Search For More Oil Gains Energy

U.S. oil companies continue to look for new oil sources as demand increases.

After achieving record profits in 2005, U.S. oil companies are gearing up for challenging years ahead. The industry is under pressure to find more oil supplies as demand from developing nations such as China and India increases.

Oil companies on IndustryWeek's IW 50 Best Manufacturers for 2005 list are responding to increasing demand by exploring, developing and acquiring new oil sources. One IW 50 Best manufacturing company that's playing a key role in locating oil reserves is the Newfield Exploration Co. Based in Houston, Newfield Exploration drills for oil in and around the Gulf of Mexico.

In 2005 the company made several major exploration discoveries, including an oil field in the deepwater Gulf of Mexico, according to the company's fourth-quarter 2005 financial report. Together the oil fields will produce more than 100 million cubic feet per day (MMcfe/d) when production begins in fourth-quarter 2006.

Companies At A Glance

Sunoco Inc.
Philadelphia, Pa.
Primary Industry: Petroleum & Coal Products
Number of Employees: 13,800
2004 In Review
Revenue: $25.5 billion
Profit Margin: 2.4%
Sales Turnover: 3.2
Inventory Turnover: 33.5
Revenue Growth: 42.2%
Return On Assets: 8.7%
Return On Equity: 38.9%


Newfield Exploration Co.
Houston, Texas
Primary Industry: Petroleum & Coal Products
Number of Employees: 762
2004 In Review
Revenue: $1.4 billion
Profit Margin: 23.1%
Sales Turnover: 0.3
Inventory Turnover: 46.5
Revenue Growth: 33%
Return On Assets: 11.4%
Return On Equity: 22.8%


Marathon Oil Corp.
Houston, Texas
Primary Industry: Petroleum & Coal Products
Number of Employees: 27,756
2004 In Review
Revenue: $49.7 billion
Profit Margin: 2.5%
Sales Turnover: 2.1
Inventory Turnover: 15.6
Revenue Growth: 20.7%
Return On Assets: 6.5%
Return On Equity: 20.8%


Murphy Oil Corp.
El Dorado, Ark.
Primary Industry: Petroleum & Coal Products
Number of Employees: 5,826
2004 In Review
Revenue: $8.4 billion
Profit Margin: 8.4%
Sales Turnover: 1.5
Inventory Turnover: 21.7
Revenue Growth: 56.4%
Return On Assets: 14.9%
Return On Equity: 35.9%
U.S.-based oil companies have also been active overseas. Newfield Exploration has begun developing four fields off the coast of Malaysia and two oil fields in China's Bohai Bay and has discovered an oil field in the North Sea. El Dorado, Ark.-based oil exploration company Murphy Oil Corp. has wells pending in Malaysia and also is drilling wells in the Gulf of Mexico.

Houston-based Marathon Oil Corp. recently said a subsidiary had discovered the company's 13th well in offshore Angola. The well, called Mostarda-1, is the company's fourth in the Block 32 development area, moving it closer toward commercial development.

"Marathon is encouraged with the results of the Mostarda well, and we will undertake additional studies to determine if this discovery can be developed with the nearby Gindungo, Canela and Gengibre pools," said Philip Behrman, Marathon senior vice president of worldwide exploration, in a Feb. 14 statement.

Additionally, oil companies are continuing to make acquisitions. Sunoco Logistics Partners LP, a business unit of Philadelphia-based oil refiner Sunoco Inc., completed in March the purchase of two Texas crude oil pipeline systems from Alon USA Energy Inc. and Black Hills Energy Inc. Sunoco purchased the system from Alon USA for $68 million and acquired the Black Hills Energy pipeline for $40.9 million, according to a company statement.

"These acquisitions will be a significant addition to our Western crude oil investment platform," said Sunoco Logistics President and CEO Deborah Fretz in a March statement. "Not only will they allow for the continued growth of our Nederland, Texas, terminal, but our customers will be provided with additional flexibility for our crude oil supply."

ConocoPhillips Co., also based in Houston, acquired the Wilhelmshaven refinery in Wilhelmshaven, Germany, from Louis Dreyfus Energy Holdings Ltd. In addition to the refinery, which produces 275,000 barrels per day, ConocoPhillips will receive a marine terminal, rail and truck-loading facilities and a tank farm, as well as Louis Dreyfus Refining and Marketing Ltd.

Meanwhile, several oil companies on the IW 50 Best Manufacturers list for 2005 are forecasting decreased production because of damages caused by hurricanes Katrina and Rita. In 2005, Murphy Oil lost $32.7 million from Hurricane Katrina-related expenses. The company recently said Gulf of Mexico production will continue to be lower than normal while one of its Gulf fields remains offline. Progress is being made, though, with the scheduled April restart of Murphy Oil's Meraux, La., plant. Newfield Exploration reports delayed deliverability of about 80 MMcfe/d of oil from hurricane-related damages.

ConocoPhillips operated at 88% worldwide refining capacity during fourth-quarter 2005 from hurricane-related damages at its Alliance refinery in Belle Chasse, La., said Jim Mulva, chairman and CEO, in a January statement. That refinery along with Murphy Oil's Meraux facility and BP America Inc.'s Texas City, Texas, refinery comprise 5% of the nation's refining capacity, according to a Feb. 12 story in New Orleans' The Times-Picayune.

Despite the production slowdown, few people are sympathizing with the oil industry. On March 14, oil executives, including ConocoPhillips' Mulva, continued to defend before Congress their companies' record-setting year.

ConocoPhillips has joined other big oil companies in their efforts to explain record profits amid high fuel prices by posting a frequently asked questions section on its Web site that addresses commonly asked questions about oil-industry profits. It can be accessed at www.conocophillips.com/newsroom/other_resources/energyanswers/oil_profits.htm.


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