Three years into the U.S. oil boom, the record profits appear to be leveling off.
Oil prices are relatively flat. And increased drilling costs are cutting into the bottom line of many companies.
Financial performance of the U.S. oil companies has been mixed, said Pavel Molchanov, an analyst with Raymond James.
“In oil, it’s case by case,” he said this week. “The companies that have the much more significant growth were more natural gas focused.”
Because of shortages caused by the cold winter, U.S. natural gas prices averaged $5.20 per MMBtu in the first three months of 2014. Last year, they averaged less than $3.50.
Oil prices have held steadier. West Texas Intermediate, the U.S. benchmark crude, was trading for $99 a barrel on average through the first three months of 2013, up $4 from a year ago.
But some companies, which employ complex contracts to sell oil, have struggled to get the same prices they did a year ago.
Denbury Resources in Plano, Texas, which specializes in extracting oil from mature fields, reported first-quarter profit of $58 million Tuesday. That was down from $88 million a year ago.
The company said that through the first three months of the year its oil was selling for $98 a barrel on average, down from $106 in the same period in 2013. Production costs were up 5 percent to more than $26 a barrel.
“We are more concerned about regional price differentials falling, especially in the Gulf Coast,” Robert Bellinski, an analyst for the research firm Morningstar, wrote in a report Tuesday.
Pioneer Natural Resources, the Irving, Texas-based firm with heavy production in West Texas, reported first-quarter profit of $123 million Tuesday. That was up more than 10 percent from a year ago.
Pioneer was selling oil for less than $93 a barrel, well below the rate on the New York Mercantile Exchange. That was an improvement over a year ago, and the company’s production costs actually decreased to around $14 a barrel.
CEO Scott Sheffield said he expected production to increase between 14 and 19 percent in 2014.
“Looking beyond 2014, we expect to continue to ramp up our horizontal rig count in the Spraberry/Wolfcamp by five to 10 rigs per year and more than double production by 2018 as compared to 2013,” he said in a statement.