Oil and Gas Industry

Revenues and earnings

The sources of a company’s revenues and earnings must be determined. For an integrated oil company, what percentage of revenues and earnings comes from exploration and production, from refining and marketing, or from petrochemicals?

Operating margin

One measure of how efficiently a company functions may be shown in its operating margin, which is determined by dividing operating income (revenues minus operating expenses) by revenues. The operating margin indicates the profitability of basic operating activities, before accounting for interest expense and income taxes.

Capitalization

The ratio of long-term debt to total capitalization is a measure of a company’s financial leverage. Because the oil industry is capital intensive, debt ratios for certain industry participants may be higher than for companies in service-related industries. Due to their more stable cash flows, the integrated oil companies tend to be less leveraged than are smaller independent exploration and production companies or refining and marketing companies.

Industry divisions

The oil and gas business has three major segments; exploration and production of oil and natural gas (the upstream); the transportation, storage, and trading of crude oil, refined products, and natural gas (the midstream); and refining and marketing of crude oil (the downstream). Participants include integrated oil and gas companies, and pure-play companies in various areas, including exploration and production, midstream services, refining and marketing and oilfield services and drilling.

International integrated oil and gas companies

Integrated oil and gas companies are involved in almost every aspect of the oil and natural gas business: the upstream, the midstream, and the downstream. Many integrated oil and gas7companies also make and sell petrochemicals. International integrated oil and gas companies conduct their operations worldwide and are among the largest and most recognized...