Saturday, April 27, 2013

US Big Oil & Gas Corps 1Q 2013 GAAP Pretax Income Down 11%.....US Congress Responds By Fleeing DC

I found 14 US Big Oil & Gas Corps, which have filed their calendar 1Q 2013 earnings with the SEC by April 26, 2013, and which had Pretax Income of more than $200 mil in either the 1Q 2013 or the 1Q 2012.

These 14 US Big Oil & Gas Corps generated US Generally Accepted Accepted Accounting Principles (GAAP) Total Pretax Income in the 1Q 2013 of $38,386 mil, which was down 10.5% from the $42,894 mil earned in the 1Q 2012.

On the other hand, these same 14 US Big Oil & Gas Corps generated GAAP Total After-tax Net Income which was down by a substantially lower 2.4% in the 1Q 2013 as compared with the 1Q 2012.

So, what's up with the 8.1% positive earnings spread from the down 10.5% Pretax Income in the 1Q 2013 to the down 2.4% After-tax Net Income in the 1Q 2013?

Well, it's all about the effective income tax rate and financial engineering.

In total, these 14 US Big Oil & Gas Corps slashed their effective income tax rates on a book basis from 42.9% of Pretax Income in the 1Q 2012 to 37.7% in the 1Q 2013.  The reported effective income tax rates of the largest US Big Oil & Gas Corps are higher than that of US Corps in Other Sectors because these largest US Big Oil & Gas Corps appear to include some of the royalties paid to foreign countries to extract natural resources as foreign income tax expense, rather than as royalty expense.

Having the US Big Oil & Gas Sector generating a total decline of 10.5% in Pretax earnings in the 1Q 2013 is not good for the US economy.  And it also is not good for US job creation in this key US sector.  The key question is that, given these poor operating results, just how much shedding of US jobs will there be in this key US Big Oil & Gas Sector.

So, how does the US Congress react to this poor 1Q 2013 quarter for the key US Big Oil & Gas Sector?  Well, they flee Washington DC.

It is pretty clear that substantial fiscal stimulus to the US economy has been needed for quite some time.  So how has the US Congress responded?  Now granted the Obama Administration should have been bolder and more creative, but the US Congress has rejected nearly every recommendation made by the Obama Administration to spur the US economy and US job creation.

And so what has the US Congress done instead?  They passed an immediate severe austerity Sequester which substantially harms US economic growth, US job creation, the profits of these US Big Oil & Gas Corps, of US Health Care Corps, of US Manufacturers, of US Technology Corps, and of the huge Dow Industrial Corps.

And what is the intellectual foundation that the US Congress used to pass this immediate severe austerity Sequester, which results in a substantial reduction in US jobs and US economic growth?  An economic study by two Harvard professors which concludes that when the US debt level is 90% of US GDP, that as if by magic, GDP growth drops dramatically.

And now that it has been proven that this economic study is clearly erroneous, how does the US Congress react to the complete collapse of the intellectual foundation of their immediate severe austerity Sequester initiative?  By ignoring its collapse.

Below here is the GAAP Pretax Income, GAAP Income Tax Expense, and GAAP Effective Income Tax Rates on a book basis for both the calendar 1Q 2013 as well as the 1Q 2012 for each of these 14 US Big Oil & Gas Corps:






1Q 2013


1Q 2012

GAAP


1Q 2013 GAAP

1Q 2012 GAAP
GAAP Combined

1Q 2013 GAAP Effective
1Q 2012 GAAP Effective
Pretax Net

GAAP Income Income
GAAP Income Income
Income Income

Pretax Tax Tax
Pretax Tax Tax
Increase Increase

Income Expense Rate
Income Expense Rate
(Decrease) (Decrease)

mil $s mil $s

mil $s mil $s

mil $s mil $s
US Big Oil & Gas Corps




















ExxonMobil 16,038 6,277 39.1%
17,515 7,716 44.1%
(1,477) (38)
Chevron 10,283 4,044 39.3%
12,069 5,570 46.2%
(1,786) (260)
ConocoPhillips 3,787 1,763 46.6%
4,265 2,086 48.9%
(478) (155)
Occidental Petroleum 2,203 844 38.3%
2,699 1,139 42.2%
(496) (201)
Schlumberger 1,679 412 24.5%
1,687 400 23.7%
(8) (20)
Hess 1,653 470 28.4%
867 328 37.8%
786 644
Kinder Morgan Inc 937 279 29.8%
401 96 23.9%
536 353
National Oilwell Varco 724 224 30.9%
873 269 30.8%
(149) (104)
Baker Hughes 400 132 33.0%
573 193 33.7%
(173) (112)
Noble Energy 318 86 27.0%
335 86 25.7%
(17) (17)
Helmerich & Payne 232 81 34.9%
205 75 36.6%
27 21
Diamond Offshore 206 30 14.6%
251 66 26.3%
(45) (9)
Nabor Industries 109 11 10.1%
212 69 32.5%
(103) (45)
Halliburton (183) (172) 94.0%
942 304 32.3%
(1,125) (649)











Total all 14 Big Oil & Gas 38,386 14,481 37.7%
42,894 18,397 42.9%
(4,508) (592)









   
Total Pretax Income % Decrease -10.51%



















Total After-tax Combined Net Income % Decrease -2.42%



















= Positive Income Tax Earnings Spread 8.09%