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Upstream Companies with the Highest Operating Margins

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Top five upstream operating margins

Now, we’ll discuss the top five upstream companies that reported the highest operating margins in the first quarter.

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Concho Resources

In the first quarter, Concho Resources (CXO) reported operating margins of ~108%—compared to 173% in the first quarter of 2017. The revenues increased 55% YoY (year-over-year) in the first quarter, while the operating income fell ~4%. The operating income was higher in the first quarter of 2017 due to a gain of $286 million on derivatives—recognized under operating costs and expenses in Concho Resources’ income statement. The YoY drop in the operating income (numerator) combined with a significant rise in revenues (denominator) resulted in a YoY drop in Concho Resources’ operating margins in the first quarter.

SM Energy

SM Energy (SM) had an operating profit margin of ~60% in the first quarter—compared to ~44.6% in the first quarter of 2017. The revenue grew 106% YoY, which was the primary reason for the company reporting a higher operating income. The operating income rose 176% YoY—partially offset by a smaller 50% rise in operating expenses.

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Diamondback Energy

In the first quarter, Diamondback Energy (FANG) reported operating margins of 55.7%—compared to 49.5% in the first quarter of 2017. The company’s revenue in the first quarter rose 104% YoY, while the operating expenses rose ~79% YoY—mainly due to an ~96% increase in DD&A expenses. The operating income in the first quarter was ~130% higher—compared to the first quarter of 2017.

Noble Energy

Noble Energy (NBL) reported an operating margin of ~55.7% in the first quarter—compared to ~3.4% in the first quarter of 2017. The higher margins were boosted by higher revenues (which rose 24% YoY) and lower operating expenses in the first quarter. Noble Energy’s operating expenses in the first quarter fell 42%.

SRC Energy

SRC Energy’s (SRCI) operating margin in the first quarter was 52.5%—compared to 37.12% in the first quarter of 2017. The company’s operating margins were boosted by a 236% increase in revenues and partially offset by a 153% rise in operating costs and expenses. SRC Energy’s operating income rose 376%.

Next, we’ll discuss how the companies’ stocks performed in the past year.

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