Jane Van Ryan
Posted April 30, 2010
Publicly traded energy companies have been announcing their first-quarter earnings.
With 10 companies reporting as of April 28, the oil and natural gas industry is averaging earnings of 7.1 cents per dollar of sales. In comparison, Dow Jones Industrial companies are averaging 10.3 cents per dollar. Eighteen of the 30 Dow Jones companies have reported their first-quarter results.
Reports about oil company earnings have tended to focus on the billions of dollars earned each quarter. The earnings are large because the companies are large. Size is an attribute in the energy field, where publicly traded companies have to compete for energy supplies with government-owned or government-supported companies around the globe.
Furthermore, exploring for and producing energy is an expensive undertaking with some wells costing more than $1 billion before any oil or natural gas is produced. Also, oil companies have a significant tax burden. Income tax expenses in 2008 (as a share of net income before income taxes) averaged 53.2 percent, compared to 32.2 percent for the S&P Industrial companies.
According to the Energy Information Administration (EIA), in the three-year 2006-2008 period, the major energy producing companies paid or incurred more than $280 billion in income tax expense.
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