4 10 0

. 0 O t he r N o nen ergy 8 4 .6 1 0 .5 4.9 1 00.0 Consolida t e d 52

. 1 30

. 2 17

. 6 10 0

. 0 

### Ta ble B1 0. Size Dis t ribut i on of Ne t Inv e stme nt in Pl ac e f o r FRS Compani e s Rank ed by Tot a l E n ergy A s se t s , 2 0 0 2 (Perce n t )

N o te: Sum o f c o m p o nen ts m a y no t eq ual to tal du e to i nde pen den t roun di ng, el im in ati ons , an d no ntrac e abl es. Sourc e : Ene r gy In f o r m a t i on A d m i ni s t rati on , Form EI A- 2 8 (Fi nan c i a l Re porti ng Sy s t e m )

.

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 98Cash Flow s 1 1996 1997 1998 1999 2000 2001 2002
Ca s h Flow s Fr om O p e r a t ions Net I n c o m e 32,029 32, 082 12,519 22, 866 53,192 37, 735 20,592 Minor ity I n ter e s t in Inc o m e 845 896 764 1, 161 1,912 2, 172 1,068 Depr ec iat i on, Depletion, & Allow anc e 29,331 29, 569 35,445 32, 452 37,621 46, 377 45,529 Dr y Hole E x pens e, T h is Y ear 1,812 2, 069 2,518 1, 808 1,328 2, 344 1,925 Def e r r ed Inc o m e T a x e s 2,863 2, 301

- 1 ,123

- 2 5 5 ,611 3, 145

- 143 Rec ogniz ed Undis t r i but ed ( E ar nings ) / Los s e s

of U n c ons olidat ed Af f iliates

- 226

- 374 2,987 136

- 3 ,319

- 318 1,144 ( G ain) /Los s on Dis pos it ion of

Pr oper ty , P l ant , & E quipm ent ( P P& E)

- 1 ,940

- 2 , 716

- 2 ,658

- 1 , 922

- 2 ,065

- 1 , 176

- 1 ,374 Changes in O per ating As s e t s and Liabilities and Ot her Nonc as h It em s - 365 298

- 3 ,792

- 2 , 259

- 6 ,269 2, 848

- 636 O t her Cas h I t em s , Net

- 165 1, 197 1,502 581 629

- 3 , 490 6,847 Net Cas h Flow F r om Oper at ions 64,184 65, 322 48,162 54, 798 88,640 89, 637 74,952 Ca s h Fl ow s Fr om I n ve s t ing A c ti v i tie s Additions to PP&E:

Due to Mer ger s and Ac quis i tions

- 2 ,281

- 5 , 579

- 18,868

- 5 , 961

- 49,722

- 40, 971

- 33,147 O t her

- 41,872

- 48, 666

- 51,046

- 44, 775

- 52,470

- 59, 313

- 57,322 T o t a l Additions to P P & E

- 44,153

- 54, 245

- 69,914

- 50, 736

- 102,192

- 100, 284

- 90,469 Additions to Inves tm ents and Adv anc es - 5 ,799

- 7 , 685

- 5 ,223

- 6 , 874

- 7 ,156

- 10, 086

- 7 ,529 Pr oc eeds F r om Dis pos als of P P & E 10,942 9, 320 16,243 13, 267 26,663 7, 683 14,310 O t her Inves tm ent A c t i v i t i es , Net 1,608 6, 587 4,235 3, 523 8,742 8, 406 29,572 Cas h Flow F r om Inves ting A c t i v i t i es - 37,402

- 46, 023

- 54,659

- 40, 820

- 73,943

- 94, 281

- 54,116 C ash F l o w s F r om Fi nan c in g A c t i v i t i es

Pr oc eeds F r om Long- T e r m Debt 10,708 17, 901 27,072 29, 862 33,292 54, 987 34,094 Pr oc eeds F r om E quit y S e c u r i t y Of f e r i ngs 1,171 1, 507 9,112 3, 557 30,606 6, 267 4,878 Reduc t i ons in Long- T e r m Debt

- 18,883

- 19, 774

- 18,019

- 24, 988

- 29,323

- 34, 264

- 27,863 Pur c has e of T r eas ur y S t oc k

- 1 ,299

- 7 , 910

- 5 ,776

- 424

- 5 ,362

- 7 , 474

- 4 ,680 Dividends t o Shar eholder s - 15,585

- 16, 941

- 17,169

- 16, 081

- 18,981

- 17, 132

- 17,744 O t her Financ ing A c t i v i t i es , Inc l uding Net Change in Shor t- T e r m Debt

- 578 5, 537 6,859

- 3 , 377

- 17,205 3, 848

- 7 ,063 Cas h Flow F r om Financ ing A c t i v i t i es - 24,466

- 19, 680 2,079

- 11, 451

- 6 ,973 6, 232

- 18,378
Ef f ect o f Exchan ge R a t e o n C ash 3

- 255

- 1 3

- 24

- 119

- 308 571
Net In crease/( D ecrease) in Cash an d Cash E q ui v a l e nt s 2,319

- 636

- 4 ,431 2, 503 7,605 1, 280 3,029 

### Tab l e B 11. C o n s olid ated St atem ent of C ash F l ow s f o r FR S C o m p an ies, 1996-2002 (Millio n Do lla rs)

1 I t em s t hat add t o c a s h ar e pos it iv e, and item s t hat us e c a s h ar e s how n as negative values

. N onc as h It em s :

Sour c e : E ner gy I n f o r m at ion Adm i nis t r a tion, F o r m E I A

- 28 ( F inanc ial Repor ting S y s t em )

.

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 9919 96 1 997 19 98 1 999 200 0 2 001 200 2
I n c o me T axes ( a s p e r F i n a n c i a l S t at emen t s ) C u r r e n t P a i d o r A c c r u e d : U

. S

. F ede r a l, b e f o r e I n v e s t m e nt T a x Cr ed it & A l t e r n at iv e M i nim u m T a x 6 , 1 4 1 5 , 656 6 0 3 1 , 375 11 , 7 0 5 8, 812 39 0 U

. S

. F ede r a l I n v e s t m e nt T a x Cr ed it

- 1 46

- 9 3

- 85

- 9 0

- 12 9

- 246

- 2 4 5 E f f e c t of A l t e r nat iv e M i n i m u m T a x - 3 25

- 400

- 1 6 445

- 1 , 2 2 2

- 632 6 9 U

. S

. S t at e & Loc al I n c o m e T a x e s 7 4 5 794 4 4 3 371 1 , 33 8 1 , 067 47 8 Fo r e i g n I n c o m e T a x e s

C a n a d a 7 4 5 9 3 2 4 5 6 5 9 7 1 , 7 6 5 1 ,1 3 9 1 , 2 3 6 E u r o pe an d F o r m e r S o v i et U n ion 1 3 , 8 6 2 2 , 927 1 , 7 9 8 3 , 110 7 , 00 2 6 , 515 5 , 61 9 A f r i c a 1 , 9 5 6 1 ,9 2 6 4 4 9 1 ,6 0 7 3 , 6 1 7 3 ,0 5 7 2 , 8 8 4 M i d d l e E a s t 1 , 3 2 6 8 0 2 7 4 5 1 ,2 8 6 2 , 3 8 0 1 ,9 3 7 1 , 7 5 3 Oth e r E a s t e r n H e m i s p h e r e 2 , 1 9 5 1 ,9 0 1 9 9 2 1 ,6 7 9 2 , 2 1 4 1 ,6 7 6 1 , 6 7 4 O t her W e s t er n H e m i s phe r e 7 2 9 1 , 739 4 2 8 346 90 0 695 66 9 T o ta l Fo r e i g n 1 0 ,8 1 3 1 0 , 2 2 7 4 , 8 6 8 8 , 6 2 5 1 7 ,8 7 8 1 5 , 0 1 9 1 3 ,8 3 5
T o ta l C u r r e n t 1 7 ,2 2 8 1 6 , 1 8 4 5 , 8 1 3 1 0 , 7 2 6 2 9 ,5 7 0 2 4 , 0 2 0 1 4 ,5 2 7
D e f e r r e d

U

. S

. F ede r a l, b e f o r e I n v e s t m e nt T a x Cr ed it 1 , 4 1 0 1 , 477

- 3 73 1, 480 3 , 16 8 2 , 403 24 1 U

. S

. F ede r a l I n v e s t m e nt T a x Cr ed it 69

- 2

- 2 8

- 14

- 7 8

- 10

- 1 8 E f f e c t of A l t e r nat iv e M i n i m u m T a x 3 1 2 400

- 1 6

- 415 1 , 23 3 650

- 6 9 U

. S

. S t at e & Loc al I n c o m e T a x e s 56 54 1 0 4 136 22 1 2 6 7 6 Fo r e i g n 9 3 0 5 1 9

- 7 9 1

- 1 ,0 7 5 9 1 0 5 6 7

- 1 9 1
T o ta l D e f e r r e d 2 , 7 7 7 2 , 4 4 8

- 1 ,1 0 4 1 1 2 5 , 4 5 4 3 , 6 3 6 3 9
Tot a l I n c o m e Ta x E x pe ns e 20 , 0 05 1 8 , 632 4 , 7 0 9 1 0, 838 35 , 0 2 4 2 7 , 656 14 , 5 6 6
R e c onc ilia t i on of A c c r ue d U

. S

. Fe de r a l Inc o m e Ta x E x pe ns e To S t a t ut or y R a t e C ons olidat ed P r e t a x I n c o m e / ( Los s ) 52 , 8 08 5 1 , 453 16 , 0 17 3 3 , 837 86 , 7 0 2 6 8 , 246 36 , 1 7 1 Le s s : F o r e ig n S o ur c e I n c o m e not S u b j ec t t o U. S

. 6 , 2 3 0 5 , 827 2 5 1 2 , 160 13 , 3 5 5 8, 918 8 , 81 6 E qua ls : I n c o m e S u bjec t t o U

. S

. T a x 46 , 5 78 4 5 , 626 15 , 7 66 3 1 , 677 73 , 3 4 7 5 9 , 328 27 , 3 5 5 Le s s : U

. S

. S t a t e & Lo c a l I n c o m e T a x e s 7 8 2 785 5 7 0 486 1 , 49 7 895 34 5
Le s s : A p p l ic ab le F o r e ig n I n c o m e T a x e s De du c t e d 5 5 4 312 32 107 35 3 8 2 2 5 2 E qua ls : P r et ax I n c o m e S u bjec t t o U

. S

. T a x 45 , 2 42 4 4 , 529 15 , 1 64 3 1 , 084 71 , 4 9 7 5 8 , 351 26 , 7 5 8 T a x P r ov is io n B a s e d on P r e v iou s L i ne 15 , 8 34 1 5 , 621 5 , 3 3 2 1 0, 902 25 , 0 3 2 2 0 , 438 9 , 36 3
F o r e ign T a x C r e d it s R e c o g n iz e d

- 6 , 9 26

- 6 , 982

- 3 , 5 63

- 5 , 963

- 9 , 7 8 7

- 8 , 513

- 7 , 2 8 3
U

. S

. F e d e r a l I n v e s t m e n t T a x C r e d it R e c o gn iz ed

- 1 23

- 137

- 1 24

- 9 8

- 12 9

- 486

- 2 4 5 S t a t u t o r y D e p l e t i o n - 5 4

- 6 3

- 3 0

- 8

- 3

- 1

- 3 E f f e c t o f A l te r n a t i v e M i n i m u m T a x 1 0

- 1 6 2 3 1 1 1 6 0 O t h e r - 1 ,2 7 3

- 1 , 3 9 9

- 1 ,4 8 5

- 2 , 0 6 8

- 4 4 7

- 5 8 2

- 1 ,4 6 2
A c t u a l U

. S

. Fe de r a l Ta x P r ov is ion ( R e f und) 7 , 4 5 9 7 , 040 1 1 4 2 , 788 14 , 6 7 7 1 0 , 872 37 0 

### T a b l e B 1 2. C o m p o s i t i o n o f I n c o me T a xes f o r F R S C o m p an i e s, 1 996 - 200 2 ( M i lli o n D o ll a r s )

1 O E C D E u r o pe c o m b ine d w i t h t h e f o r m er S o v i et U n io n and E a s t er n E u r o pe t o a v oid dis c los u r e

. S our c e : E n e r g y I n f o r m a t io n A d m i n i s t r a t i on, F o r m E I A

- 2 8 ( F inan c i al Re po r t in g S y s t em )

.

I n c r eas e/ ( D ec r e a s e) in T a x e s D u e T o :

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 100

### 1996 1997 1998 1999 2000 2001 2002
P r oduct i on T axes

Oil and Gas Produc t i on 2,098 1, 965 1, 176 1,674 2,604 2, 506 2,187 Coal 1 3 9 1 7 2 4 7 4 3 3 0 3 5 3 Ot her 1 

### 1 1 0 0 2 5 1 T o tal Produc tion T a x e s 2,238 2, 138 1, 223 1,717 2,659 2, 542 2,222 S upe rfund 1 4 WWW WWW Im port Duti e s 2 6 0 WWW WWW Sal es, Use, an d Pr o p e rt y 2,516 2, 407 2, 648 2,268 2,356 2, 373 2,360 Pay r o l l 1,531 1, 406 1, 357 1,289 1,259 1, 193 1,121 Ot h e r T axes 514 55 9 360 467 789 546 378 T o tal T axes Paid (O th er T h an I n co me T axes) 7,073 6, 601 5, 660 5,825 7,186 6, 740 6,156 Exci se T axes C o ll ected 32,426 30, 984 39, 918 46,293 47,084 44, 310 43 , 464 

## Table B 13. U

. S. Taxes Ot her Than Incom e Taxes for FR S C o mpanies, 1996-2002 ( M ill ion Dollar s )

1 

### N u clear, O t her Ener gy , and N onenergy

.

W = Dat a w i t hhel d to avoi d dis c los u re. Sour c e : Energy Inf o rm at i on Adm i nis t r a tion, F o rm EIA-28 ( F i nanc ial Report i ng Sy s t e m ). 3 2

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 101

### 1 996 19 97 1 998 199 9 2 000 200 1 200 2 U n i t ed S t a t es E x plo r a t io n A c qu is it io n of U npr o v ed A c r e age 997 2, 6 5 3 3 , 912 63 3 4 , 010 3, 5 2 7 2 , 2 8 1 G eolo g ic a l and G e o phy s i c a l 625 7 5 0 916 62 1 849 75 8 8 2 1 Dr illin g an d E q uippi ng 1 

### 2 , 338 2, 9 0 5 2 , 964 1, 92 1 2 , 550 3, 2 7 6 2 , 5 5 5 O t her 693 6 9 0 954 65 9 610 77 0 8 3 2

T o ta l E x p l o r a t i o n 4 , 6 5 3 6 , 9 9 8 8 ,7 4 6 3 , 8 3 4 8 ,0 1 9 8 , 3 3 1 6 ,4 8 9 D e v e lo pm e n t A c qu is it io n of P r ov e d A c r eag e 922 2, 9 2 8 3 , 568 1, 14 4 2 7 , 939 7, 3 8 3 7 , 5 7 2 L e a s e E q u i p m e n t 1 , 6 1 3 1 , 8 2 3 2 ,6 8 8 2 , 4 3 1 1 ,9 0 7 3 , 8 1 8 3 ,3 2 5 Dr illin g an d E q uippi ng 1 

### 6 , 154 8, 5 4 0 7 , 769 5, 02 2 8 , 788 11, 67 1 1 0, 71 1 O t her 2 

### 1 , 290 1, 5 5 7 1 , 657 1, 05 6 1 , 391 2, 6 5 5 3 , 7 1 5

T o t a l Dev e lop m ent 9 , 979 14, 8 4 8 1 5 , 682 9, 65 3 4 0 , 025 25, 52 7 2 5, 32 3
To t a l U

. S

. E x pl or a t ion a nd D e v e lo pm e n t 14 , 632 21, 8 4 6 2 4 , 428 13, 48 7 4 8 , 044 33, 85 8 3 1, 81 2 Fo r e ig n E x plo r a t io n A c qu is it io n of U npr o v ed A c r e age 745 5 6 5 2 , 159 2, 25 2 4 , 105 4, 6 9 6 2 , 5 8 8 G eolo g ic a l and G e o phy s i c a l 869 8 9 7 1 , 065 88 5 875 1, 0 2 8 9 3 9 Dr illin g an d E q uippi ng 1 

### 2 , 277 2, 6 8 4 2 , 650 1, 57 9 1 , 824 2, 6 7 7 2 , 1 0 8 O t her 919 1, 1 2 8 1 , 299 90 3 1 , 087 1, 1 4 6 8 6 4

T o ta l E x p l o r a t i o n 4 , 8 1 0 5 , 2 7 4 7 ,1 7 3 5 , 6 1 9 7 ,8 9 1 9 , 5 4 7 6 ,4 9 9
D e v e lo pm e n t A c qu is it io n of P r ov e d A c r eag e 1 , 932 1, 6 4 1 7 , 121 2, 08 3 1 1 , 644 12, 18 6 8 , 6 0 0 L e a s e E q u i p m e n t 2 , 0 6 4 2 , 2 0 7 2 ,5 0 5 2 , 1 4 2 1 ,8 4 2 3 , 1 8 6 2 ,5 3 8 Dr illin g an d E q uippi ng 1 

### 5 , 278 6, 4 2 6 6 , 206 5, 14 3 5 , 057 7, 0 6 0 8 , 0 4 0 O t her 2 

### 2 , 534 2, 3 8 3 3 , 388 2, 53 1 2 , 364 3, 9 6 5 5 , 6 9 5

T o t a l Dev e lop m ent 11 , 808 12, 6 5 7 1 9 , 220 11, 89 9 2 0 , 907 26, 39 7 2 4, 87 3
To t a l F o r e ign E x plo r a t i on a nd D e v e lo pm e n t 16 , 618 17, 9 3 1 2 6 , 393 17, 51 8 2 8 , 798 35, 94 4 3 1, 37 2 

## Ta bl e B 1 4

. O i l a nd G a s E x p l or a t i o n a n d D e v e l o p m e n t E x pe ndi t u r e s f o r FR S C o m p a n i e s , U n it e d S t a t e s a n d F o r e i g n , 1 9 9 6 - 2 0 0 2 ( M i lli o n D o lla r s )

1 

### E x pe ndit u r e in c u r r ed in a giv en y ear n o t c u m u l a t i v e ( i nc l udes wor k

- i n- p r ogr e s s a d jus t m e n t )

. 2 

### I n c l u des s upp or t e quipm ent

. S our c e : E ner gy I n f o r m at ion A d m i n i s t r a t i on, F o r m E I A

- 28 ( F ina n c i a l Rep o r t in g S y s t em )

.

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 102T o tal O nshor e Offs hor e Ex plor atio n and Dev e lopment Expenditur e s
Ex p l ora t ion E x penditur e s

Unp r ov ed A c re age 4 , 8 6 9 2 ,2 81 1,48 3 7 9 8 2,588 Dril lin g and E q u i pp ing :

Com p let e d W e l l Cos t s - 2 ,0 65 60 9 1 ,45 6

- W o r k

- i n- pr ogr e s s Adj u s t m e nt

- 4 90 16 5

- T o tal Dr il ling and Equipping 4 , 6 6 3 2 ,5 55 77 4 1 ,78 1 2,108 G e olo g ical an d G e o phy s i cal 1 , 7 6 0 8 21 35 5 4 6 6 939 O t he r, Inc l udi ng Dire c t O v erhe ad 1 , 6 9 6 8 32 41 1 4 2 1 864 T o tal E x p l ora t i on E x pe ndi tu res 12,9 8 8 6 ,4 89 3,02 3 3 ,46 6 6,499 D e v e lo pme n t E x pend iture s

P r ov ed A c re age (Includ i ng Me rgers and A c q u isitio ns ) 16,1 7 2 7 ,5 72 6,95 1 6 2 1 8,600 Dril lin g and E q u i pp ing :

Com p let e d W e l l Cos t s - 8 ,6 65 5,92 9 2 ,73 6

- W o rk -i n-pro g ress Ad jus t m e n t

- 2 ,0 46 88 2 1 ,16 4

- T o tal Dr il ling and Equipping 18,7 5 1 1 0 , 7 1 1 6 ,81 1 3,90 0 8 ,040 Le ase Equ i pm e n t 5 , 8 6 3 3 ,3 25 2,27 6 1 ,04 9 2,538 O t he r Dev e lop m ent

Suppor t Equipm ent 1 , 5 6 1 1 ,3 66 1,34 0 2 6 195 Ot her , Inc l uding D i r e c t O v er head 7 , 8 4 9 2 ,3 49 1,92 9 4 2 0 5,500 T o tal D e v e lo pm en t E x p end itures 50,1 9 6 2 5 , 3 2 3 19,30 7 6 ,01 6 2 4 ,873

T o tal Ex p l or atio n and Dev e lop m ent E x penditur e s 63,1 8 4 3 1 , 8 1 2 22,33 0 9 ,48 2 3 1 ,372

- = Not available. So urc e : E nerg y Inform atio n Ad m i ni s t ration , Form EIA

- 28 (Fina n c i al Rep o rting S y ste m ). 

### Tab l e B15. C o mp onent s of U

. S. and F o reig n Explo r ation and D e v e lopment Exp e ndit u res fo r FR S Co mpan ies, 2002 (M ill ion Doll ars)
Un it ed St at es Wor l dw i d e F or e i g n

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 10319 96 19 97 199 8 1 999 20 00 200 1 2 00 2 E x plor ation E x pe nd i t ure s

U. S

. On sho r e 1 , 8 2 6 3 , 3 96 3, 94 1 1 , 174 4 , 1 3 6 4 , 7 79 3, 02 3 U. S

. Offsh o r e 2 , 8 2 7 3 , 6 02 4, 80 5 2 , 660 3 , 8 8 3 3 , 5 52 3, 46 6 T o ta l Un i t e d St at es 4 , 6 5 3 6 , 9 98 8, 74 6 3 , 834 8 , 0 1 9 8 , 3 31 6, 48 9 C a n a d a 3 5 5 3 10 63 8 420 1 , 1 8 4 3 , 8 99 1, 69 4 O E CD E u r o pe 1 , 3 4 5 1 , 6 84 1, 91 6 767 8 6 9 7 5 6 1, 22 3 F o r m er S o viet Un ion a nd E. Eu r o p e 1 9 4 2 85 63 0 354 3 1 7 3 7 4 47 0 Af r i c a 7 7 9 8 07 1, 09 2 1 , 268 9 1 0 1 , 5 79 1, 29 2 M i ddle E a s t 45 53 14 1 9 6 5 6 1 9 7 12 1 O t he r Ea s t er n Hem i s p he r e 1 , 4 6 2 1 , 3 41 1, 56 3 1 , 192 1 , 6 7 5 1 , 4 78 1, 12 1 O t he r W e s t er n He m i s p h e r e 6 3 0 7 94 1, 19 3 1 , 522 2 , 8 8 0 1 , 2 64 57 8 T o ta l Fo r e i g n 4 , 8 1 0 5 , 2 74 7, 17 3 5 , 619 7 , 8 9 1 9 , 5 47 6, 49 9
W o r l dwide Ex plor at ion E x pe ndit u r e s 9 , 4 6 3 12, 2 7 2 1 5, 91 9 9 , 453 15 ,9 10 17, 87 8 1 2, 98 8 Dev e lopme n t Ex penditure s

U. S

. On sho r e 6 , 0 8 7 9 , 6 24 9, 51 9 5 , 396 22 ,9 53 19, 46 5 1 9, 30 7 U. S

. Offsh o r e 3 , 8 9 2 5 , 2 24 6, 16 3 4 , 257 17 ,0 72 6, 0 6 2 6 , 0 1 6 T o t a l Unit ed Sta t e s 9 , 9 7 9 14, 8 4 8 1 5, 68 2 9 , 653 40 ,0 25 25, 52 7 2 5, 32 3 C ana da 1 , 2 1 0 1 , 6 88 4, 16 8 1 , 636 3 , 6 9 7 11, 42 5 4 , 9 9 3 O E CD E u r o pe 4 , 2 2 2 5 , 3 68 6, 67 0 3 , 370 6 , 6 5 1 4 , 6 17 8, 57 1 F o r m er S o viet Un ion a nd E. Eu r o p e 2 6 7 3 43 63 7 252 5 7 6 5 0 7 80 3 Af r i c a 2 , 0 1 4 2 , 1 71 2, 04 2 1 , 826 1 , 8 0 9 3 , 9 68 3, 79 9 M i ddle E a s t 4 1 8 5 90 80 1 297 4 9 4 5 4 2 65 3 O t he r Ea s t er n Hem i s p he r e 2 , 6 7 0 1 , 6 43 2, 38 6 2 , 250 5 , 1 1 2 3 , 5 13 5, 07 4 O t he r W e s t er n He m i s p h e r e 1 , 0 0 7 8 54 2, 51 6 2 , 268 2 , 5 6 8 1 , 8 26 98 0 T o ta l Fo r e i g n 11 , 808 12, 6 5 7 1 9, 22 0 1 1, 899 20 ,9 07 26, 39 7 2 4, 87 3
W o r l dwide De v e lopm e n t Ex p end itu r e s 21 , 787 27, 5 0 5 3 4, 90 2 2 1, 552 60 ,9 32 51, 92 4 5 0, 19 6

T o tal Ex plora t ion and De v e lopment E x pe n d i t ure s

U. S

. On sho r e 7 , 9 1 3 13, 0 2 0 1 3, 46 0 6 , 570 27 ,0 89 24, 24 4 2 2, 33 0 U. S

. Offsh o r e 6 , 7 1 9 8 , 8 26 1 0 , 9 6 8 6, 917 20 ,9 55 9, 6 1 4 9 , 4 8 2 T o ta l Un i t e d St at es 14 , 632 21, 8 4 6 2 4, 42 8 1 3, 487 48 ,0 44 33, 85 8 3 1, 81 2 C ana da 1 , 5 6 5 1 , 9 98 4, 80 6 2 , 056 4 , 8 8 1 15, 32 4 6 , 6 8 7 O E CD E u r o pe 5 , 5 6 7 7 , 0 52 8, 58 6 4 , 137 7 , 5 2 0 5 , 3 73 9, 79 4 F o r m er S o viet Un ion a nd E. Eu r o p e 4 6 1 6 28 1, 26 7 606 8 9 3 8 8 1 1, 27 3 Af r i c a 2 , 7 9 3 2 , 9 78 3, 13 4 3 , 094 2 , 7 1 9 5 , 5 47 5, 09 1 M i ddle E a s t 4 6 3 6 43 94 2 393 5 5 0 7 3 9 77 4 O t he r Ea s t er n Hem i s p he r e 4 , 1 3 2 2 , 9 84 3, 94 9 3 , 442 6 , 7 8 7 4 , 9 91 6, 19 5 O t he r W e s t er n He m i s p h e r e 1 , 6 3 7 1 , 6 48 3, 70 9 3 , 790 5 , 4 4 8 3 , 0 90 1, 55 8 T o ta l Fo r e i g n 16 , 618 17, 9 3 1 2 6, 39 3 1 7, 518 28 ,7 98 35, 94 4 3 1, 37 2 W o rl dw i d e E x p l oration a nd Dev e lopme n t Ex penditure s 31 , 250 39, 7 7 7 5 0, 82 1 3 1, 005 76 ,8 42 69, 80 2 6 3, 18 4 

### Tab l e B 16. Explor at ion an d Dev e lopmen t Expendit u res by Region , fo r FRS Co mp anies, 1996-2002 (Millio n Do ll ars)

S o u r c e : En er gy I n f o r m at ion Ad m i nis t r a t i on, F o r m EI A- 28 ( F inan c i al Rep o r t in g Sy s t e m )

.

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 10419 96 1997 199 8 1 999 20 00 200 1 200 2
U n it ed St at es Ta x e s O t h e r Th a n I n c o m e Ta xe s 2 , 0 9 8 1 , 965 1 , 17 6 1 , 674 2,6 0 4 2 , 5 0 6 2, 18 7 Ot h e r Co s t s 10 ,2 21 10, 147 9 , 78 7 9 , 494 8,4 1 7 10, 37 7 10, 31 5

T o ta l P r o d u c ti on Co s t s 12 ,3 19 12, 112 10 ,96 3 11, 168 1 1 ,0 21 12, 88 3 12, 50 2

U. S. On s h o r e 9 , 8 5 5 9 , 604 8 , 19 8 8 , 039 8,2 5 4 9 , 8 3 8 9, 65 0 U. S. Of f s h o r e 2 , 4 6 4 2 , 508 2 , 76 5 3 , 129 2,7 6 7 3 , 0 4 5 2, 85 2
Ca na da R o ya l t y E x p e n s e s W W W W W 0 Ta x e s O t h e r Th a n I n c o m e Ta xe s W W W W W 1 0 5 Ot h e r Co s t s 9 9 3 961 1 , 03 7 1 , 120 1,3 7 9 1 , 8 4 2 2, 30 3

T o ta l P r o d u c ti on Co s t s 1 , 0 8 2 1 , 049 1 , 12 9 1 , 252 1,4 9 6 1 , 9 4 7 2, 41 2
OEC D E u r o pe R o ya l t y E x p e n s e s 2 5 1 217 25 1 6 2 W W 4 9 Ta x e s O t h e r Th a n I n c o m e Ta xe s 4 0 0 360 26 9 330 W W 45 6 Ot h e r Co s t s 3 , 9 9 6 3 , 950 3 , 98 0 3 , 666 3,4 8 5 3 , 4 9 6 3, 41 6

T o ta l P r o d u c ti on Co s t s 4 , 6 4 7 4 , 527 4 , 50 0 4 , 058 4,0 2 5 4 , 1 5 1 3, 92 1
F o r m e r So v i e t U n i o n an d E. Eu r o p e R o ya l t y E x p e n s e s W W W W W W Ta x e s O t h e r Th a n I n c o m e Ta xe s W W W W W W Ot h e r Co s t s 1 3 3 188 20 7 111 1 7 9 1 5 5 11 1

T o ta l P r o d u c ti on Co s t s 1 3 4 192 20 8 148 1 9 6 1 9 1 11 1
Af r i c a R o ya l t y E x p e n s e s W W W W W W Ta x e s O t h e r Th a n I n c o m e Ta xe s W W W W W W Ot h e r Co s t s 8 1 2 861 1 , 19 4 1 , 153 1,2 0 8 1 , 3 8 4 1, 73 0

T o ta l P r o d u c ti on Co s t s 1 , 2 5 9 1 , 310 1 , 49 0 1 , 268 1,7 8 4 1 , 8 4 7 2, 10 7
M i dd le E ast R o ya l t y E x p e n s e s W W W W 1 3 7 0 Ta x e s O t h e r Th a n I n c o m e Ta xe s W W W W 7 5 55 46 Ot h e r Co s t s 2 9 6 280 25 0 235 1 7 5 4 0 7 50 2

T o ta l P r o d u c ti on Co s t s 4 8 3 491 42 9 424 3 8 7 4 6 2 54 8
Othe r E a s t er n H e m i sp he r e Ro y a lt y Ex pe ns e s and Ta x e s O t h e r Th a n I n c o m e Ta xe s 5 4 2 456 24 0 507 6 1 8 5 2 7 46 8 Ot h e r Co s t s 1 , 1 6 1 1 , 144 1 , 07 4 1 , 097 1,3 9 2 1 , 9 3 1 2, 11 4

T o ta l P r o d u c ti on Co s t s 1 , 7 0 3 1 , 600 1 , 31 4 1 , 604 2,0 1 0 2 , 4 5 8 2, 58 2
Othe r We s t er n H e m i sp he r e Ro y a lt y Ex pe ns e s and Ta x e s O t h e r Th a n I n c o m e Ta xe s 18 0 1 5 6 87 1 8 4 30 4 1 43 2 7 6 Ot h e r Co s t s 3 8 9 470 55 2 443 5 3 3 6 0 0 63 3

T o ta l P r o d u c ti on Co s t s 5 6 9 626 63 9 627 8 3 7 7 4 3 90 9
T o ta l Fore ign R o ya l t y E x p e n s e s 9 0 1 891 74 0 384 4 3 7 1 5 3 15 0 Ta x e s O t h e r Th a n I n c o m e Ta xe s 1 , 1 9 6 1 , 050 67 5 1 , 172 1,9 4 7 1 , 8 3 1 1, 63 1 Ot h e r Co s t s 7 , 7 8 0 7 , 854 8 , 29 4 7 , 825 8,3 5 1 9 , 8 1 5 10, 80 9

T o ta l P r o d u c ti on Co s t s 9 , 8 7 7 9 , 795 9 , 70 9 9 , 381 1 0 ,7 35 11, 79 9 12, 59 0 

### T a b l e B 17. Pro d u c t io n ( L ift i n g ) Co st s b y Re gio n f o r F R S C o mp an ies, 1996 -20 0 2 (Mi llio n Do lla rs)

W = Da ta w i th he l d to av o i d d i sclo s ure

. Sour c e : Ener gy I n f o r m at ion Adm i nis t r a t i on, For m EI A- 28 ( F ina n c i al R epor t i ng Sy s t em )

. 0 1 0 9

0 0

0 3 7 7

0

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 1051996 1997 19 98 1999 2000 2001 200 2
N e t A c rea g e

U.S. O n s hor e Dev e loped 26,733 25,47 4 26,3 9 6 2 5 , 895 31,760 34,332 37,10 3 Undev e l oped 31,659 31,15 4 30,5 9 8 2 5 , 880 37,657 43,293 40,28 0 U.S. O f f s hor e Dev e loped 5,470 5,343 4,6 3 4 4 ,988 5,383 5,881 5,28 1 Undev e l oped 16,880 22,98 3 23,1 6 8 2 4 , 940 21,483 20,933 21,92 9 Fo re i g n Dev e loped 22,574 21,98 4 24,8 8 7 2 6 , 337 32,535 32,903 37,60 3 Undev e l oped 445,176 472,10 6 514,5 1 1 416 ,209 4 16,941 424,465 429,39 4
G r os s A c r eag e

U.S. O n s hor e Dev e loped 46,887 45,24 9 49,0 9 7 4 5 , 978 57,626 63,721 69,64 1 Undev e l oped 53,775 55,53 0 51,3 6 4 4 2 , 325 59,295 69,790 64,84 1 U.S. O f f s hor e Dev e loped 9,668 10,66 5 8 ,8 61 9 , 534 10,588 11,317 9,80 2 Undev e l oped 21,786 30,84 5 32,4 3 9 3 5 , 689 31,609 30,523 32,38 4 Fo re i g n Dev e loped 59,926 58,19 8 64,3 5 8 5 9 , 247 71,330 70,112 81,17 1 Undev e l oped 857,130 924,83 9 1 ,083,3 5 5 835 ,615 8 82,761 834,500 799,00 7 

### T a ble B 18. Oil a nd Gas A c re age f o r FR S C o mp anies , 1996 - 2002 ( T hous and Ac r e s )

Sour c e : Ene r g y Inf o r m atio n Adm i nis t r a tio n , F o r m EIA- 28 ( F inanc ial Repor ting Sy s t em )

.

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 1061 9 9 6 19 97 199 8 1 99 9 2 0 0 0 2 0 0 1 2 00 2 Number of Ne t W e lls Comple t e d Dur i ng Y e ar fo r FRS Compa n i e s Onsho r e

Net E x p l o r a t o r y W e l l s Dry H o l e s 27 4 1 63 1 5 9 9 3 8 6 1 22 11 9 Oi l W e ll s 9 1 90 55 2 6 19 59 2 1 Gas W e l l s 20 7 1 70 1 4 2 1 0 5 2 1 7 3 51 16 4

T o t a l E x p l orato r y W e ll s 57 2 4 24 3 5 6 2 2 5 3 2 1 5 33 30 4 Net De v e l o p m e n t W e ll s Dry H o l e s 31 9 3 01 2 5 6 1 6 2 2 2 9 2 66 22 0 Oi l W e ll s 2, 09 5 3 ,0 16 2 , 5 1 0 1 ,13 0 1,7 7 5 1 ,8 15 1 , 18 7 Gas W e l l s 2, 04 9 2 ,2 61 2 , 0 7 4 1 ,51 9 2,9 2 7 5 ,2 26 4 , 98 2

T o t a l De v e l o p m ent W e l l s 4, 46 3 5 ,5 77 4 , 8 4 1 2 ,81 2 4,9 3 0 7 ,3 07 6 , 38 9 Of f s ho r e

Net E x p l o r a t o r y W e l l s Dry H o l e s 8 4 98 91 5 9 73 63 5 2 Oi l W e ll s 3 6 31 22 2 8 28 39 3 5 Gas W e l l s 8 7 73 63 6 1 59 63 5 3

T o t a l E x p l orato r y W e ll s 20 6 2 02 1 7 6 1 4 8 1 5 9 1 65 14 0 Net De v e l o p m e n t W e ll s Dry H o l e s 2 3 46 32 2 6 29 38 3 8 Oi l W e ll s 15 8 1 81 1 1 5 1 4 5 1 2 8 2 40 13 5 Gas W e l l s 15 3 1 68 1 3 3 1 5 3 1 5 7 1 70 13 4

T o t a l De v e l o p m ent W e l l s 33 4 3 96 2 8 0 3 2 4 3 1 5 4 48 30 7 T o t a l Un it e d St at e s

Net E x p l o r a t o r y W e l l s Dry H o l e s 35 8 2 61 2 4 9 1 5 3 1 5 8 1 85 17 1 Oi l W e ll s 12 7 1 21 77 5 4 47 98 5 6 Gas W e l l s 29 3 2 43 2 0 5 1 6 6 2 7 5 4 15 21 7

T o t a l E x p l orato r y W e ll s 77 8 6 26 5 3 1 3 7 2 4 8 0 6 98 44 3 Net De v e l o p m e n t W e ll s Dry H o l e s 34 2 3 47 2 8 8 1 8 8 2 5 8 3 05 25 9 Oi l W e ll s 2, 25 3 3 ,1 97 2 , 6 2 5 1 ,27 5 1,9 0 3 2 ,0 54 1 , 32 1 Gas W e l l s 2, 20 2 2 ,4 29 2 , 2 0 8 1 ,67 2 3,0 8 4 5 ,3 96 5 , 11 6

T o t a l De v e l o p m ent W e l l s 4, 79 7 5 ,9 73 5 , 1 2 1 3 ,13 6 5,2 4 5 7 ,7 55 6 , 69 6 Number of Ne t W e lls Comple t e d Dur i ng Y e ar fo r T o tal U.S

. I n dus t r y

Net E x p l o r a t o r y W e l l s Dry H o l e s 2, 15 4 2 ,1 45 1 , 8 4 3 1 ,15 7 1,3 3 1 1 ,5 76 1 , 13 0 Oi l W e ll s 48 4 4 34 3 0 6 1 5 3 2 6 7 3 27 22 3 Gas W e l l s 57 5 5 42 5 8 9 5 2 0 6 1 3 9 63 66 6

T o t a l E x p l orato r y W e ll s 3, 21 3 3 ,1 21 2 , 7 3 9 1 ,83 0 2,2 1 0 2 ,8 66 2 , 01 8 Net De v e l o p m e n t W e ll s Dry H o l e s 3, 18 4 3 ,6 59 3 , 1 3 8 2 ,27 3 2,6 3 6 2 ,7 42 2 , 39 4 Oi l W e ll s 7, 91 1 9 ,8 89 6 , 5 6 6 4 ,11 9 7,2 4 0 7 ,8 76 5 , 93 4 Gas W e l l s 8 , 7 2 9 1 0 , 59 2 1 1, 49 4 1 0, 5 3 0 1 5 , 85 2 2 0, 74 0 1 6, 0 9 7

T o t a l De v e l o p m ent W e l l s 19, 82 4 2 4,1 4 0 2 1 , 1 9 8 1 6 , 92 1 2 5,7 2 8 3 1 , 3 5 8 2 4 , 42 4 Number of Ne t In- P r ogre s s W e lls A t Y e a r E n d fo r F R S C o m p a n i e s Onsho r e

Expl o r a t ory W e l l s 13 3 1 35 51 4 0 70 85 6 6 Dev e l opm e n t W e l l s 67 5 9 29 3 9 2 4 6 4 7 1 6 1 ,0 52 1 , 31 5 T o ta l In-P r o gress W e ll s 80 8 1 ,0 64 4 4 4 5 0 4 7 8 6 1 ,1 38 1 , 38 1 Of f s ho r e

Expl o r a t ory W e l l s 4 5 92 52 6 8 50 56 5 5 Dev e l opm e n t W e l l s 93 12 8 7 3 8 7 1 1 0 6 3 47 T o ta l In-P r o gress W e ll s 13 8 2 20 1 2 4 1 5 5 1 6 0 1 18 10 2 T o ta l Uni t e d St ate s

Expl o r a t ory W e l l s 17 8 2 26 1 0 3 1 0 8 1 2 0 1 41 12 0 Dev e l opm e n t W e l l s 76 8 1 ,0 58 4 6 5 5 5 1 8 2 6 1 ,1 15 1 , 36 2 T o ta l In-P r o gress W e ll s 94 6 1 ,2 84 5 6 8 6 5 9 9 4 6 1 ,2 56 1 , 48 2

FRS c o m pan i e s' da ta - E n ergy I n f o rm ati o n A d m i ni strati on , Fo r m E I A

- 28 (F i n an c i al R e p o rti n g S y s t e m ). 

### Ta b l e B 1 9. U

. S. N e t We ll s C o mp l e t e d f o r FR S C o mp an i es an d U

. S. I n d u s t ry , 19 96- 200 2

No te : S u m o f c o m p on ent s m a y no t e qua l to tal d u e to in de pe nd en t rou ndi n g

. S o u r c e s : I n d u str y da ta - S p ecia l c o m p i l a t i o n pro v id ed by the Of f i c e o f O i l an d G a s , E nerg y In f o r m at io n Ad m i n s tra t i on. T o tal s are based on d a ta w h i c h a ppe are d i n the E n e r g y In f o rm a t i o n A d m i ni s t r a ti on ' s M o n t hl y E n ergy R e v i ew , O c to ber 2 0 0 3 , p. 8 4

.

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 1071996 1997 1998 1 999 2000 2001 2002 FR S C o m p a n ies O n shore Ex plo r at ory W e ll Foot a ge D r y H o le Fo o t a g e 2 , 052 1 , 700 1, 71 4 9 21 95 5 1 , 085 1 , 000 Oil W e ll Foot ag e 732 1 , 027 40 6 3 12 19 9 397 141 Ga s W e ll Foot ag e 1 , 860 1 , 521 1, 54 8 1 , 1 50 1, 39 9 2 , 016 1 , 284 Tot a l E x plora t ory Foot ag e 4 , 644 4 , 248 3, 66 8 2 , 3 83 2, 55 3 3 , 498 2 , 425 D e v e lo pm ent W e ll Foot a ge D r y H o le Fo o t a g e 2 , 224 1 , 926 1, 93 9 1 , 2 52 1, 59 7 2 , 029 1 , 716 Oil W e ll Foot ag e 10 , 956 14 , 534 12, 51 3 4 , 4 49 9, 37 4 9 , 435 6 , 928 Ga s W e ll Foot ag e 14 , 304 16 , 751 16, 52 1 1 2 , 2 9 1 20, 51 6 2 6 , 653 32 , 078 Tot a l D e v e lop m e n t Foot ag e 27 , 484 33 , 211 30, 97 3 1 7 , 9 9 2 31, 48 7 3 8 , 117 40 , 722 Offshore Ex plo r at ory W e ll Foot a ge D r y H o le Fo o t a g e 1 , 091 1 , 362 1, 34 5 8 48 1, 15 1 1 , 004 652 Oil W e ll Foot ag e 408 397 44 3 4 34 36 4 551 589 Ga s W e ll Fo o t a g e 1 , 824 981 1, 28 5 1 , 0 02 1, 14 1 759 697 Tot a l E x plora t ory Foot ag e 3 , 323 2 , 740 3, 07 3 2 , 2 84 2, 65 6 2 , 314 1 , 938 D e v e lo pm ent W e ll Foo t a ge D r y H o le Fo o t a g e 244 459 34 4 1 99 41 1 353 369 Oi l W e l l Fo o t a g e 1 , 704 1 , 736 1, 42 8 1 , 2 80 1, 50 5 2 , 260 1 , 362 Ga s W e ll Fo o t a g e 1 , 538 1 , 584 1, 39 8 1 , 2 95 1, 89 9 1 , 917 1 , 370 To ta l D e v e lo p m e n t Fo o t a g e 3 , 486 3 , 779 3, 17 0 2 , 7 74 3, 81 5 4 , 530 3 , 101 T o t a l U n it e d St a t e s Ex plo r at ory W e ll Foot a ge D r y H o le Fo o t a g e 3 , 143 3 , 062 3, 05 9 1 , 7 69 2, 10 7 2 , 089 1 , 652 Oi l W e l l Fo o t a g e 1 , 140 1 , 424 84 9 7 46 56 3 948 730 Ga s W e ll Fo o t a g e 3 , 684 2 , 502 2, 83 3 2 , 1 52 2, 54 0 2 , 775 1 , 981 Tot a l E x plora t ory Foot ag e 7 , 967 6 , 988 6, 74 1 4 , 6 67 5, 20 9 5 , 812 4 , 363 D e v e lo pm ent W e ll Foo t a g e D r y H o le Fo o t a g e 2 , 468 2 , 385 2, 28 3 1 , 4 51 2, 00 8 2 , 382 2 , 085 Oil W e ll Foot ag e 12 , 660 16 , 270 13, 94 1 5 , 7 29 10, 87 9 1 1 , 695 8 , 290 Ga s W e ll Foot ag e 15 , 842 18 , 335 17, 91 9 1 3 , 5 8 6 22, 41 5 2 8 , 570 33 , 448 To ta l D e v e lo p m e n t Fo o t a g e 30 , 970 36 , 990 34, 14 3 2 0 , 7 6 6 35, 30 3 4 2 , 647 43 , 823 T o t a l U n it e d St a t e s Ind u s t r y Ex plo r at ory W e ll Foot a ge D r y H o le Fo o t a g e 13 , 199 13 , 861 12, 39 8 7 , 6 46 8, 86 3 1 0 , 100 7 , 479 Oi l W e l l Fo o t a g e 3 , 504 3 , 432 2, 50 5 1 , 0 45 1, 91 8 2 , 433 1 , 548 Ga s W e ll Foot ag e 3 , 782 3 , 955 4, 19 6 3 , 3 15 4, 53 8 6 , 938 5 , 016 Tot a l E x plora t ory Foot ag e 20 , 485 21 , 248 19, 09 8 1 2 , 0 0 6 15, 31 9 1 9 , 472 14 , 044 D e v e lo pm ent W e ll Foo t a ge D r y H o le Fo o t a g e 16 , 656 19 , 666 18, 00 5 1 2 , 5 0 8 13, 98 1 1 4 , 573 12 , 688 Oil W e ll Foot ag e 36 , 988 47 , 773 32, 12 5 1 7 , 7 0 5 31, 78 2 3 6 , 470 26 , 589 Ga s W e ll Foot ag e 54 , 376 65 , 860 70, 74 6 5 2 , 2 0 4 76, 30 9 103 , 547 88 , 903 To t a l D e v e lop m e n t Foot a ge 108 , 020 133 , 298 1 20, 87 5 8 2 , 4 1 7 1 22, 07 3 154 , 590 128 , 179 N u mber of N e t Pr oduc ing W e l l s f o r FR S C o m p a n ies O n shore Oi l W e l l s 87 , 461 75 , 493 69, 40 1 5 8 , 9 8 7 68, 27 4 6 6 , 667 69 , 021 Ga s W e ll s 48 , 779 48 , 779 49, 42 9 4 4 , 8 8 0 64, 69 6 8 2 , 083 89 , 102 To ta l Pr o d u cin g W e ll s 136 , 240 124 , 272 1 18, 83 0 103 , 8 67 1 32, 97 0 148 , 750 158 , 123 Offshore Oi l W e l l s 3 , 552 3 , 760 3, 42 1 2 , 8 55 3, 53 6 4 , 738 4 , 384 Ga s W e ll s 2 , 556 2 , 898 2, 73 7 2 , 7 07 3, 11 1 3 , 606 3 , 011 To ta l Pr o d u cin g W e ll s 6 , 108 6 , 658 6, 15 8 5 , 5 62 6, 64 7 8 , 344 7 , 395 T o t a l U n it e d S t a t e s Oi l W e l l s 91 , 013 79 , 253 72, 82 2 6 1 , 8 4 2 71, 81 0 7 1 , 405 73 , 405 Ga s W e ll s 51 , 335 51 , 677 52, 16 6 4 7 , 5 8 7 67, 80 7 8 5 , 689 92 , 113 To ta l Pr o d u cin g W e ll s 142 , 348 130 , 930 1 24, 98 7 109 , 4 29 1 39, 61 7 157 , 094 165 , 518 

### Tabl e B20. U. S. Net Dri l l i ng Foo tage and Net Produ ci n g W e ll s For FRS Co mp anies and U

. S. I ndu st ry , 1996 -20 0 2

Sources : W e ll f o ot ag e, U. S. - s pec ial c o m p ilat ion prov ide d by t he O f f i c e of Oil and G a s , Energ y I n f o rm a t ion Adm i nis t r a t i on

. To t a ls are bas e d on d a t a w h ic h app eare d in t h e E n e r gy I n f o rm at io n A d m i n i s t rat i o n ' s Mont hly

Ene r gy R e v i ew , Oc t o ber 2 003, p. 8 4

. F R S com pani es ' data - Ene r gy I n f o rm ation Adm i nis t rat i on, F o r m EIA-28 ( F i nanc i a l Repor ting Sy s t em ). ( num ber o f w e lls ) (t hou s and f e et )

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 1081 9 9 6 1 997 19 98 1 9 9 9 20 00 2 0 0 1 20 02
Ca nad a N e t W e lls C o m p leted D u ring Y e a r

E x p l or at or y W e lls Dr y H o les 86 .2 2 2

. 8 5 4

. 8 3 6 .4 12 6. 3 1 0 6 .4 15 6. 6 Oi l W e lls 4 6 .0 10 .7 10 .0 25 .8 23 .3 63 .1 74 .0 Gas W e lls 96 .1 4 9

. 2 6 6

. 3 12 7.5 1 9 4

. 2 16 5.9 3 2 9

. 4 T o tal E x plor atory W e lls 2 2 8

. 3 8 2. 7 1 3 1

. 1 18 9.7 3 4 3

. 8 33 5.4 5 6 0

. 0 D e velopm ent W e lls

Dr y H o les 48 .1 5 9

. 6 5 8

. 8 5 8 .3 13 8. 2 2 2 8 .8 15 1. 2 Oi l W e lls 5 5 9

. 4 7 7 8

. 6 19 8. 9 3 5 2 .1 37 3. 3 8 1 8 .1 79 4. 1 Gas W e lls 23 3.7 2 75 .1 4 2 2

. 4 7 58 .7 8 9 1

. 5 2 ,0 25 .1 2,3 8 1

. 1 T o tal D e v e lopm ent W e lls 84 1.2 1 ,1 13 .3 6 8 0

. 1 1 ,1 69 .1 1,4 0 3

. 0 3 ,0 72 .1 3,3 2 6

. 4 N e t I n - P r o gress W e lls at Y e ar E n d 17 .2 3 0

. 6 2 4

. 3 7 6 .3 11 6. 8 3 0 7 .2 19 0. 0 Net Prod uc i n g W e l l s

O il W e lls 8,7 1 9 .5 9, 36 4. 7 1 0 , 53 2. 3 1 0, 15 5.9 1 2 , 09 4. 8 1 7, 64 0.5 1 4 , 20 3. 0 G a s W e lls 5 , 784 .8 6 , 1 9 9

. 5 8 ,8 72 .7 10 ,0 38 .7 1 5 ,2 42 .7 25 ,2 30 .5 2 6 ,4 34 .9

T o ta l P r o d u c ing W e lls 14 ,50 4 .3 15 ,5 64 .2 1 9 ,4 05 .0 20 ,1 94 .6 2 7 ,3 37 .5 42 ,8 70 .9 4 0 ,6 37 .9
E u ro pe a nd For me r S o vi et U n i on 1 N e t W e lls C o m p leted D u ring Y e a r

E x p l or at or y W e lls Dr y H o les 4 9 .4 56 .6 36 .3 15 .4 15 .7 15 .6 11 .2 Oi l W e lls 1 4

. 5 19 .2 11 .8 9

. 2 5 .2 25

. 9 5

. 3 Gas W e lls 11 .4 8.9 1 2. 0 4 .0 6. 4 8 .6 3. 1 T o tal E x plor atory W e lls 7 5 .3 84 .7 60 .1 28 .6 27 .3 50 .1 19 .6 D e velopm ent W e lls

Dr y H o les 5.3 3 .2 7. 8 2 .6 10. 3 5.4 4

. 6 Oi l W e lls 77 .6 8 0

. 7 11 8. 5 7 5.4 6 7. 7 9 1.8 6 3. 0 Gas W e lls 3 1 .0 25 .1 60 .5 30 .4 30 .4 31 .8 41 .2 T o tal D e v e lopm ent W e lls 1 1 3

. 9 1 0 9

. 0 18 6. 8 1 0 8 .4 10 8. 4 1 2 9 .0 10 8. 8 N e t I n - P r o gress W e lls at Y e ar E n d 6 8 .7 62 .7 54 .5 31 .6 63 .7 69 .3 38 .7 Net Prod uc i n g W e l l s

O il W e lls 1,4 4 5 .5 1, 32 8. 0 1 ,29 4

. 4 1, 21 8.8 1 ,43 1

. 3 1, 47 8.2 1 ,22 5

. 7 G a s W e lls 7 6 5

. 2 7 6 6

. 8 80 5. 3 6 2 6 .6 73 7. 7 7 1 7 .2 78 8. 7

T o ta l P r o d u c ing W e lls 2,2 1 0 .7 2, 09 4. 8 2 ,09 9

. 7 1, 84 5.4 2 ,16 9

. 0 2, 19 5.4 2 ,01 4

. 4
A

f r i ca a nd M i dd le E a st N e t W e lls C o m p leted D u ring Y e a r

E x p l or at or y W e lls Dr y H o les 1 9 .8 25 .3 33 .1 14 .9 37 .2 21 .9 26 .8 Oi l W e lls W W W 9

. 9 W W Gas W e lls W W W 1 0

. 0 W W T o tal E x plor atory W e lls 4 4 .0 46 .1 65 .0 34 .8 50 .7 50 .9 67 .5 D e velopm ent W e lls

Dr y H o les W W W 5

. 8 W W 1 Oi l W e lls 1 3 3

. 0 1 5 1

. 6 21 8. 4 2 0 6 .3 23 9. 3 1 5 9 .8 20 9. 4 Gas W e lls W W W 8

. 6 W W 1 T o tal D e v e lopm ent W e lls 1 4 4

. 0 1 5 7

. 8 22 5. 6 2 2 0 .7 25 2. 0 1 8 6 .9 23 4. 2 N e t I n - P r o gress W e lls at Y e ar E n d 3 6 .9 29 .0 18 .0 36 .8 35 .2 35 .4 57 .0 Net Prod uc i n g W e l l s

O il W e lls 1,6 8 8 .9 1, 64 4. 6 1 ,92 4

. 2 1, 96 9.8 1 ,95 4

. 1 2, 06 3.8 2 ,20 9

. 2 G a s W e lls 4 9 .9 59 .5 62 .7 83 .2 79 .0 1 2 1

. 2 1 40 .2

T o ta l P r o d u c ing W e lls 1,7 3 8 .8 1, 70 4. 1 1 ,98 6

. 9 2, 05 3.0 2 ,03 3

. 1 2, 18 5.0 2 ,34 9

. 4 

### T a b l e B 21. N u mb er o f N e t W e l l s C o mp let e d , I n - P r o g r ess Wel l s, an d Pr o d u ci n g Well s b y F o r eig n R e g i on s f o r F R S C o mp an ies, 199 6- 2002

See f o o t no te s at en d o f ta bl e

. W W

1

. 3
3

. 5

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 10919 96 19 97 19 9 8 19 99 2 0 0 0 20 01 2 0 0 2
Ot her E a st er n He mis phe r e N e t W e lls C o m p le te d D u rin g Y e a r

E x p l or at or y W e lls Dr y H o les 4 2

. 6 39

. 8 47 .1 3 5

. 4 40 .7 39

. 1 36 .8 O il W e lls 2 1

. 6 16

. 1 36 .6 4 1

. 6 31 .3 19

. 9 11 .0 G a s W e lls 4 6

. 3 15

. 8 13 .8 1 6

. 0 20 .7 42

. 3 26 .6 T o ta l E x p l or ato r y W e lls 11 0. 5 7 1

. 7 9 7

. 5 9 3. 0 9 2

. 7 1 01

. 3 74 .4 D e velo pm en t W e lls

Dr y H o les 3. 7 4

. 7 11 .5 1

. 9 4 .4 7

. 1 3 .0 O il W e lls 10 3. 1 1 62

. 6 1 4 9

. 5 8 2. 4 1 40 .6 5 9 5

. 3 5 54 .8 G a s W e lls 91 .7 11 6.5 1 0 1

. 2 1 0 4 .5 11 3. 5 1 1 7 .0 20 1. 7 T o ta l D e v e lop m en t W e lls 1 9 8

. 5 2 8 3 .8 26 2. 2 1 8 8 .8 25 8. 5 7 1 9 .4 75 9. 5 N e t I n - P r o g r e s s W e lls at Y e ar E n d 7 2

. 4 61

. 4 64 .5 5 6

. 2 80 .5 67

. 1 30 .9 Net Prod uc i n g W e l l s

O il W e lls 1, 62 2. 0 1 ,7 67

. 0 1 , 7 0 7

. 2 1 , 654

. 2 1 , 9 5 0

. 2 7 , 852

. 9 7, 4 5 8

. 6 G a s W e lls 56 1. 2 6 33

. 8 8 6 2

. 2 882

. 2 9 2 7

. 4 1 , 090

. 3 1, 2 8 8

. 8

T o ta l P r o d u c ing W e lls 2, 18 3. 2 2 ,4 00

. 8 2 , 5 6 9

. 4 2 , 536

. 4 2 , 8 7 7

. 6 8 , 943

. 2 8, 7 4 7

. 4
Other Wester n He mi spher e N e t W e lls C o m p le te d D u rin g Y e a r

E x p l or at or y W e lls Dr y H o les 12 .4 5.7 1 4. 6 7 .9 1 4

. 5 3 1 .9 1 3

. 2 O il W e lls 9. 0 4

. 7 10 .4 3

. 2 W W W G a s W e lls 2

. 0 0 .0 4.5 3 .8 W W W T o ta l E x p l or ato r y W e lls 2 3

. 4 10

. 4 29 .5 1 4

. 9 23 .4 40

. 0 21 .3 D e velo pm en t W e lls

Dr y H o les W W W W W W O il W e lls 12 3. 3 1 41

. 4 2 1 2

. 8 8 1. 4 2 05 .8 2 4 0

. 5 2 17 .0 G a s W e lls W W W W W W T o ta l D e v e lop m en t W e lls 12 9. 8 1 48

. 3 2 2 4

. 5 9 1. 7 2 45 .0 2 6 2

. 9 2 45 .1 N e t I n - P r o g r e s s W e lls at Y e ar E n d 1 6

. 1 24

. 4 28 .9 2 7

. 2 31 .3 47

. 4 31 .6 Net Prod uc i n g W e l l s

O il W e lls 2, 47 8. 9 6 05

. 0 2 , 0 4 5

. 6 2 , 426

. 5 2 , 5 9 7

. 2 2 , 580

. 2 2, 4 3 9

. 6 G a s W e lls 77 .3 7 2 .2 19 0. 9 1 6 1 .4 25 3. 1 2 6 2 .7 27 4. 0

T o ta l P r o d u c ing W e lls 2, 55 6. 2 6 77

. 2 2 , 2 3 6

. 5 2 , 587

. 9 2 , 8 5 0

. 3 2 , 842

. 9 2, 7 1 3

. 6
T o t a l For ei gn N e t W e lls C o m p le te d D u rin g Y e a W
W

r E x p l or at or y W e lls Dr y H o les 2 1 0

. 4 1 5 0 .2 18 5. 9 1 1 0 .0 23 4. 4 2 1 4 .9 24 4. 6 O il W e lls 1 1 0

. 9 7 1.0 9 7. 6 8 9

. 7 7 4. 1 1 3 6 .0 13 4. 3 G a s W e lls 1 6 0

. 2 7 4.4 9 9. 7 1 6 1 .3 22 9. 4 2 2 6 .8 36 3. 9 T o ta l E x p l or ato r y W e lls 4 8 1

. 5 2 9 5 .6 38 3. 2 3 6 1 .0 53 7. 9 5 7 7 .7 74 2. 8 D e velo pm en t W e lls

Dr y H o les 67 .9 7 5 .5 8 3

. 7 70 .1 15 6. 7 2 5 2 .5 17 1. 2 O il W e lls 99 6. 4 1 ,3 14

. 9 8 9 8

. 1 797

. 6 1 , 0 2 6

. 7 1 , 905

. 5 1, 8 3 8

. 3 G a s W e lls 36 3. 1 4 21

. 8 5 9 7

. 4 911

. 0 1 , 0 8 3

. 5 2 , 212

. 2 2, 6 6 4

. 5 T o ta l D e v e lop m en t W e lls 1, 42 7. 4 1 ,8 12

. 2 1 , 5 7 9

. 2 1 , 778

. 7 2 , 2 6 6

. 9 4 , 370

. 3 4, 6 7 4

. 0 N e t I n - P r o g r e s s W e lls at Y e ar E n d 2 1 1

. 3 2 0 8 .1 19 0. 2 2 2 8 .1 32 7. 5 5 2 6 .4 34 8. 2 Net Prod uc i n g W e l l s

O il W e lls 15 ,9 54 .8 1 4 , 7 0 9 .3 1 7 , 5 0 3

. 7 1 7 ,4 25 .2 2 0 , 02 7. 6 3 1, 61 5.6 2 7 , 53 6. 1 G a s W e lls 7, 23 8. 4 7 ,7 31

. 8 10 ,7 93 .8 11 , 7 9 2

. 1 17, 2 3 9

. 9 2 7 , 4 2 1

. 9 28, 9 2 6

. 6

T o ta l P r o d u c ing W e lls 23 ,1 93 .2 2 2 , 4 4 1 .1 2 8 , 2 9 7

. 5 2 9 ,2 17 .3 3 7 , 26 7. 5 5 9, 03 7.4 5 6 , 46 2. 7 

### T a b l e B 21. N u mb er o f N e t Wel l s C o m p l e t e d , I n - P ro g r ess Well s, an d Pr o d u c i n g W e l l s b y F o r eig n R e g i o n s f o r F R S C o mp an ies, 1996- 2002 ( C o n t i n ued )

1 O E C D Eu r o pe c o m b in ed with the f o r m e r So vie t U n io n an d Ea s t er n E u r o p e to av oid dis c l os u r e

. W = d a t a with he ld t o a v o i d dis c l os ur e. Sou r ce: En ergy I n f o rm a t i on A d m i n i s t r a t i on , Fo r m E I A-28 (Fi n an c i al Re po r t i n g Sy s t em )

.

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 110Dri lli ng an d Equ i pp in g M easures 2 001 2002 Perc en t Chang e 2001 2002 Per cen t Chang e 2001 2002 P e rcent Ch a n ge E x pl or a t io n O il W e lls W e lls C o m p let e d 97.9 55.5

- 43.3 58.8 21.0

- 64. 3 39. 1 34.5

- 11.8 A ver a ge Dep t h ( t hou s and f e et ) 9.7 13.2 35.8 6 .8 6.7

- 0. 6 14. 1 17.1 21.1 G a s W e lls W e lls C o m p let e d 414.7 216.7

- 47.7 351.4 164.0

- 53. 3 63. 3 52.7

- 16.7 A ver a ge Dep t h ( t hou s and f e et ) 6.7 9 .1 36.6 5 .7 7.8 36. 5 12. 0 13.2 10.3 Dry Ho l e s W e lls C o m p let e d 185.2 171.2

- 7.5 122.4 118.8

- 2. 9 62. 8 52.4

- 16.5 A ver a ge Dep t h ( t hou s and f e et ) 11.3 9 .6

- 14.5 8 .9 8.4

- 5. 0 16. 0 12.4

- 22.2
Dev e lopmen t O il W e lls W e lls C o m p let e d 2,054.3 1 , 321.3

- 35.7 1 , 814.6 1 , 186.6

- 34. 6 239. 7 134.7

- 43.8 A ver a ge Dep t h ( t hou s and f e et ) 5.7 6 .3 10.2 5 .2 5.8 12. 3 9

. 4 10.1 7 .3 G a s W e lls W e lls C o m p let e d 5,396.3 5 , 115.7

- 5.2 5 , 226.1 4 , 982.0

- 4. 7 170. 2 133.7

- 21.4 A ver a ge Dep t h ( t hou s and f e et ) 5.3 6 .5 23.5 5 .1 6.4 26. 3 11. 3 10.2

- 9.0 Dry Ho l e s W e lls C o m p let e d 304.7 258.7

- 15.1 266.3 220.4

- 17. 2 38. 4 38.3

- 0.3 A ver a ge Dep t h ( t hou s and f e et ) 7.8 8 .1 3.1 7 .6 7.8 2

. 2 9. 2 9 .6 4.8 S our c e : E ner gy Inf o r m at ion A d m i ni s t r a tion, For m E I A

- 28 ( F inancial Rep o r t ing S y s t em ). U. S. Offs hor e 

### T a ble B 22. N u mb er of N e t Wells C o mp let e d, and A v erag e D e p t h, On sh or e an d Off s h o r e , f o r FR S C o m p an ies, 2 001 an d 200 2

T o t a l Uni t ed St at es U.S. On s h ore

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 111Beginn in g Reserv e s Pl u s Reserv e Ad d i t i o n s 1 Plu s Net Purch ases Less Prod uction Eq u a l s E n di ng Reserv e s Rep l ace ment Rate ( p ercen t ) Cru d e Oi l and Nat u ral Gas Li qu id s U. S

. O n s hor e

T o t a l U. S

. I ndus tr y 24, 242.0 2 ,149. 0 0

. 0 2,048. 0 24,342. 0 104.9

F R S Com panies 11, 652.2 585. 4 14. 6 868. 9 11,383. 4 67.4 Al l O t h e r 12, 589.8 1 ,563. 6

- 14. 6 1 ,179. 1 12,958. 6 132.6 U

. S

. Offs h o r e

T o t a l U. S

. I ndus tr y 6, 197.0 842. 0 0

. 0 711. 0 6 ,329. 0 118.4

F R S Com panies 4, 479.7 459. 9 4

. 3 477. 5 4 ,466. 4 96.3 Al l O t h e r 1, 717.3 382. 1

- 4. 3 233. 5 1 ,862. 6 163.6 U.S

. T o ta l

T o t a l U. S

. I ndus tr y 30, 439.0 2 ,991. 0 0

. 0 2,759. 0 30,671. 0 108.4

F R S Com panies 16, 131.9 1 ,045. 3 19. 0 1 ,346. 4 15,849. 8 77.6 Al l O t h e r 14, 307.1 1 ,945. 7

- 19. 0 1 ,412. 6 14,821. 2 137.7 F R S Comp ani es' F o rei g n O i l Reserv e s Canada 2, 583.5 228. 8

- 389. 2 234. 7 2 ,188. 4 97.5 Eur ope 4, 448.6

- 28. 9

- 34. 1 559. 7 3 ,825. 8

- 5.2 F S U and Eas t er n E u r ope 948.9 393. 2

- 5. 0 28. 9 1 ,308. 2 1 , 360.2 Af ric a 5, 257.8 999. 3 104. 1 370. 9 5 ,990. 3 269.4 Middle Eas t 857.4 38. 7 6

. 8 116. 8 786. 1 33.2 O t her E a s t er n Hem i s pher e 3, 048.5 14. 3

- 81. 1 316. 7 2 ,664. 9 4 .5 O t her W e s t er n Hem i s pher e 1, 599.7 14. 5

- 38. 3 119. 2 1 ,456. 7 12.1 T o t a l F o r e ign 18, 744.4 1 ,659. 9

- 436. 9 1 ,746. 9 18,220. 5 95.0 W o r l dw ide T o tal f o r F R S Com panies 34, 876.3 2 ,705. 2

- 417. 9 3 ,093. 3 34,070. 3 87.5 Dry Natu ral Gas U. S

. O n s hor e

T o t a l U. S

. I ndus tr y 155, 127.0 20,283. 0 0

. 0 14,688. 0 160,722. 0 138.1

F R S Com panies 68, 514.6 4 ,930. 9 610. 5 5 ,920. 7 68,135. 3 83.3 Al l O t h e r 86, 612.4 15,352. 1

- 610. 5 8 ,767. 3 92,586. 7 175.1 U

. S

. Offs h o r e

T o t a l U. S

. I ndus tr y 28, 333.0 2 ,556. 0 0

. 0 4,665. 0 26,224. 0 54.8

F R S Com panies 19, 485.1 1 ,048. 2

- 26. 5 2 ,791. 8 17,715. 1 37.5 Al l O t h e r 8, 847.9 1 ,507. 8 26. 5 1 ,873. 2 8 ,508. 9 80.5 U.S

. T o ta l

T o t a l U. S

. I ndus tr y 183, 460.0 22,839. 0 0

. 0 19,353. 0 186,946. 0 118.0

F R S Com panies 87, 999.7 5 ,979. 2 583. 9 8 ,712. 5 85,850. 3 68.6 Al l O t h e r 95, 460.3 16,859. 8

- 583. 9 10,640. 5 101,095. 7 158.4 F R S Comp ani es' F o rei g n G as Reserv es Canada 15, 937.3 970. 2 76. 8 1 ,863. 3 15,121. 0 52.1 Eur ope 21, 348.4 639. 8

- 213. 5 2 ,270. 4 19,504. 3 28.2 F S U and Eas t er n E u r ope 1, 020.2 373. 7 0

. 0 31. 7 1 ,362. 2 1 , 177.7 Af ric a 5, 267.6 1 ,031. 4 563. 9 214. 3 6 ,648. 6 481.4 Middle Eas t 610.9 115. 2 52. 6 90. 4 688. 3 127.5 O t her E a s t er n Hem i s pher e 24, 186.2 2 ,322. 0

- 696. 1 1 ,849. 1 23,963. 0 125.6 O t her W e s t er n Hem i s pher e 16, 336.5 4 ,294. 8

- 262. 1 715. 1 19,654. 1 138.6 T o t a l F o r e ign 84, 707.1 9 ,747. 1

- 478. 4 7 ,034. 3 86,941. 5 138.6
W o r l dw ide T o tal f o r F R S Com panies 172, 706.8 15,726. 3 105. 5 15,746. 8 172,791. 9 99.9

F R S c o m panies ' data - Ener gy Inf o r m ation A d m i nis t r a t i on, For m EIA- 28 ( F inanc ial Repor t i ng Sy s t em )

. 

### Tab l e B 23. Oil and Gas R eserv es f o r FR S C o m p an ies and U

. S. In du str y , 2002

1 E x c l ud es ne t pu rc ha s e s of m i n e ra l s i n p l a c e; i n c l ud es c r ud e oi l an d na t u ral g a s l i qu i d s (m ea s u re d i n m i l l i o n s o f ba rrel s ) a n d na t u ral g a s (m e a s u red in m i ll ion s o f ba r r e ls o f c r ud e oil eq uiva l e nt)

. Th e c o n v e r s i o n f a c t o r for na t u r a l g a s i s 0.17 8 ba r r els o f c r ud e / 10 00 c u bic fee t

. R e s e r v e ad dit i on s inc l ud e t h e ne t of c o r r ec ti o n s an d ad j u s t m e n t s

. No t e : " N et O w ne rs hi p I n t e res t " i s d e f i n e d a s n e t w o rk i n g i n t e re s t pl us ow n roy a l t y i n t e re s t

. S o ur c e s : I n du s t r y d a ta - Ene r gy Infor m ati o n A d m i nis t r a t i on For m EI A- 23 ( A nn ua l S u r v e y of D o m e s t ic Oil an d Gas R e s e r v e s ) ; s e e U. S

. Crud e Oi

l, Na t u ral Ga s , an d N a tur a l

Gas Liqu i d s R e s e r v e s Ann u a l R e

p o r

t , 2 0 0 1 an d 20 02 (No v e m b e r 20 02 a n d No ve m b er 20 03 ). ( m illion bar r e ls )

( b illion c ubic f eet)

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 112

### T o tal O n s hore O f f shore
Cr u d e Oi l a n d Na tu r a l G a s Li qu i d s

Be gi n n ing of Per i od 34, 876 16 ,1 32 1 1 , 652 4, 480 18, 74 4

R e vis i o n s o f Pr eviou s Es tim a te s 29 1 0 5 109

- 4 -7 6 I m pr oved Re c o ver y 685 3 4 6 247 99 33 8 Pur c has es of Miner als

- i n - P l a c e 1, 497 4 7 3 430 44 1, 02 4 Ext e nsi o n s & D i sco v e rie s 1, 991 5 9 4 229 365 1, 39 7 Prod u c ti on - 3 , 093

- 1 ,3 46

- 869

- 477

- 1 , 7 4 7 Sal e s o f Mi ne ra l s - i n - Plac e - 1 , 915 -4 54

- 415

- 4 0

- 1, 46 1 En d o f per iod 34, 070 15 ,8 50 1 1 , 383 4, 466 18, 22 1 Pro por tion at e I n t e r e s t in I n ves t ee Re se rv e s a n d Fo re i g n A ccess Re ser v es -- -- -- -- 7 , 3 8 3 N a t u ral Gas R ese rv es

Be gi n n ing of Per i od 1 72, 707 88 ,0 00 6 8 , 515 1 9 , 485 84, 70 7

R e vis i o n s o f Pr eviou s Es tim a te s 694

- 1 ,1 11

- 558

- 553 1, 80 5 I m pr oved Re c o ver y 2, 327 8 2 1 780 41 1, 50 6 Pur c has es of Miner als

- i n - P l a c e 12, 649 5,5 6 2 5 ,2 97 265 7, 08 7 Ext e nsi o n s & D i sco v e rie s 12, 705 6,2 6 9 4 ,7 09 1, 560 6, 43 6 Prod u c ti on - 15, 747

- 8 ,7 13

- 5 ,9 21

- 2 , 792

- 7 , 0 3 4 Sal e s o f Mi ne ra l s - i n - Plac e - 12, 544

- 4 ,9 78

- 4 ,6 87

- 292

- 7 , 5 6 6 En d o f Pe riod 1 72, 792 85 ,8 50 6 8 , 135 1 7 , 715 86, 94 2 Pro por tion at e I n t e r e s t in I n ves t ee Re se rv e s a n d Fo re i g n A ccess Re ser v es -- -- -- -- 2 9 , 5 1 2 See f oot not es at e nd of t able. 

## Ta bl e B24

. Oi l an d Ga s Res e r v e Bal a nces by Region f o r FRS C o mpanie s, 2002

U n i t e d States To t a l Forei g n R e s e rv es Stat i s t i c s Wor l d w i d e To t a l (m i l l i on ba rrel s)

( b il li o n c ubic f eet )

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 113T o t al C a nada E u rope and Fo r m er S o v i e t U n ion 1 Af r i c a and M i d d le East Other E astern Hem i s p her e Ot h e r W est e r n H e mi sphere
Cr u d e Oi l and Na tural Ga s L i quids Be ginn ing of P e r i o d 1 8 ,744 2,584 5 , 39 7 6 ,1 15 3 , 0 4 9 1 ,60 0

R e visions of Pr evious Es tim a tes

- 7 6 7 8

- 11 6 1 82

- 1 13

- 1 0 6 Im pr oved Rec o ver y 338 9 2 2 2 37 W W P u rch a se s o f M i n e r a l s-i n - P l a ce 1 , 0 2 4 15 0 4 75 19 6 W W E x tens i ons & Dis c o ve r i es 1 , 3 9 7 14 1 4 58 61 9 1 0 0 79 Pr oduc t ion -1,747 -235

- 5 8 9

- 4 88

- 3 17

- 1 1 9 Sa le s of M i ne r a ls

- i n - Plac e -1,461 -540

- 5 1 5 -85

- 2 3 4

- 8 7 En d of per i od 1 8 ,221 2,188 5 , 13 4 6 ,7 76 2 , 6 6 5 1 ,45 7
Pr opor tionat e Inter e st in Inves t ee Re s e r v es a nd For e ig n Acc e ss Res e r v e s 7,383 W 3 ,23 5 W W 2,70 9 Natu r a l Gas Reser v e s

Be ginn ing of P e r i o d 8 4 ,707 1 5 ,9 37 22 ,3 69 5 , 8 7 8 2 4 , 1 8 6 16,33 7

R e visions of Pr evious Es tim a tes 1,805 -508 35 4 2 72 1 , 5 5 4 1 3 3 Im pr oved Rec o ver y 1,506 11 W W 51 W P u rch a se s o f M i n e r a l s-i n - P l a ce 7,087 1,711 2 , 79 8 6 68 1 , 9 0 9 0 E x tens i ons & Dis c o ve r i es 6,436 1,467 62 2 7 26 7 1 7 2 ,90 5 Pr oduc t ion -7,034 -1,8 63

- 2 ,3 02

- 3 05

- 1 ,8 49

- 7 1 5 Sa le s of M i ne r a ls

- i n - Plac e -7,566 -1,6 34 W W

- 2 ,6 05 W En d of P e r i od 8 6 ,942 1 5 ,1 21 20 ,8 66 7 , 3 3 7 2 3 , 9 6 3 19,65 4
Pr opor tionat e Inter e st in Inves t ee Re s e r v es a nd For e ig n Acc e ss Res e r v e s 2 9 ,512 42 19 ,9 80 W W 2,36 8

S ou r c e: E ner g y In f or m a tio n Ad m i nis t r a tion , For m E I A

- 2 8 ( F i nancial Rep o r t ing S ys t e m )

. F o r e i g n

Rese rv es S t at ist i cs 

### Ta bl e B24

. Oi l and G a s Res e r v e Bal a nc es by Re gi on fo r FRS Compa n i e s , 20 0 2 (Contin ued )

1 O E CD E u rop e c o m b in ed w i t h t he f o rm er S o v i et Unio n a nd E a s t ern E u r o pe t o avo i d dis c l o s u r e. P r ior t o 1993 , only O E CD E u ro pe i s i n c lud ed i n t h i s regi on.

-- = Not ap pli c abl e. W = Dat a w i t h hel d t o a v oi d d i s c l os ure. ( m illion bar rels )

( b illi on c u bic f eet)

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 114

### T o tal O ns hor e Offs hor e
E x plo r a t io n and Dev e lopme n t E x penditu r e s ( m il li on doll ar s)

FRS Com p a n i e s 31 ,8 12 .0 2 2 ,3 30 .0 9,48 2.0 3 1,3 7 2

. 0 P e rcen t Ch an ge -6

. 0 -7 .9 -1. 4 -12

. 7
W e lls Com p let e d

FRS Com p a n i e s 7 , 1 3 9

. 1 6 ,6 92 .8 44 6.3 5 ,4 16 .8 P e rcen t Ch an ge -15

. 5

- 14 .6 -2 7. 2 9 .5 Indus t r y 1 

### 26 ,4 42 .0 2 5 ,9 27 .0 51 5.0 2 1,4 9 3

. 0 P e rcen t Ch an ge -25

. 9

- 27 .0 20 8.4

- 16 .3 Su cc es s R a t e 2



### FRS Com p a n i e s 94 .0 94 .9 7 9 .7 92 .3 Indus t r y 1 

### 86 .7 87 .2 5 8 .3 93 .2 Cr ud e O i l a n d NG L Pr oduction 3 

### ( m il li on bar r e ls)

FRS Com p a n i e s 1 , 3 4 6

. 4 8 68 .9 47 7.5 1 ,7 78 .3 P e rcen t Ch an ge -1

. 2 -0 .9 -1. 8 1

. 2 Indus t r y 1 

### 2, 75 9.0 2 ,04 8

. 0 7 1 1

. 0 2 2 , 76 5. 3 P e rcen t Ch an ge -1

. 6 -1 .3 -2. 6 -1 .7
Cr ud e O i l a n d NG L Res e r v e In t e rest s 4 

### (m i l l i on b a rre l s )

FRS Com p a n i e s 15 ,8 49 .8 1 1 ,3 83 .4 4,46 6.4 2 5,6 0 3

. 8 P e rcen t Ch an ge -1

. 3 -2 .6 2. 2 3 .2 Natur a l G a s P r od uc tion ( b il li on c u bi c f e e t )

FRS Com p a n i e s 8 , 7 1 2

. 5 5 ,9 20 .7 2,79 1.8 7 ,0 34 .3 P e rcen t Ch an ge - 1 .4 3. 5

- 10 .4 1 1

. 5 Indus t r y 1 

### 19 ,3 53 .0 1 4 ,6 88 .0 4,66 5.0 6 8,3 4 7

. 9 P e rcen t Ch an ge - 2 .2 0. 7

- 10 .1 3. 1
Na t u ral G a s Res e rv e I n t e re st s ( b il li on c u bi c f e e t )

FRS Com p a n i e s 85 ,8 50 .3 6 8 ,1 35 .3 1 7 ,71 5 .1 11 6,4 5 4

. 0 P e rcen t Ch an ge 0.1 2

. 2

- 7 .1 4. 0 

## T a ble B 25. Oil an d Gas Explo r at ion and D e v e lop m ent Expen d it ures, R eserv es, an d Pro ductio n by Reg i on fo r F R S Co mpanies an d Tot al Indust r y , 2002 an d Percen t C h ang e f r om 2001

See f o otn o t e s at en d of t a b l e

. United S t ate s For eign T o tal

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 115T o t a l C anada E u rope & Fo r m er Sov i et U n io n 5 Af r i c a Mi d d l e East Ot h e r E ast ern Hemi sp here Ot h e r W est ern Hemi sp here
E x pl or a t io n a n d D e ve lo pm e n t E x p e nditures ( m illion dollars )

FRS Com panies 3 1 ,372.0 6 ,6 87.0 11,06 7.0 5 ,091.0 774.0 6 ,19 5 .0 1,558.0 P e r c ent Ch ange - 12.7

- 56.4 7 7

. 0

- 8.2 4 .7 2 4 .1

- 49.6
We ll s Compl e te d

FRS Com panies 5,416 .8 3,8 86.4 1 2 8 .4 201.7 100.0 8 3 3 .9 266.4 P e r c ent Ch ange 9.5 14.1

- 28 .3 35.0 13.3 1 .6

- 12.1 For e ign Indu s t r y 1 2 1 ,493.0 14,2 37.0 6 8 7 .0 854. 0 1 ,050 .0 1,64 9.0 3 ,016.0 P e r c ent Ch ange - 16.3

- 19.6

- 11 .4 33.0 38.5

- 2 0 .1

- 19.3 S u cce ss Rate 2 ( per c ent)

FRS Com panies 92.3 92.1 8 7

. 7 83.3 95.5 9 5.2 94.6 For e ign Indu s t r y 1 93.2 94.0 1 0 0 .9 85.7 97.2 8 8.9 92.9 Crud e Oil and NGL P r o duction 3 ( m illion bar r e ls )

FRS Com panies 1,778 .3 2 34.7 5 8 8 .6 370.9 148.2 3 1 6 .7 119.2 P e r c ent Ch ange 1.2 15.1

- 4.1 3 .2

- 2 .2 -1.1 9.7 For e ign Indu s t r y 1 2 2 ,765.3 1 ,0 51.2 5 ,74 5 .9 2,897. 0 7 ,655 .0 1,67 9.0 3 ,737.2 P e r c ent Ch ange - 1 .7 4.2 1 .8 1.6

- 5.7

- 0.8

- 3.1
Crud e Oil and NGL Reser v e In t e rest s 4 ( m illion bar r e ls )

FRS Com panies 2 5 ,603.8 2 ,2 62.0 8 ,36 9 .2 5,990. 3 2 ,119 .0 2,69 7.2 4 ,166.0 P e r c ent Ch ange 3.2

- 13.7 5 .7 13.9

- 3.6

- 1 2 .8 12.2 Natural Gas P r od uctio n ( b illion c ubic f eet)

FRS Com panies 7,034 .3 1,8 63.3 2 ,30 2 .1 214.3 90.4 1 ,84 9 .1 715.1 P e r c ent Ch ange 11.5 24.5

- 3.2 37.1 1 .9 1 7 .3 16.4 For e ign Indu s t r y 1 6 8 ,347.9 6 ,4 77.6 34,40 8.1 4 , 702.0 8 ,316 .7 9,49 9.2 4 ,864.3 P e r c ent Ch ange 3.1 6 .7 0.5 7 .4 3.3 7 .8 2.2
Nat u ral Gas R eserv e In t e r est s ( b illion c ubic f eet)

FRS Com panies 11 6,454.0 15,1 62.6 40, 84 6.3 6 ,648.6 6 ,380 .1 25,39 4.6 22,021.8 P e r c ent Ch ange 4.0

- 5.0

- 0.9 26.2 31.6

- 1.0 15.7 

### T a ble B 25. Oil a n d Gas Exp l or at ion an d D e v e lop m en t Exp e nd itu r es, R eser v es, an d Prod u c tio n by Reg i o n f o r F R S Comp anies and T o t a l In du st ry , 200 2 and Perc ent C h ang e f r o m 2001 ( C o n t i nu ed )

1 F o re i g n i n d u s t r y l e v e l s de f i ne d as t o t a l ac t i v i t y out s i d e of t h e Uni t ed S t a t e s ex c e pt t h e P e opl e' s Re pub l i c o f C h i n a. 2 S u c c e s s Rat e d e f i n e d as t h e t o t a l n u m ber of s u c c e s s f u l w e l l c o m p l e t i on s du ri n g t h e p e ri od di vi de d by t h e t o t a l n u m ber of w e l l s dril led

. 3 Cru de oi l pl us n a t u ra l gas l i qu i d s

. F o re i g n i n c l ud es o w n e rs hi p i n t e re s t pro duc t i o n and f o re i g n a c c e s s p r od uc t i on

. 4 F o re i g n i n c l ud es n e t o w ne rs hi p i n t e re s t r e s e rv es (7 1. 2 perc e nt o f t o t a l f o rei g n ) a n d " O t h er A c c e s s " r e s e rv es (2 8. 8 pe r c e n t o f t o t a l f o r e ig n)

. "Oth er A c c e s s " r e se r v e s i n cl u d e p r o p o r t i o n a l i n t e r e st i n in v e st e e r e se r v e s a n d fo r e i g n a cce ss r e se r v e s

. 5 O E CD E u rop e c o m b i n ed w i t h t he f o rm e r S o vi et Uni o n a nd E a s t e r n E u ro pe t o a v o i d di s c l o s ure.

FRS c o m panies ' data

- Ene r gy Inf o r m ation Adm i nis t r a ti on, F o rm EIA-28 ( F inanc ial Repor ting Sy s t em )

. Sou r c e s : R e s e r v e ad dit i o n s , U

. S. - Ene r g y I n f o r m ati o n A d m i n i s t r a tion For m E I A

- 2 3 ( A nn ua l Sur v ey o f D o m e s t i c Oi l a n d Gas R e s e r v e s) ; se e U. S

. Cru d e Oil

, Nat u ra l Ga s , an d Na t u ral G a s Li qui ds Res e rv e s , 200 1, a nd 20 02 A nnu al Re port s

. W e l l s c o m p l e t e d , U

. S

. - s pec i a l c o m p i l a t i o n pro v i d e d by t h e E n e r gy I n f o rm a t i o n A d m i n i s t rat i on ' s O f f i c e of O i l and G a s

. T o t a l s a r e b a s e d o n da t a w h i c h a ppe are d i n t h e E n e r gy I n f o rm a t i o n A d m i ni s t r at i o n' s Mo nthly En er g y R e v i ew , O c t o be r 20 03 , p. 84

. Re s e rve A ddi t i on s , F o re i g n - B r i t i s h P e t r ol eu m S t a t

i s t

i c a l

Rev i ew

of W o rl d E n ergy 20 02 an d 20 03. W e l l s Com p lete d, Fore ign - Wo r l d O i l , A u gu s t 200 2 an d 2 0 0 3

. Fo r e i g n

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 11619 96 1 9 9 7 1 9 9 8 1 9 9 9 20 00 20 01 20 02
U. S

. Re fining /M ar k e ti n g S o urce s

A c qu isitio ns f r o m U.S

. P r od uct i on S e gm en t 1 , 59 9 1 ,5 42 1, 4 8 4 1 , 5 16 1, 23 8 1 , 3 5 8 1 , 36 8 Pu r c ha s e s f r o m O t he r U

. S. Se gm en ts a n d Unc o ns ol idated Af f iliates 45 9 4 68 1, 9 3 5 2 , 1 81 2, 14 9 2 , 6 2 9 1 , 70 9 P u rch a se s f r om T h i r d P a rt ies 4 , 48 8 4 ,4 44 4, 9 6 8 5 , 2 05 5, 34 0 3 , 6 7 9 4 , 21 9 Net T r an sf e r s f r o m Foreig n Ref i n i ng /M ark e t i ng Se gm en t 56 6 5 71 6 3 5 4 75 32 4 7 1 6 63 1 T o t a l S o u r ces 7 , 11 2 7 ,0 25 9, 0 2 1 9 , 3 77 9, 05 0 8 , 3 8 3 7 , 92 6 Disp osit ion s

Net Cha n g e i n I n v e n t ories 21 1 4 3 1 -1 -4 -1 -28 Inp u t to Ref i n e ri es 3 , 56 3 3 ,2 59 4, 8 8 3 4 , 8 72 4, 69 0 4 , 6 6 8 4 , 71 1 S a le s to : Un af f i lia ted T h i r d P a rtie s 3 , 29 1 3 ,4 24 3, 7 3 0 4 , 1 47 4, 28 1 3 , 3 9 1 3 , 06 0 Oth e r S e g m ent s E xclud in g Foreig n Re f i nin g /M a r k e tin g 23 7 3 28 3 7 7 3 59 8 4 32 5 1 8 3 T o t a l Dispo s itio ns 7 , 11 2 7 ,0 25 9, 0 2 1 9 , 3 77 9, 05 0 8 , 3 8 3 7 , 92 6
Fo r e i g n Re finin g /M ar ke ting S o urce s

Ac q u is it ion s f r om F o r e ig n Pr od uc t i on Seg m e n t 1 , 37 1 1 ,3 91 1, 3 8 0 1 , 4 62 1, 58 5 1 , 6 6 1 1 , 59 0 P u rch a se s Oth e r F o re ign S e gm en ts 8 8 WWWWW Un conso lid at ed A f f i l i at es 8 9 WWWWW Un af f i lia ted T h i r d P a rtie s

F o reig n A ccess 14 5 2 28 2 0 9 W W W W F o reig n Gov e rnm e n t s (Op e n M a rk et ) 84 4 8 51 6 7 9 W W W W O t her Unaf f iliated T h ir d Pa r t ies 1 , 81 9 1 ,7 85 2, 0 0 0 2 , 2 44 2, 16 5 2 , 4 5 9 1 , 62 6 Net T r an sf e r s to U. S

. Re f i nin g / M a r k e tin g -5 66

- 5 7 1 -63 5 -47 5 -3 24 -7 16 -6 31 T o t a l S o u r ces 3 , 79 0 3 ,6 99 4, 0 2 1 4 , 3 07 4, 06 7 4 , 2 0 0 3 , 28 7 Disp osit ion s Ne t Ch an ge in In ve nto r ie s 38 1 8 15 5

- 1 9 10 -2 0 In pu t to Re f i ne rie s 1 , 60 5 1 ,4 35 1, 4 1 9 1 , 6 41 1, 67 3 1 , 6 8 2 1 , 63 9 S a les 2 , 14 7 2 ,2 46 2, 4 4 6 2 , 6 85 2, 38 4 2 , 5 2 0 1 , 64 7 T o t a l Dispo s itio ns 3 , 79 0 3 ,6 99 4, 0 2 1 4 , 3 07 4, 06 7 4 , 2 0 0 3 , 28 7 

### Ta bl e B 2 6. U

. S. an d F o r e i g n Refi ni ng / M a r ke tin g S o urc e s an d Di sp os iti o n s of Cru d e O il an d N a t u ral G a s L i qu id s f o r F R S C o m p an ies,1996- 2 002 (m i llio n ba rre l s)

W = Dat a w i th he ld to av oi d d i sclo s u r e

. So ur c e : En er gy I n f o rm at ion Adm i n i s t r a tio n , F o rm EIA- 28 (F ina n c i a l R e p o r t i ng S y s t em ). W W

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 1171996 1 997 1998 199 9 2000 2001 2 002
P u r c h a s e s U

. S

. R e f i n i ng/M a r k eti ng S egm ent

R a w M a ter i al s

C r ude O i l and N G L 1 38,397 126,535 10 6, 1 2 8 152,880 253 , 0 9 2 1 92,228 186,084 N a tur a l G a s 15,651 18,657 1 5 , 1 77 20,387 58 , 6 7 9 38,947 33,744 O t her R a w M a ter i al s 2,697 3,159 5, 3 4 8 5 ,705 8 , 39 5 7 ,852 7,950 T o tal R a w M a t e r i al s 1 56,745 148,351 12 6, 6 5 3 178,972 320 , 1 6 6 2 39,027 227,778 R e f i ned P r odu c t s

M o tor G a s o l i ne 18,078 18,613 2 4 , 2 49 36,095 65 , 4 8 8 64,609 59,357 D i s t i l l a te F uel s 9,634 9,565 1 0 , 5 74 17,433 35 , 1 1 6 31,323 27,031 O t her R e f i ned P r od uc ts 10,246 9,141 8, 7 8 6 9 ,963 17 , 0 3 6 18,895 16,868 T o tal R e f i ned P r oduc t s 37,958 37,319 4 3 , 6 09 63,491 117 , 6 4 0 1 14,827 103,256
U

. S

. P r oduc ti o n S egm ent

C r ude O i l and N G L 5,163 5,399 4, 6 9 4 5 ,695 4 , 79 4 1 ,979 721 N a tur a l G a s 10,715 11,220 8, 9 2 2 8 ,608 12 , 2 0 8 14,113 11,785 T o tal R a w M a t e r i al s 15,878 16,619 1 3 , 6 16 14,303 17 , 0 0 2 16,092 12,506
S a le s U

. S

. R e f i n i ng/M a r k eti ng S egm ent

R a w M a ter i al s

C r ude O i l and N G L 69,485 70,437 5 0 , 7 02 72,955 121 , 1 1 8 86,675 75,241 N a tur a l G a s 15,790 18,252 1 5 , 2 70 20,023 56 , 4 8 2 37,648 32,882 O t her R a w M a ter i al s 1,276 1,499 2, 1 7 2 1 ,576 2 , 40 3 2 ,203 944 T o tal R a w M a t e r i al s 86,551 90,188 6 8 , 1 44 94,554 180 , 0 0 3 1 26,526 109,067 R e f i ned P r odu c t s

M o tor G a s o l i ne 75,330 71,185 8 4 , 9 68 109,301 176 , 3 9 4 1 67,735 158,691 D i s t i l l a te F uel s 41,618 36,962 3 9 , 5 13 51,810 91 , 9 9 8 83,702 75,929 O t her R e f i ned P r od uc ts 24,577 20,964 2 3 , 2 83 28,506 42 , 2 6 9 40,172 37,570 T o tal R e f i ned P r oduc t s 1 41,525 129,111 14 7, 7 6 4 189,617 310 , 6 6 1 2 91,609 272,190
U

. S

. P r oduc t i on S egm en t C r ude O i l and N G L 32,948 30,604 1 9 , 6 88 25,186 38 , 3 1 4 31,613 30,930 N a tur a l G a s 26,840 29,459 2 3 , 6 49 23,178 40 , 7 1 9 47,390 40,208 T o tal R a w M a t e r i al s 59,788 60,063 4 3 , 3 37 48,364 79 , 0 3 3 79,003 71,138 

### T a b l e B 2 7

. U

. S

. P u r c h a se s an d S a l e s o f Oi l , N a t u r a l Ga s, Ot h e r R a w M a t e r i a l s , a n d R e f i n e d P r o d u c t s f o r F R S C o m p a n ie s , 1 9 9 6 - 2 0 0 2

V a lu e s ( m il li o n d o l l a r s )

P u r c h a s e s U

. S

. R e f i n i ng/M a r k eti ng S egm ent

R a w M a ter i al s

C r ude O i l and N G L ( m i l l i on bar r e l s ) 7,112 7,025 9, 0 2 1 9 ,377 9 , 05 0 8 ,383 7,926 N a tur a l G a s ( b i l l i on c u bi c f eet) 7,506 7,573 7, 4 2 5 9 ,285 13 , 3 2 3 9,147 10,458 R e f i ned P r odu c t s ( m i l l i on bar r e l s )

M o tor G a s o l i ne 677 689 1, 2 7 2 1 ,533 1 , 70 8 1 ,892 1,840 D i s t i l l a te F uel s 380 397 6 2 5 837 94 3 987 944 O t her R e f i ned P r od uc ts 363 329 4 6 4 446 53 5 625 633 T o tal R e f i ned P r oduc t s 1,420 1,415 2, 3 6 1 2 ,815 3 , 18 6 3 ,504 3,417 U

. S

. P r oduc t i on S egm en t C r ude O i l and N G L ( m i l l i on bar r e l s ) 300 308 3 9 4 367 20 0 8 8 3 7 N a tur a l G a s ( b i l l i on c u bi c f eet) 4,723 4,551 4, 2 9 5 3 ,835 3 , 27 6 3 ,461 3,956
S a le s U

. S

. R e f i n i ng/M a r k eti ng S egm ent

R a w M a ter i al s

C r ude O i l and N G L ( m i l l i on bar r e l s ) 3,528 3,752 4, 1 0 7 4 ,506 4 , 36 5 3 ,716 3,243 N a tur a l G a s ( b i l l i on c u bi c f eet) 7,195 7,242 6, 7 6 4 8 ,834 13 , 0 0 1 8,460 9,783 R e f i ned P r odu c t s ( m i l l i on bar r e l s )

M o tor G a s o l i ne 2,488 2,371 3, 7 8 9 4 ,070 4 , 28 6 4 ,539 4,551 D i s t i l l a te F uel s 1,562 1,473 2, 1 4 6 2 ,344 2 , 44 4 2 ,540 2,490 O t her R e f i ned P r od uc ts 1,069 1,008 1, 3 4 2 1 ,407 1 , 40 5 1 ,528 1,351 T o tal R e f i ned P r oduc t s 5,119 4,852 7, 2 7 7 7 ,820 8 , 13 5 8 ,606 8,392 U

. S

. P r oduc t i on S egm en t C r ude O i l and N G L ( m i l l i on bar r e l s ) 1,933 1,860 1, 8 0 5 1 ,667 1 , 48 4 1 ,498 1,433 N a tur a l G a s ( b i l l i on c u bi c f eet) 12,281 12,421 1 1 , 7 65 10,952 11 , 3 4 8 11,957 13,109 V o l u m e s

S o u r c e : E n er g y I n f o r m ati o n A d m i n i s t r a t i on, F o r m E I A

- 28 ( F i nanc i a l R epor t i ng S y s t em )

.

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 118199 6 1 997 1998 19 99 2 000 200 1 2 002
U.S. Ref i n i ng Run s to S t ill s At O w n Ref i n e ries 9,77 7 9 , 060 1 3 ,699 13,4 7 6 1 3 , 361 1 3 ,87 5 13, 307 By Ref i ner i e s of O t her s 5 5 0 82 86 10 5 8 0 T o t a l Runs to Stil ls 9,78 2 9 , 065 1 3 ,699 13,5 5 8 1 3 , 447 1 3 ,98 0 13, 387 Ref i n e ry O u tp ut at O w n Ref i ner ies a nd Ref i ner i e s of O t her s Re f o r m u l a t ed Moto r G a s o l i ne 1,30 2 768 1,552 1,7 9 2 2 ,129 2,06 1 1 , 991 O x y gen ated Mot o r G a s o li n e 16 5 749 1,018 6 0 9 412 58 8 552 O t her Mo tor Ga s o line 3,41 0 2 , 980 4,665 4,5 8 8 4 ,207 4,37 3 4 , 456 T o tal Motor Ga s o line 4,87 7 4 , 497 7,235 6,9 8 9 6 ,748 7,02 2 6 , 999 Dis t illate F u e l s 3,32 3 2 , 921 4,278 4,1 6 7 4 ,376 4,33 1 4 , 167 O t her Ref i ned P r odu c t s 2,75 4 2 , 612 3,416 3,4 8 3 3 ,375 3,66 9 3 , 595 T o t a l Ref i n e ry O u tp ut 1 0 ,95 4 10, 030 1 4 ,929 14,6 3 9 1 4 , 499 1 5 ,02 2 14, 761 Ref i ner y Capa c i ty at End of Y ear 1 0 ,47 7 9, 410 1 4 ,277 14,1 5 8 1 4 , 424 1 4 ,68 2 14, 557

Num ber of W h o l ly

- O wned R e f i ne ries 6 9 60 95 94 90 9 9 84

Fo reig n Refi nin g Run s to S t ill s At O w n Ref i n e ries 3,93 6 3 , 961 4,043 4,4 0 7 4 ,513 4,62 0 4 , 778 By Ref i ner i e s of O t her s 50 6 340 29 2 3 97 403 33 9 325 T o t a l Runs to Stil ls 4,44 2 4 , 301 4,335 4,8 0 4 4 ,916 4,95 9 5 , 103 Ref i ner y O u t put a t O w n Re f i ne ries Motor Ga s o line 1,17 2 1 , 041 1,135 1,2 4 7 1 ,295 1,29 3 1 , 427 Dis t illate F u e l s 1,69 0 1 , 648 1,787 1,9 0 1 1 ,738 1,74 4 2 , 041 O t her Ref i ned P r odu c t s 1,28 0 1 , 283 1,213 1,3 1 5 1 ,717 1,72 9 1 , 405 T o t a l Ref i n e ry O u tp ut at O w n Ref i ner ies 4,14 2 3 , 972 4,135 4,4 6 3 4 ,750 4,76 6 4 , 873 Ref i ner y O u t put a t Ref i ner i e s of O t her s Motor Ga s o line 10 7 7 5 8 3 1 22 123 12 0 117 Dis t illate F u e l s 23 4 154 12 1 1 35 171 15 5 175 O t her Ref i ned P r odu c t s 16 5 110 87 1 4 6 8 0 8 4 7 0 T o ta l Ref i ne ry O u tpu t at Ref i n e ries of 50 6 339 29 1 4 03 374 35 9 362 T o ta l Re f i ne ry O u tpu t 4,64 8 4 , 311 4,426 4,8 6 6 5 ,124 5,12 5 5 , 235 Ref i n e ry C apac i t y at End o f Y ear 4,34 6 4 , 270 4,508 4,9 3 0 5 ,134 5,57 2 5 , 642

Num ber of W h o l ly

- O wned R e f i ne ries 2 0 20 20 19 18 2 3 22 Num ber of Part i a lly -O w n ed Re f i ne ries 1 2 15 15 18 18 1 8 19

Sour c e : E n e r g y Inf o rm ation A d m i nis t r a tion, For m E I A-2 8 ( F ina n c i al Rep o rt i n g Sy s t em ). ( num ber of re f i ne ries ) ( num ber of re f i ne ries ) 

### T a ble B28. U.S. an d For e i gn Pet r oleum Ref i n i ng St at ist i cs f o r FR S Comp a n ies, 1996- 2 002

( t hou s a n d bar r e ls pe r c a lenda r d a y )

(tho us a nd b a rr els p e r c a lend ar day )

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 119A l l FRS T op Fo ur Fi v e thr o ugh T w el ve 2 A ll O t h e r 2 Un it ed St ate s Ref i ner y O u tput Volum e 3 1 4 ,761 5,08 9 4 , 354 5 , 318 17 ,655 83.6 Per c ent G a s o li ne R e f o r m ulated/O x y gen ated 17.2 17. 0 1 6.9 17.7 17.2 83.8 O t her 30.2 28. 7 3 0.7 31.2 30.1 84.0 Per c ent D i s t i l l a te 28.2 28. 3 2 7.5 28.8 30.0 78.6 Per c ent O t her 24.4 26. 0 2 4.9 22.3 22.7 89.6 Ref i ner y C apac i t y Y e ars Cha nge ( N et)

- 125 -5 1 553

- 627

- 2 9 (5) At Y e ar End 1 4 ,557 4,54 4 4 , 542 5 , 471 17 ,339 84.0 Ut i l i z ation R a te 4 91.0 96. 8 9 2.0 85.8 88.4 (5) F o r e i gn Ref i ner y O u tput Volum e 3 5,235 4,58 3 0 652

- (5) Per c ent G a s o li ne 29.5 29. 1 0 .0 32.4

- (5) Per c ent D i s t i l l a te 42.3 42. 0 0 .0 44.9

- (5) Per c ent O t her 28.2 29. 0 0 .0 22.7

- (5) Ref i ner y C apac i t y Y e ars Cha nge ( N et) 70 197 0

- 127 0 (5) At Y e ar End 5,642 5,12 1 0 521 0 0 .0 Ut i l i z ation R a te 3 85.2 82. 3 0 .0 1 10.4 0 .0 (5)

FR S c o m panies dat a - Ener gy I n f o rm ati o n Adm i nis t ra ti on , F o r m EIA- 28 ( F i n a n c i a l R epor ting Sy s t em )

. Note: S u m o f components ma ynot eq ual total due to in dependent rounding. S o urces: Industry data, U.S

. - Refinery output and refinery c apacity : Energy Information Ad ministration, Forms E I A-820 (Annua l R e finery R e port) and EIA

- 810 (M onthly R e finery R epo rt); see Petroleum S upply Annual, 2001 and 2 002. Industry data, F o reign - Refinery C apacity: B r

itish P e troleum S t

atistical Review o f

W

o rld E nerg y , 2 002 and 2003

. Re f i n e d P r oduc t S t at i s t i cs 1

1 U

. S. FR S and U

. S. industry data include op erations in P u erto R i co a nd the U

. S. V i rgin Isla nds. Foreign FR S a nd foreign indu str ydata ex clude ope rations in P u erto R i co an d the U

. S. V i rgin Islan d s, as w e ll as C h ina. 2 For foreign FR S, the "F i v e throu gh T w elve" and " A ll O t h e r" group s are combined to av oid d i sclosu r e. 3 For F R S comp anies, includes refine ry outp u t at ow n refineries for ow n account and at others' refineries for ow n account. 4 D e fine d as av erage daily crude runs at o w n refineries, for ow n account, and f o r account of o t hers, div i d ed byaverage d a ilycru de distillation capacity

. 5 N o t m eaningful. FR S Comp an ie s 

### Tabl e B29

. U. S. a nd Fore i gn R e fi ner y Output a nd Capa ci ty for FRS Compa nie s , Rank ed by Tota l Ene r gy A s se ts , an d I ndus tr y , 20 02 ( T hous a nd Bar r els per D a y )

T o ta l I ndus t r y F R S Pe r c e n t o f In du st ry

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 120U

. S. Disp o s it ion s 199 6 1 997 1998 1999 2000 2001 2002

M o t o r G aso lin e Inter s egm ent Sales 4 0 0 581 966 1,521 1,802 2,521 3,500 U.S. T h ir d-Par t y Sales W holes ale-R e s e l l er s 32,50 0 31, 895 3 8 ,659 51,908 83,203 69,799 68,311 Com p any O p e r ate d Autom o tiv e O u tlets 11,29 3 11, 855 1 5 ,497 17,334 24,870 22,843 18,662 Com p any Le s s ee and O pen A u tom o ti ve O u tlets 21,72 5 20, 517 2 3 ,966 29,434 48,693 45,798 40,720 O t her (I ndus tr i a l, Com m e rc ial a nd O t her Reta i l ) 9,41 2 6 , 337 5,880 9,104 17,826 26,774 27,498 T o tal T h i r d- Part y Sal e s 74,93 0 70, 604 8 4 ,002 1 07,780 174,592 165,214 155,191 T o t a l M o t o r G a s o li n e S a le s 75,33 0 71, 185 8 4 ,968 1 09,301 176,394 167,735 158,691 Dist illat e F u el s Inter s egm ent Sales 2 9 1 191 682 708 444 535 2,387 T h i r d- Part y Sal e s 41,32 7 36, 771 3 8 ,831 51,102 91,554 83,167 73,542 T o tal Di s t il late F uel s S a les 41,61 8 36, 962 3 9 ,513 51,810 91,998 83,702 75,929
Ot he r R e f i n e d P r oduc t s Inter s egm ent Sales 4,12 4 3 , 322 2,059 2,779 6,078 7,386 4,474 T h i r d- Part y Sal e s 20,45 3 17, 642 2 1 ,224 25,727 36,191 32,786 33,096 T o tal O t her Ref i ned P r oduc ts Sales 24,57 7 20, 964 2 3 ,283 28,506 42,269 40,172 37,570
T o tal U

. S. Ref in ed Pr o d u c t s Inter s egm ent Sales 4,81 5 4 , 094 3,707 5,008 8,324 10,442 10,361 T h i r d- Part y Sal e s 136,7 1 0 125, 017 144 ,057 1 84,609 302,337 281,167 261,829 T o tal U.S. Re f i ned Prod uc ts Sal e s 141,5 2 5 129, 111 147 ,764 1 89,617 310,661 291,609 272,190

M o t o r G aso lin e Inter s egm ent Sales 1 2 18 50 66 47 79 101 U.S. T h ir d-Par t y Sales W holes ale-R e s e l l er s 1,15 4 1 , 150 1,901 2,059 2,126 1,956 2,032 Com p any O p e r ate d Autom o tiv e O u tlets 3 1 9 335 558 540 543 545 464 Com p any Le s s ee and O pen A u tom o ti ve O u tlets 6 5 3 615 965 1,006 1,105 1,182 1,133 O t her (I ndus tr i a l, Com m e rc ial a nd O t her Reta i l ) 3 5 0 253 316 399 465 777 820 T o tal T h i r d- Part y Sal e s 2,47 6 2 , 353 3,739 4,004 4,239 4,460 4,450 T o t a l M o t o r G a s o li n e S a le s 2,48 8 2 , 371 3,789 4,070 4,286 4,539 4,551

Dist illat e F u el s Inter s egm ent Sales 1 2 8 3 8 3 3 1 3 1 7 8 T h i r d- Part y Sal e s 1,55 0 1 , 464 2,109 2,310 2,430 2,522 2,405 T o tal Di s t il late F uel s S a les 1,56 2 1 , 473 2,146 2,344 2,444 2,540 2,490
Ot he r R e f i n e d P r oduc t s Inter s egm ent Sales 2 0 9 254 141 153 213 258 162 T h i r d- Part y Sal e s 8 6 0 755 1,201 1,254 1,191 1,269 1,188 T o tal O t her Ref i ned P r oduc ts Sales 1,06 9 1 , 008 1,342 1,407 1,405 1,528 1,351
T o tal U

. S. Ref in ed Pr o d u c t s Inter s egm ent Sales 2 3 2 280 229 252 274 354 348 T h i r d- Part y Sal e s 4,88 6 4 , 572 7,048 7,568 7,861 8,252 8,043 T o tal U.S. Re f i ned Prod uc ts Sal e s 5,11 9 4 , 852 7,277 7,820 8,135 8,606 8,392
Nu mb er o f A c tiv e A u to m o tiv e O u t l ets at Y ear En d Com pa ny O per ated 8,92 7 8 , 942 1 3 ,645 12,018 12,583 11,380 9,745 Les s ee D eal er s 15,24 7 12, 852 1 6 ,396 17,847 16,953 11,474 9,371 O pen D eal er s 14,15 1 11, 959 2 8 ,859 26,805 25,707 31,231 26,277 T o tal O u tl ets 38,32 5 33, 753 5 8 ,900 56,670 55,243 54,085 45,393 S o urc e : E n e r gy Inf o rm ati on Adm i nis t ration, F o r m EIA-28 (F i n anc i a l Repo rting Sy s t em ). 

### T a ble B 3 0. U

. S. Re fin i ng/ M a rke t ing Dispositions of Re fined Produc ts by Channe l of D i str ibut ion for FR S Comp ani e s, 1996- 2002

Val ues ( m il li on do l l a r s )

Volum e s ( m il l i on bar r e l s )

N u m ber of Autom o tiv e O u tl ets 5

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 121V olume P r i c e V olum e P r i c e V olume P r i c e V ol ume P ric e
G a soline Intr a- Com pany S a les 2002 101.4 34.5 1 101. 4 34.51 W W 0.0 0 .00 2001 78.8 31.9 9 77. 8 31.95 W W 0.0 0 .00 P e r c ent Change 28.7 7 .9 30. 3 8 .0 W W 0.0 0 .0 W holesale/Res e l l er s

2002 2,032.4 33.6 1 695. 3 34.60 371.3 34. 95 96 5.8 32.38 2001 1,955.8 35.6 9 676. 6 36.06 324.4 36. 80 95 4.9 35.05 P e r c ent Change 3.9

- 5. 8 2

. 8

- 4 .0 14.5

- 5

. 0 1 .1

- 7 .6 Dealer

- O per ated Outlet s

2002 1,133.4 35.9 3 653. 4 36.23 148.8 36. 68 33 1.2 34.99 2001 1,182.1 38.7 4 634. 5 38.22 76.7 37. 59 47 1.0 39.63 P e r c ent Change

- 4 .1

- 7

. 3 3. 0

- 5.2 94.0

- 2

. 4

- 2 9 .7

- 11.7
Com pany - O per at ed O u tlets

2002 464.3 40.2 0 189. 0 37.56 135.2 40. 50 14 0.1 43.46 2001 545.1 41.9 0 149. 4 40.35 118.7 43. 65 27 7.0 41.99 P e r c ent Change

- 14.8

- 4. 1 26. 5

- 6.9 13.8

- 7

. 2

- 4 9 .4 3.5 Other 1

2002 819.8 33.5 4 211. 7 33.69 504.6 33. 65 10 3.6 32.71 2001 777.0 34.4 6 257. 4 35.72 198.3 32. 90 32 1.2 34.41 P e r c ent Change 5.5

- 2. 7

- 17. 8

- 5.7 154.4 2 .3

- 6 7.8

- 5.0 T o ta l G a s o line

2002 4,551.2 34.8 7 1,850. 7 35.37 1,159.8 35. 25 1,54 0.8 33.97 2001 4,538.9 36.9 6 1,795. 7 36.95 719.1 36. 94 2,02 4.1 36.96 P e r c e n t C h ange 0.3

- 5. 6 3

. 1

- 4 .3 61.3

- 4

. 6

- 2 3 .9

- 8 .1 D i stillate

2002 2,489.9 30.4 9 1,008. 4 31.27 658.1 30. 09 82 3.3 29.87 2001 2,539.8 32.9 6 988. 6 33.55 415.6 33. 55 1,13 5.6 32.22 P e r c e n t C h ange - 2 .0

- 7

. 5 2. 0

- 6.8 58.4

- 10 .3

- 2 7.5

- 7.3 A ll Othe r P r odu c t s

2002 1,350.7 27.8 1 535. 5 28.15 345.1 29. 67 47 0.2 26.07 2001 1,527.6 26.3 0 641. 4 26.66 286.0 25. 03 60 0.2 26.51 P e r c e n t C h ange - 11.6 5 .8

- 16. 5 5 .6 20.7 1 8

. 5

- 2 1 .7

- 1 .6 T o ta l Re fi ne d P r oduc ts

2002 8,391.9 32.4 3 3,394. 6 33.01 2,163.0 32. 79 2,83 4.3 31.47 2001 8,606.3 33.8 8 3,425. 7 34.04 1,420.7 33. 55 3,75 9.9 33.86 P e r c e n t C h ange -2 .5 -4

. 3 -0

. 9 -3 .0 5 2

. 3

- 2

. 3

- 2 4 .6 -7 .1 1 Inc l udes dir e c t s a les to indus tr ial an d c o m m e r c ial c u s t om er s a nd s a les to unc o n s o li dated af f ilia tes

. Note: S u m of com pone nts m a y not eq ual total d ue to inde pendent r o unding. S our c e : Ene r gy Inf o r m ation Adm i ni s t r a tio n , F o r m E I A-28 ( F inancial Repor tin g Sy s t e m )

. W = D a t a w i thhel d to avoid dis c losur e

. 

### Table B31. Sales of U

. S

. Refined P r oducts , by V o lume and Price, for FRS Companies R a nked by Tot al Ener gy A sset s, 2001 - 2002 ( M i l l i on Bar r e l s and Dol l a r s pe r Bar r e l )
Pr oduc t D i s t r i bution C h a nne l A ll FR S T op Four Fiv e throug h T w e l ve A ll Othe r

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 122Re v e nues and Costs 1996 19 97 1998 19 99 2000 20 01 2002 R e fined P r oduct R e v e nues 141,525 12 9,1 1 1 147,764 18 9,6 1 7 310,661 29 1,6 0 9 272,190 R e fined P r oduct C o sts Raw Mater i al s P r ocessed 1 70,339 5 8 ,8 88 60,094 8 3 ,3 48 135,624 10 9,5 6 5 116,277 Ref i nery E nergy Expe ns e 5,480 5,005 5,349 6,4 2 7 10,838 1 1 ,3 21 10,114 O t her Re f i n e r y E x pense 9,882 8,436 12,219 1 1 ,7 34 10,635 1 2 ,2 74 15,202 Product P u r c ha s e s 37,958 3 7 ,3 19 43,609 6 3 ,4 91 117,640 11 4,8 2 7 103,256 O t her P r odu c t Sup p l y Expen s e 4,072 3,777 5,160 4,9 1 5 6 ,655 6,5 5 2 12,562 Ma r k eti ng Expen s e 2 9,318 8,538 10,308 1 1 ,1 00 11,128 1 3 ,6 72 13,186 T o tal Ref i ned Product Costs 137,049 12 1,9 6 3 136,739 18 1,0 1 5 292,520 26 8,2 1 1 270,597 R e fined P r oduct M a r g i n 4,476 7,148 11,025 8,6 0 2 18,141 2 3 ,3 98 1,593 R e fined P r oducts S o l d ( m ill io n b a r r e l s ) 5 , 11 8.6 4 ,852.2 7 ,27 6 .9 7, 820.2 8 ,13 4 .7 8,606.3 8 ,391 .9 Do ll ars p e r B a rrel M a rg i n 3 0

. 87 1.47 1

. 52 1.10 2

. 23 2.72 0.19 Othe r R e fi nin g /M ar keting R e v e nues 4 10,731 9,693 15,997 1 4 ,2 82 14,196 1 6 ,9 18 15,343 Othe r R e fi nin g /M ar keting E x pense s Dep r eci a ti on , Dep l e t i on, & Al l o w ance 3,847 3,674 4,700 5,2 7 3 4 ,712 5,2 5 9 5 ,617 O t her 5 7,873 8,419 15,547 1 2 ,5 46 16,865 1 8 ,6 83 12,811 T o tal Othe r Expen s e s 11,720 1 2 ,0 93 20,247 1 7 ,8 19 21,577 2 3 ,9 42 18,428 R e fini ng/ M a r k eti ng Oper ating I n come 3,487 4,748 6,775 5,0 6 5 10,760 1 6 ,3 74

- 1 ,492 M i scella neous Rev e nue & E x pens e 6

- 101 204 1,315 1,3 6 7 1 ,265 1,8 6 6 1 ,002 Less Inc o m e T axes 1,135 1,876 2,142 1,7 1 4 4 ,360 6,2 7 1 346 R e fini ng/ M a r k eti ng Net I n come 2,251 3,106 5,932 4,8 8 3 7 ,659 1 1 ,9 51

- 2 ,164 

### T a b l e B 3 2

. U

. S. R e fin i n g / M a r keting R e v e nu es and C o st s fo r F R S C o m p an ies, 19 96- 2002 (Mill ion Dollar s )

1 Rep r esents reporte d cost of raw m a ter i al s p r ocessed at r e f i n e r i es, l e ss any pr o f i t f r om raw m a teria l trade s or exchange s by ref i ni ng/m a rk etin g.

2 Exclu des costs of nonf ue l goo ds and servi c e s and ti res , batteri es, and access ori e s (T B A ). 3 Dol l a r s per ba r r el of r e f i n ed pr od uct s o ld

. 4 In c l ude s r e venu es f r o m transporta ti on ser v ices s u ppl ie d (non

- f ede r a l l y r e gul ated) , T B A s a le s , and m i sc e l l ane ous. 5 In c l ude s gene r a l and adm i n i s tr ati v e expenses, researc h and de vel opm ent costs , c o s t s of tr ansportati on ser v i c es suppl i ed to others, and expenses f o r T B A

.

6 In c l ude s other reven ue and expense i t em s, extraordi nar y it em s , and cum u l a ti ve ef f e ct of accountin g cha nges. Sou r ce: E nergy Inf o rm ati on Adm i ni s t r a ti on, For m E I A-28 ( F i nanci a l Reporting S y stem )

.

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 123G e ne ral O p erat ing E x pen ses 1996 1997 1 998 19 99 200 0 2001 2002 Raw M a t e r i al S u pp ly Raw M a ter i al Purc has es 1 56,745 14 8,351 126 ,653 178,9 7 2 320,16 6 2 39,027 22 7,778 O t he r Raw Mater i al S upp l y Ex pens e 4,067 4,523 5 , 183 3,1 8 4 2 ,37 1 4,196 4,520 T o tal Raw Mater i al Supp l y Ex pens e 1 60,812 15 2,874 131 ,836 182,1 5 6 322,53 7 2 43,223 23 2,298
Les s : Cos t o f Raw Mater i al s Input T o Ref i ning 75,892 6 4 ,132 62 ,955 85,2 7 0 139,93 1 1 14,400 12 1,192 Net Raw Mater i a l Suppl y 84,920 8 8 ,742 68 ,881 96,8 8 6 182,60 6 1 28,823 11 1,106 R e f i ni ng Raw M a ter i als I nput to Ref i ning 75,892 6 4 ,132 62 ,955 85,2 7 0 139,93 1 1 14,400 12 1,192 Les s : Raw M a ter i al Us e d as Ref i nery F uel 3,922 3,798 3 , 598 4,2 5 4 6 ,91 0 7,132 6,954 Ref i ne ry P r oc es s Energ y Ex pe ns e 5,480 5,005 5 , 349 6,4 2 7 10,83 8 11,321 1 0 ,114 O t he r Ref i n i n g O per ating Ex pen s e s 10,631 9,173 12 ,984 12,9 2 8 13,67 5 14,657 1 6 ,459 Ref i ne d P r oduc t P u r c has es 37,958 3 7 ,319 43 ,609 63,4 9 1 117,64 0 1 14,827 10 3,256 O t he r Ref i n ed Produ c t Supply E x p ens es 4,072 3,777 5 , 160 4,9 1 5 6 ,65 5 6,552 1 2 ,562 T o tal Ref i ning 1 30,111 11 5,608 126 ,459 168,7 7 7 281,82 9 2 54,625 25 6,629
Ma r k e t i n g Cos t o f O t her Pr oduc ts S o ld 5,449 6,255 6 , 844 5,3 0 5 7 ,34 2 9,797 8,677 O t he r Ma rk eting Ex pens es 9,318 8,538 10 ,308 11,1 0 0 11,12 8 13,672 1 3 ,186 Subtotal 14,767 1 4 ,793 17 ,152 16,4 0 5 18,47 0 23,469 2 1 ,863 E x pens e of T r ans port S e r v i c e s f o r O t her s 507 376 4 , 297 4,1 9 1 3 ,69 1 4,002 439 To t a l M a r k e t i n g 15,274 1 5 ,169 21 ,449 20,5 9 6 22,16 1 27,471 2 2 ,302 T o ta l U

. S

. R e f i ni ng / M a r k e t i ng S e gm e n t Gen e r a l Op er at in g Expe nse s 2 30,305 21 9,519 216 ,789 286,2 5 9 486,59 6 4 10,919 39 0,037 

### T a b l e B33. U

. S. Pet r o l eu m R e f i n i n g / M arket i n g G e ne ral Op erat i n g Exp e nses f o r F R S C o mp ani es, 1996- 2002 ( M illio n Do lla r s)

S o urc e : E n e r gy Inf o r m ation Adm i nis t ra ti o n , F o rm EIA-28 (F i n a n c i al Repor ti ng S y s t e m ).

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 124Res e r v e s a n d Prod uc t i on Sta t is tics 19 9 6 19 9 7 19 9 8 19 9 9 20 0 0 20 0 1 20 0 2
Ch a n g e s to U.S. Coal Re se rv e s Begin n ing of Per i od 10 ,493 9, 410 7 ,502 5 , 334 4 ,410 2 , 530 1 , 320 C han ges d ue to: Le as es /Pur c has es of Min e r a ls

- i n- P l a c e WWWWWWW C o r por a t e M e r ger s and Acq u is itio ns WWWWWWW O t h e r R e se r v e C han ges 8

- 127

- 17

- 2 5

- 58

- 354 27 Prod uc tio n - 1 69

- 1 63

- 7 4

- 44

- 3 6

- 33

- 2 9 D i s p o s i t ions of Min e r a ls

- i n- P l a c e - 1 , 1 50

- 7 74

- 2 ,113

- 8 02

- 1 ,799 W W End o f Per i o d R e s e r v es 9, 542 8 , 4 98 5 , 334 4 , 507 2 ,530 1 , 320 856
We ig h t e d A v e r a g e A n nu al P r od uc t i on Capa city 192 2 15 65 55 51 40 40
Res e r v e s a n d Prod uc t i on : T o ta l Uni t ed State s F R S C o m p ani es ' R e s e r v es 9, 542 8 , 4 98 5 , 334 4 , 507 2 ,530 1 , 320 856 F R S C o m p ani es ' Pr od uc tion 169 1 63 74 44 36 33 29 U

. S. I ndu st r y Pr od uc tio n 1, 064 1 , 0 90 1 , 118 1 , 100 1 ,074 1 , 128 1 , 093
Re gion Eas t FRS Com p a n ies ' Re se rv e s 2, 675 2 , 4 77 1 , 774 1 , 676 1 ,034 557 227 FRS Com p a n ies ' Pro duc tion 44 43 24 21 20 16 14 U. S. Ind u s t ry P r odu c t ion 452 4 68 460 426 4 20 433 399
M i dw es t FRS Com p a n ies ' Re se rv e s 2, 467 2 , 0 80 1 , 372 1 , 055 1 ,051 394 W FRS Com p a n ies ' Pro duc tion 1 8 1 7 1 2 WWWW U. S. Ind u s t ry P r odu c t ion 112 1 12 110 104 8 7 9 5 9 3 W e s t FRS Com p a n ies ' Re se rv e s 4, 400 3 , 9 40 2 , 188 1 , 776 4 46 370 W FRS Com p a n ies ' Pro duc tion 1 0 7 1 0 4 3 8 WWWW U. S. Ind u s t ry P r odu c t ion 500 5 11 548 571 5 66 597 601
M i n i ng M e th od Und e rgrou n d F R S C o m p ani es ' R e s e r v es 4, 571 3 , 8 80 2 , 352 1 , 853 1 ,752 886 620 F R S C o m p ani es ' Pr od uc tion 59 51 28 21 21 18 16 U

. S. I ndu st r y Pr od uc tio n 410 4 21 418 392 3 74 381 357
Surf ac e F R S C o m p ani es ' R e s e r v es 4, 970 4 , 6 18 2 , 982 2 , 654 7 79 434 236 F R S C o m p ani es ' Pr od uc tion 110 1 12 46 23 15 15 13 U

. S. I ndu st r y Pr od uc tio n 654 6 69 700 709 7 00 747 736 

### T a b l e B3 4. U

. S

. Co al Re se r v es B a l a n c e f o r F R S C o m p an i e s , 1 9 9 6 - 2 0 0 2 ( M il li o n T o n s )

W = D a ta w i thh e l d to av oid dis c l o sur e

. S ources: C oal produ c t ion: 19 96-2 000-- E ne rgy Infor m atio n Administr a tio n , C oal In dus t r y Annua l , ann ual r epor ts; 2001- 2002 - EIA , An nual Coa l R epor t, annu al r epor ts. F R S C o m pan ies ' da ta - Ener gy In f o r m atio n Adm i n i s t r a ti on, F o r m EIA- 28 ( F in anc i al R e po r t in g Sy s t em )

.

Energ y I n for m at ion A d mi nistra ti on/Perf orma nce Profiles of Maj o r Energ y Pr od ucers 2002 

## 125