What Is the🍷 Average Profit Margin for the Oil &a🐻mp; Gas Drilling Sector?

Oil and gas industry profit margins are an important variable for those considering energy investments and 𓆏a perennial political issue when gasoline prices rise qu🎐ickly.

Oil and gas industry profits are highly dependent on the revenue generated from sales of oil and gas, commodities subject to particularly sharp price swings. As a result, oil and gas profit margins tend to be volatile. That 澳洲幸运5开奖号码历史查询:volatility means industry profit margins are more useful as signposts for recent trends than as a rationale for long-term investment or policy decisions.

Understanding Net and Operating Profit Margins

The 澳洲幸运5开奖号码历史查询:net profit margin of a company is determined by dividing its 澳洲幸运5开奖号码历史查询:net income (the difference between revenue and expen💞ses) by revenue.

Net Profit Margin Percentage = [(Revenue – Cost of Goods Sold – Operating Expenses – Other Expenses – Interest – Taxes) / Revenue] X 100

澳洲幸运5开奖号码历史查询:Operating profit margin is calculated by dividing 澳洲幸运5开奖号码历史查询:operating income (the difference♍ between revenue and the sum of cost of goods sold, operating expenses and depreciation) by revenue.

Operating Profit Margin Percentage = [(Revenue – Cost of Goods Sold – Operating Expenses – Depreciation, Depletion & Amortization) / Revenue] X 100

Note that the main difference between net profit margin and operating profit margin is that the latter does not include interest, taxes and non-operating expenses other than depr♈eciation, depletion and amortization (DD&A).

Because oil and gas producers often report considerable non-cash DD&A expense, profit measures such as net income and operating income often understate the 澳洲幸运5开奖号码历史查询:cash flow available to be apportioned between 澳洲幸运5开奖号码历史查询:dividends, 澳洲幸运5开奖号码历史查询:share repurchases and 澳洲幸运5开奖号码历史查询:capital spending.

Oil and Gas Drilling Profit Margin

In Q4 2021, the average net margin for oil and gas production was 31.3%, according to CSIMarket. That was up from 3.2% in Q3, -1.4% in Q2, and -22% in Q1, for a 12-month trailing average of 4.7%.

A different online data set based on fiscal year 2020 accounting data calculates the average net profit margin for the 澳洲༒幸运5开奖号码历史查询:oil and﷽ gas production and exploration sector at about 2.8%.

The operating margin for oil and gas production was 44.4% in Q4 2021 and 23% for the full year, according to CSIMarket. For oil and gas exploration and production stocks included in the S&P 500 index, the aggregate operating profit margin was 19.6% in Q4 2021, according to Yardeni Research.

Oil & Gas Profit Trends

By the broadest measure used to calculate the 澳洲幸运5开奖号码历史查询:gross domestic product, aggregate corporate profits from petroleum and coal products increased to a seasonally adjusted annual rate of $11.2 billion in Q3 2021, from $2.7 billion in Q2 2021 and losses at a $55.6 billion annual rate in Q3 2020. Those figures include 澳洲幸运5开奖号码历史查询:midstream profits from shipping and storing crude and 澳洲幸运5开奖号码历史查询:downstream income from refining it in addition to the profits of the upstream oil and gas drillers.

Meanwhile, the reported net profits of 41 large publicly traded oil and gas producers and refiners, also in Q3 2021, totaled $16.7 billion, compared with a loss of $16.7 billion a year earlier. Chevron Corporation (CVX) alone reported Q4 2021 earnings of $5.1 billion and annual fiscal 2021 earnings of $15.6 billion. Chevron had $29.2 billion in annual cash flow from operations, 澳洲幸运5开奖号码历史查询:free cash flow of $21.1 billion and spent $11.6 billion on dividends and share repurchases.

Industry critics contend oil industry profits would be better spent on lowering energy prices, with direct subsidies or through investments in increased production. Energy company investors have strongly disagreed, often pressing for increased share repurchases and dividends.