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