Financial Review of the Global Oil and Industry: Second-quarter 2017

Markets and Financial Analysis Team

September 2017

U.S. Energy Information Administration Independent Statistics & Analysis www.eia.gov Key findings for second-quarter 2017 • oil prices remained lower than in the 2012–14 period but were 6% higher than in second-quarter 2016, increasing operating cash flow for most producers

• Liquids production increased 4% in second-quarter 2017, the highest rate since third-quarter 2015

• Energy companies’ return on equity was the largest since first-quarter 2015

• Capital expenditure increased year over year for the first quarter since second-quarter 2014

Markets and Financial Analysis Team | Financial Review Second-quarter 2017 2 September 2017 Geographic distribution of global oil and natural gas companies, second-quarter 2017 number of companies 80 76

70

60

50

40

30

20 14 9 9 10

0 United States Canada Europe other

Source: U.S. Energy Information Administration, Evaluate Energy

Markets and Financial Analysis Team | Financial Review Second-quarter 2017 3 September 2017 Distribution of global energy companies by production of liquids, second-quarter 2017 number of companies 60 52 50

40

30 23 20 16 10 10 7

0 less than 50 50–99 100–499 500–999 1,000 or greater thousand barrels per day

Source: U.S. Energy Information Administration, Evaluate Energy

Markets and Financial Analysis Team | Financial Review Second-quarter 2017 4 September 2017 Liquids and natural gas production was 34 and 20 million barrels of oil equivalent, respectively, in second-quarter 2017 liquids and natural gas production million barrels of oil equivalent per day 40 liquids 35 30 25 natural gas 20 15 10 5 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2012 2013 2014 2015 2016 20172017

Source: U.S. Energy Information Administration, Evaluate Energy

Markets and Financial Analysis Team | Financial Review Second-quarter 2017 5 September 2017 Global liquids production increased 4% and natural gas production increased 1% in second-quarter 2017 from second-quarter 2016 levels liquids and natural gas production year-over-year change 10%

8% liquids 6%

4% natural gas 2%

0%

-2%

-4% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2013 2014 2015 2016 2017201

Source: U.S. Energy Information Administration, Evaluate Energy

Markets and Financial Analysis Team | Financial Review Second-quarter 2017 6 September 2017 Operating cash flow in second-quarter 2017 totaled $93 billion, a 51% increase from second-quarter 2016 cash from operations billion 2017$ 200 2013 2014 2015 2016 2017 180 160 140 120 100 80 60 40 20 0 Q1 Q2 Q3 Q4

Source: U.S. Energy Information Administration, Evaluate Energy

Markets and Financial Analysis Team | Financial Review Second-quarter 2017 7 September 2017 Capital expenditure in second-quarter 2017 totaled $67 billion, 4% higher than second-quarter 2016 capital expenditure billion 2017$ 200 2013 2014 2015 2016 2017 180 160 140 120 100 80 60 40 20 0 Q1 Q2 Q3 Q4

Source: U.S. Energy Information Administration, Evaluate Energy

Markets and Financial Analysis Team | Financial Review Second-quarter 2017 8 September 2017 Cash from operations in second-quarter 2017 remained higher than $85 billion for the fourth consecutive quarter cash flow items and Brent price billion 2017$; Brent in 2017 $/b 200 180 cash from operations 160 140

120 capital expenditure 100 Brent crude oil price 80 60 40 20 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2012 2013 2014 2015 2016 2017 2017 Source: U.S. Energy Information Administration, Evaluate Energy, Bloomberg Note: b=barrel

Markets and Financial Analysis Team | Financial Review Second-quarter 2017 9 September 2017 Cash from operations was $86 billion higher than capital expenditure for the sum of the four quarters ending June 30, 2017 annualized cash flow items billion 2017$ 650 600 550 annualized cash from operations annualized capital expenditure 500 450 400 350 300 = 250 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2013 2014 2015 2016 20172017

Source: U.S. Energy Information Administration, Evaluate Energy

Markets and Financial Analysis Team | Financial Review Second-quarter 2017 10 September 2017 Over 35% of companies had a positive free cash flow and 79% reported positive upstream earnings in second-quarter 2017

100% 90% 80% 70% percentage of companies reporting positive upstream earnings 60% 50% percentage of companies with positive free cash flow 40% 30% 20% 10% 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2012 2013 2014 2015 2016 20172017 Source: U.S. Energy Information Administration, Evaluate Energy Note: free cash flow=cash from operations minus capital expenditure

Markets and Financial Analysis Team | Financial Review Second-quarter 2017 11 September 2017 The long-term debt-to-equity ratio declined in recent quarters as companies paid off debt

billion 2017$ 80% 80 70% 70 60% 60 net change in debt, right axis long-term debt-to-equity ratio, left axis 50% 50 40% 40 30% 30 20% 20 10% 10 0% 0 -10% -10 -20% -20 -30% -30 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2012 2013 2014 2015 2016 20172017

Source: U.S. Energy Information Administration, Evaluate Energy

Markets and Financial Analysis Team | Financial Review Second-quarter 2017 12 September 2017 The increase in cash flow has reduced the ratio of debt repayments to cash flow in second-quarter 2017 annualized debt repayments to cash flow ratio 1.20

1.00

0.80

0.60

0.40

0.20

0.00 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2013 2014 2015 2016 2017201

Source: U.S. Energy Information Administration, Evaluate Energy

Markets and Financial Analysis Team | Financial Review Second-quarter 2017 13 September 2017 The energy companies’ return on equity increased to over 3% profitability and production 15% four-quarter return on equity 10%

5%

0% liquids and natural gas production year-over-year change -5%

-10%

-15% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2013 2014 2015 2016 2017201

Source: U.S. Energy Information Administration, Evaluate Energy

Markets and Financial Analysis Team | Financial Review Second-quarter 2017 14 September 2017 Upstream capital expenditure on a per-barrel basis remains below $15 per barrel of oil equivalent upstream capital expenditure per barrel of oil equivalent produced 2017 $/boe four-quarter moving average 30

25

20

15

10

5

0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2013 2014 2015 2016 201720 Source: U.S. Energy Information Administration, Evaluate Energy Note: boe=barrel of oil equivalent

Markets and Financial Analysis Team | Financial Review Second-quarter 2017 15 September 2017 Upstream capital expenditures per barrel of oil equivalent were 36% of the quarterly average crude oil price, in part driven by large merger and acquisition activity ratio of upstream capital expenditure/boe to Brent price

70% merged with BG Group in first-quarter 2016. Mergers are typically large, non-recurring expenditures. The $52 billion merger 60% accounted for almost half of all combined company upstream capital expenditure, which contributed to the large increase in the ratio of 50% upstream capital expenditure/boe to Brent price from fourth-quarter 2015 to first-quarter 2016. 40%

30%

20%

10%

0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2012 2013 2014 2015 2016 20172017

Source: U.S. Energy Information Administration, Evaluate Energy

Markets and Financial Analysis Team | Financial Review Second-quarter 2017 16 September 2017 The return on equity for energy companies was positive for the second consecutive quarter but remain lower than U.S. manufacturing company returns four-quarter return on equity 20% U.S. manufacturing companies 15%

10% energy companies 5%

0%

-5%

-10%

-15% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2013 2014 2015 2016 20172017

Source: U.S. Energy Information Administration, Evaluate Energy, U.S. Census Bureau

Markets and Financial Analysis Team | Financial Review Second-quarter 2017 17 September 2017 The long-term debt-to-equity ratios for both sectors was essentially unchanged from the first quarter of 2017 to the second quarter long-term debt-to-equity 70%

60% U.S. manufacturing companies 50%

40%

30% energy companies 20%

10%

0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2012 2013 2014 2015 2016 20172017

Source: U.S. Energy Information Administration, Evaluate Energy, U.S. Census Bureau

Markets and Financial Analysis Team | Financial Review Second-quarter 2017 18 September 2017 Capital expenditure increased year over year for the first quarter since second-quarter 2014 cash flow items and Brent prices year-over-year change 80% cash from operations 60%

40%

20% Brent crude oil price 0%

-20% capital expenditure -40%

-60% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2013 2014 2015 2016 2017

Source: U.S. Energy Information Administration, Evaluate Energy, Bloomberg

Markets and Financial Analysis Team | Financial Review Second-quarter 2017 19 September 2017 Appendix: List of companies

Abraxas Petroleum Corporation Inc. EPL Oil & Gas Inc Lundin Petroleum Range Resources Corporation T-Rex Oil, Inc. Adams Resources & Energy Inc. Chesapeake Energy Corp. ExxonMobil Corp. Triangle Petroleum Corporation Aker BP ASA Forest Oil Corporation Matador Resources Company Resolute Energy Corporation Unit Corp Amplify Energy Corp. Cimarex Energy Co. Frontera Energy Corporation Mid-Con Energy Partners, LP Ring Energy Inc Vaalco Energy Inc Anadarko Petroleum Corp. Clayton Williams Energy, Inc. Neft Murphy Oil Corporation Rosetta Resources Inc. Vanguard Natural Resources LLC Antero Resources Corporation Comstock Resources Goodrich Petroleum Corporatio Newfield Exploration Company Vermilion Energy Inc. Apache Corporation Concho Resources Inc Gran Tierra Energy Inc. Noble Energy Royal Dutch Shell W & T Offshore Approach Resources Inc ConocoPhillips Gulfport Energy Corporation Northern Oil & Gas, Inc RSP Permian Inc Whiting Petroleum Corporation Athlon Energy Inc. Contango Oil and Gas Company Halcon Resources Corporation Novatek Sabine Oil & Gas Corporation WPX Energy, Inc. Bankers Petroleum Ltd Continental Resources Harvest Natural Resources Inc. Oasis Petroleum Inc. Sanchez Energy Corp YPF Sociedad Anonima Baytex Energy Corp. Denbury Resources Inc. Hess Corp Obsidian Energy Ltd. SandRidge Energy, Inc. Yuma Energy, Inc. (Pre Davis) Berry Petroleum Company LLC Corporation Houston American Energy Corp Corporation SilverBow Resources, Inc. BG Group Diamondback Energy Inc. Inc. OMV Bill Barrett Corporation Earthstone Energy Inc. Isramco, Inc Parsley Energy Inc. SM Energy Company Blue Ridge Mountain Resources, Inc. Ithaca Energy Inc. PDC Energy, Inc. Sonde Resources Corp. BP Plc. Encana Corporation Jones Energy, Inc. PEDEVCO Corp. SRC Energy Inc BPZ Resources Inc Endeavour International Corp Kodiak Oil & Gas Corp. Penn Virginia Corporation Statoil ASA Breitburn Energy Partners LP Energen Corp Kosmos Energy (IFRS US$ Current) Stone Energy Corporation California Resources Corporation Energy XXI Gulf Coast, Inc. Laredo Petroleum PetroChina Inc. Callon Petroleum Enerplus Corporation Legacy Reserves LP Petrominerales Ltd. TNK-BP International Ltd Canacol Energy Ltd. Lilis Energy Inc. PetroQuest Energy, Inc Total Canadian Natural Resources Limited EOG Resources Linn Energy Pioneer Natural Resources Company TransAtlantic Petroleum Ltd. Carrizo Oil & Gas, Inc EP Energy Corporation Lukoil (IFRS) QEP Resources Inc TransGlobe Energy Corporation

Source: U.S. Energy Information Administration, Evaluate Energy Note: Some companies merged or split before 2017. A total of 108 companies existed in second-quarter 2017.

Markets and Financial Analysis Team | Financial Review Second-quarter 2017 20 September 2017 Background • This analysis focuses on the financial and operating trends of 108 global oil and natural gas companies (called the energy companies)

• The data come from the public financial statements each company submits to the U.S. Securities and Exchange Commission, which a data service (Evaluate Energy) aggregates for ease of data analysis

• Several charts show comparisons between energy companies and the U.S. manufacturing industry, collected from U.S. Census Bureau’s Quarterly Financial Report

• For consistency, a company’s assets that were acquired by another company in the group after first-quarter 2012 were kept in the prior-year data

Markets and Financial Analysis Team | Financial Review Second-quarter 2017 21 September 2017 Brief description of terms • Cash from operations is a measure of income

• Capital expenditure represents cash used for property, plant, and equipment

• Financing activities measure inflows/outflows in debt or equity markets including dividends, share issuance or repurchases, and debt issuance or repayments

• Return on equity is a measure of the profit a company earns on money shareholders have invested

• Market capitalization is the total value of all of a company’s publicly traded shares outstanding

Markets and Financial Analysis Team | Financial Review Second-quarter 2017 22 September 2017 Brief description of terms • Net income represents profit after taxes and depreciation

• Asset impairments occur when a company lowers the estimated value of a property to reflect current market value, which may result from loss of production potential or declining oil prices

• Upstream refers to crude oil exploration, production, and other operations prior to refining

• Downstream refers to refinery operations, product sales, and marketing at the wholesale and retail levels

Markets and Financial Analysis Team | Financial Review Second-quarter 2017 23 September 2017