Oil Vs. Natural Gas Revenue Distributions - Part 2

 |  Includes: APA, APC, CHK, COG, EOG, NBL
by: Steven Weitz

<< Return to Part 1

In part 1 of this article, I investigated the oil-to-gas revenue positioning of select companies: EOG Resources (NYSE:EOG), Apache (NYSE:APA), and Chesapeake (NYSE:CHK). All three companies turn out to be heavily weighted towards oil, but it seems as if EOG Resources, followed by Apache, have the most flexibility and growth prospects in the natural gas space if the pricing environment for gas eventually improves.

Please refer back to part 1 of this article as to why it is so important to understand what percent of revenues come from crude oil vs. natural gas for companies in the exploration and production field.

Many companies don't break their revenues down between crude oil and natural gas in their releases, but I decided to spotlight a few that do. I plan for this series of articles to be a valuable tool to refer back to when considering various energy companies, while taking into account recent movements in oil and gas prices.

One thing to consider beforehand: Obviously, the revenues of a certain product are driven partially by the price that product is selling at. So I have included the spot prices of West Texas Intermediate Crude Oil and Brent Crude Oil (the two major prices for oil, WTI for the U.S. and Brent for Europe) along with the Henry Hub Natural Gas spot price (the primary price for natural gas). So while oil-to-gas revenues are partially impacted by these changing prices, comparing how various companies' oil-to-gas revenues changed year-over-year should still be an apples-to-apples comparison.

Price Chart
Type June 30 '12 June 30 '11 Y/Y % Change
WTI Crude Oil $85.04 $95.30 (10.8%)
Brent Crude Oil $94.17 $111.71 (15.7%)
Henry Hub Natural Gas $2.74 4.28 (36.0%)
Click to enlarge

1. Anadarko Petroleum Corporation (NYSE:APC)

Market Cap: $34.3 B

Anadarko Petroleum Corporation has made a slight shift towards oil revenue, but a move this small is most likely just a result of the larger decrease in the price of natural gas relative to crude oil. Overall revenues from oil & gas production were down 13.7%. Anadarko though seems to remain committed to selling natural gas internationally with its expansive shale assets worldwide in environments where natural gas does not stir up the political debate that it does in the U.S.

Anadarko Revenues

3 Months Ended June 30 '12 3 Months Ended June 30 '11 Y/Y % Change
% of Revenue from Crude Oil 74.1% 64.3% 9.8%
% of Revenue from Natural Gas, LNG 25.9% 35.7% (9.8%)
Total Oil & Gas Revenues $3,000 MM $3,476 MM (13.7%)
Click to enlarge

2. Noble Energy Inc. (NYSE:NBL)

Market Cap: $15.3 B

Noble Energy Inc. has made a large jump to oil as now 82.3% of revenues are coming from oil, the highest of any company investigated in this article series. Oil revenue leaped 56.9% y/y while overall revenues notched 19.3% y/y growth. But there is still some intriguing news out of Noble on the natural gas front. In May, the company discovered 991 billion cubic meters of natural gas reserves in Israel and Cyprus. For some indication of the size of this find, the amount uncovered surpasses the domestic needs of both of those countries.

Noble Revenues

3 Months Ended June 30 '12

3 Months Ended June 30 '11

Y/Y % Change

% of Revenue from Crude Oil




% of Revenue from Natural Gas, LNG




Total Oil & Gas Revenues

$934 MM

$783 MM


Click to enlarge

3. Cabot Oil & Gas Corporation (NYSE:COG)

Market Cap: $8.5 B

Of all the companies featured, Cabot Oil & Gas Corporation is clearly the purest natural gas play. This solely domestic company, with most of its drilling coming out of the abundant Marcellus and Eagle Ford shales, had around 80% of their revenues come from natural gas in the latest quarter. Cabot has stuck to their guns the whole way down natural gas' collapse from over $13 in the middle of 2008 to a measly $2.74 currently. The company hopes that the price of natural gas will stabilize long term at higher levels, and if it does, Cabot will definitely be one of those to benefit the greatest.

Cabot Revenues

3 Months Ended June 30 '12

3 Months Ended June 30 '11

Y/Y % Change

% of Revenue from Crude Oil




% of Revenue from Natural Gas, LNG




Total Oil & Gas Revenues

$264 MM

$239 MM


Click to enlarge

Comparing these three companies, Noble Energy seems to stand out with high oil revenues complemented by solid growth prospects in the natural gas space. Cabot offers something most exploration & production companies don't, with its heavy focus on natural gas, and will be the best option if the price dynamic changes course and natural gas becomes more economically feasible at higher margins.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.