Lower production costs per barrel of oil equivalent (BOE) and increased production levels led to a higher return on equity for these companies for the fourth quarter of 2018 than in any quarter from 2013 through 2018.


EIA calculates that these companies accounted for about one-third of total US crude oil and natural gas liquids production in the fourth quarter of 2018. However, EIA states that their results do not necessarily represent the US oil production industry as a whole.

The majority of these companies operate in Lower 48 US onshore basins, with some in the Federal Offshore Gulf of Mexico and Alaska, and some in several other regions across the globe. Because of various corporate mergers and acquisitions in 2018, the number of US producers that EIA examined in this analysis reduced from 46 companies in 2017 to 43 companies in 2018.

The overall income statements for these 43 companies indicate a trend of relatively low increases in expenses directly regarding upstream production in 2018. Although these upstream production expenses per barrel typically relate with crude oil prices, the size of these increases in 2018 was small compared with the increase in prices.

The annual average West Texas Intermediate (WTI) crude oil price rose 28% from 2017 to average $65 per barrel (b) in 2018, but expenses directly related to upstream production activities increased 16% between 2017 and 2018 to $24/BOE.

When taking into consideration depreciation, impairments, and other costs not directly related to upstream production, expenses for these 43 companies averaged $48/BOE in 2018, the lowest amount from 2013 to 2018.

Unlike production expenses, between 2017 and 2018, upstream revenue for these 43 companies grew 31% to average $48/BOE in 2018, primarily due to the increases in average energy prices and production. As crude oil prices decreased in late 2018, their upstream revenue fell 11% between the third and fourth quarters of 2018.

Finally, contributions to revenue from derivative hedges for these 43 companies reached the largest total for any quarter since the fourth quarter of 2014. Financial hedging can be an insurance policy, reducing risk by stabilizing revenue for producers. Namely, when oil prices are lower than the prices at which producers established a hedge, the producer receives higher revenues than selling at market prices. When oil prices rise higher than the hedged price, hedging leads to a loss that is treated as an operating expense.