Oil Drilling - Gas Extraction in The US Industry Report

WWW.IBISWORLD.
COM Oil Drilling & Gas Extraction in the USDecember 2019 1
It’s a gas: Industry set to return to revenue growth

moving forward as commodity prices rebound
IBISWorld Industry Report 21111

Oil Drilling & Gas
Extraction in the US
December 2019 Thomas Henry
2 About this Industry 16 International Trade 34 Operating Conditions

2 Industry Definition 19 Business Locations 34 Capital Intensity
2 Main Activities 35 Technology and Systems
2 Similar Industries 21 Competitive Landscape 36 Revenue Volatility
2 Additional Resources 21 Market Share Concentration 37 Regulation and Policy
21 Key Success Factors 38 Industry Assistance
3 Industry at a Glance 21 Cost Structure Benchmarks
23 Basis of Competition 39 Key Statistics
4 Industry Performance 24 Barriers to Entry 39 Industry Data
4 Executive Summary 25 Industry Globalization 39 Annual Change
4 Key External Drivers 39 Key Ratios
6 Current Performance 26 Major Companies 40 Industry Financial Ratios
8 Industry Outlook 26 Chevron Corp.
11 Industry Life Cycle 27 Exxon Mobil Corporation 41 Jargon & Glossary
29 BP PLC
13 Products and Markets 30 ConocoPhillips Company
13 Supply Chain 32 Devon Energy Corp.
13 Products and Services 32 Royal Dutch Shell PLC
14 Demand Determinants 33 Hess Corp.
15 Major Markets
www.ibisworld.com | 1-800-330-3772 | info @ibisworld.com

WWW.IBISWORLD.COM Oil Drilling & Gas Extraction in the USDecember 2019 2
About this Industry
Industry Definition Companies in this industry operate and production of natural gas; sulfur
develop oil and gas field properties. recovery from natural gas; and recovery
Activities include: the exploration and of hydrocarbon liquids. Companies may
production of crude petroleum; the operate oil and gas wells on their own
mining and extraction of oil from oil account or for others on a contract or
shale and oil sands; the exploration and fee basis.
Main Activities The primary activities of this industry are

Extracting crude petroleum and natural gas
Extracting natural gas liquid
Exploring for crude petroleum and natural gas
Drilling, completing and equipping wells
Operating separators, emulsion breakers, desilting equipment and field gathering lines for crude petroleum
The major products and services in this industry are

Crude oil and lease condensate
Dry natural gas
Natural gas liquids
Similar Industries 21311 Oil & Gas Field Services in the US

Operators in this industry perform oil field services for operators on a contract or fee basis.
32411 Petroleum Refining in the US

Operators in this industry refine crude petroleum into refined petroleum and liquid hydrocarbons.
32511 Petrochemical Manufacturing in the US

Operators in this industry manufacture acyclic and cyclic aromatic hydrocarbons from refined petroleum or
liquid hydrocarbons.
32512 Oxygen & Hydrogen Gas Manufacturing in the US

Operators in this industry recover helium from natural gas.
Additional Resources For additional information on this industry

www.api.org
American Petroleum Institute
www.iadc.org
International Association of Drilling Contractors
www.eia.gov
US Energy Information Administration
WWW.IBISWORLD.COM Oil Drilling & Gas Extraction in the US December 2019 3
Industry at a Glance
Oil Drilling & Gas Extraction in 2019
Key Statistics Revenue Annual Growth 14–19 Annual Growth 19–24

Snapshot
$413.2bn -0.4% 7.6%
Profit Exports Businesses
$11.6bn $87.0bn 7,633

Revenue vs. employment growth World price of crude oil
Market Share
Chevron Corp. 50 125
6.5%
25 100
Exxon Mobil
$ per barrel
% change
Corporation 0 75
5.2%
BP PLC -25 50
4.8%
-50 25
ConocoPhillips Year 11 13 15 17 19 21 23 25 Year 12 14 16 18 20 22 24 26
Company Revenue Employment
4.5% SOURCE: WWW.IBISWORLD.COM
Products and services segmentation (2019)
p. 26 4.9%
Dry natural gas
Key External Drivers

World price of crude oil
25.1%
World production of oil Natural gas liquids
World price of natural gas

Regulation for
the Petrochemical
Manufacturing industry
Trade-weighted index
Total vehicle miles
70.0%
Crude oil and
lease condensate
p. 4
SOURCE: WWW.IBISWORLD.COM
Industry Structure Life Cycle Stage Mature Regulation Level Heavy

Revenue Volatility Very High Technology Change Medium
Capital Intensity High Barriers to Entry High
Industry Assistance Low Industry Globalization High
Concentration Level Low Competition Level High
FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 39
Industry Performance
Executive Summary | Key External Drivers | Current Performance
Industry Outlook | Life Cycle Stage
Executive Summary In recent years, the Oil and Gas gas resources increasingly meet domestic
Extraction industry has been challenged demand. Revenue is expected to rise an
by a decline in oil and natural gas prices. estimated 13.3% in 2019 alone, as the
Domestic production of oil and gas has Organization of Petroleum Exporting
steadily increased during the five years to Countries in addition to major non-
2019, and operators have positioned member producers such as Russia,
themselves to perform strongly as prices Mexico and Kazakhstan (OPEC+)
rise in the five years to 2024. Although adhered in aggregate to individually
the industry remains exposed to global pledged output cuts through 2019.
commodity price fluctuations, IBISWorld The future of the industry is expected
expects that the industry will sustain to increasingly hinge on improvements
itself moving forward due to its highly in drilling technology and techniques. As
lucrative operations. industry operators deplete their
During the five years to 2019, industry reserves, it will become necessary to
revenue has decreased at an estimated improve efficiency and minimize waste
during the next five years. Industry
operators replenish their reserves
The
future of the industry will increasingly through either acquisitions or
exploration. The number of industry
hinge on improvements in drilling technology operators is expected to increase as
previously uneconomical resources
annualized rate of 0.4% to $413.2 billion. become accessible. In the five years to
The industry includes globalized 2024, IBISWorld expects industry
companies that engage in all stages of the revenue to expand at an annualized rate
oil and gas production process. These of 7.6% to total $596.6 billion. This rate,
companies benefited the most from the however, is inflated due to steep revenue
emergence of hydraulic fracturing declines of 41.9% and 9.8% in 2015 and
(commonly known as fracking) and 2016, respectively, causing growth to
horizontal drilling techniques during the start from a relatively low base.
period. Furthermore, the United States Improving technology is anticipated
continued to lessen its reliance on foreign to assist operators in meeting
sources of oil and gas, most notably those environmental concerns and maximize
in the Middle East. By reducing exposure well efficiency. As a result, IBISWorld
to foreign political events and pressure, expects industry companies will be able
domestic operators are expected to to continue profitable and successful
perform strongly as US-produced oil and operations in the United States.
Key External Drivers World price of crude oil demand conditions. Increasing levels of
The basic principles of supply and demand global production reduce the price of
determine the world price of oil. Oil prices crude oil; conversely, falling levels of
have a history of exhibiting high volatility, supply increase prices. World production
and any increase positively affects industry of oil is expected to increase in 2019.
revenue and profit. The world price of
crude oil is expected to decline in 2019. World price of natural gas
International and local trends in supply
World production of oil and demand influence the price of
Global production levels of oil influence natural gas. The price of natural gas is
industry revenue according to supply and often volatile and significantly affects
Key External Drivers industry revenue. When the price of dollar relative to foreign currencies.
continued natural gas goes up, industry revenue When the TWI decreases, US
also increases. The world price of natural products become less expensive on
gas is expected to fall in 2019, the global market. However, an
representing a potential threat to increasing TWI decreases the
the industry. attractiveness of domestic products on
the international market as the dollar
Regulation for the Petrochemical appreciates. As the United States seeks
Manufacturing industry to decrease its reliance on foreign oil,
Regulation for the Petrochemical domestic producers will export a
Manufacturing industry (IBISWorld greater proportion of their products.
report 32511) has been increasing due to The trade-weighted index is expected
environmental disasters associated with to rise in 2019.
its operations. New hydraulic fracturing
techniques to extract previously Total vehicle miles
nonviable sources of natural gas and oil If people drive more, there is
have increased regulatory pressure on the more demand for finished oil products.
industry, as environmental concerns The Oil Drilling and Gas Extraction
about water contamination and pollution industry provides the raw materials that
have not been fully addressed. Regulation refineries require to produce gasoline,
for the Petrochemical Manufacturing diesel and other vehicle fuels. So an
industry is expected to continue increase in the number of vehicle miles
increasing in 2019. driven can positively influence the
industry. In 2018, IBISWorld expects
Trade-weighted index total vehicle miles to increase,
The trade-weighted index (TWI) representing a potential opportunity
represents the value of the US for this industry.
World price of crude oil World production of oil
125 4
3
100
$ per barrel
2
% change
75
1
50
0
25 -1
Year 12 14 16 18 20 22 24 26 Year 14 16 18 20 22 24 26
Current The Oil and Gas Extraction industry

benefited from improving technology Industry revenue
Performance and strong demand for energy
50
products during the five years to
2019. The emergence of fracking and
25
horizontal drilling enabled industry
operators to ramp up production in
% change
patches historically viewed as marginal 0
and uneconomic. The United States
also increasingly emphasized energy -25
self-sufficiency during the past five
years. While trade still remains -50
significant, industry operators began to Year 11 13 15 17 19 21 23 25
shift their long-term focus toward
domestic production of oil and gas SOURCE: WWW.IBISWORLD.COM
products. However, revenue fell 41.9%

in 2015 and an additional 9.8% in 2016 entirely offset overall industry
due to persistently low hydrocarbon growth during the period.
prices. Although revenue grew from IBISWorld expects total industry
2013 to 2014 and again later during the revenue will fall at an annualized
period, the disproportionally extreme rate of 0.4% in the five years to 2019
drops in price are anticipated to to $413.2 billion.
Constrained Oil and gas companies must seek out and downstream markets around the country.
profitability develop deposits of natural resources. This problem was highlighted in April
The high costs and risk of exploration 2019 when prices at the Waha hub, the
inherent in these operations are determinant for the price of natural gas
systematic throughout the industry, but originating in the Permian, dropped
exploration has the potential to be below zero to set record lows of -$4.28
extremely profitable. Profit in the per Btu, indicating suppliers would
industry has declined in the five years to actually have to pay per unit of takeaway
2019, but this is largely due to an to market. This price inversion was a
increasing US supply of both oil and result of production vastly outpacing
natural gas exerting downward pressure takeaway and storage capacity in the
on prices. As production levels increased, region, and resulted in the large-scale
so has the need for pipeline flaring of natural gas.
infrastructure, especially in areas In 2019, profit is estimated to account
surrounding the Gulf of Mexico, Permian for 2.8% of industry revenue. Intensifying
Basin and the Bakken formation. This competition has pressured industry
shortage in pipeline infrastructure has operators’ profit margins over the five
led to occasional supply gluts in Cushing, years to 2019, as smaller companies
OK, a major US oil and gas entered the market to capitalize on new
transportation hub. As production technologies and opportunities. Though
continues at elevated levels, industry the largest players are expected to
operators are expected to continue continue acquiring small companies to
requiring additional capacity to transport expand their reserves, some smaller
crude products to refineries and companies are expected to engage in
Constrained projects that would be too small for the to increase at an annualized rate of 2.8%
profitability largest companies to develop. Advances to an estimated 7,633 in 2019. This
in directional drilling and fracking number includes small, nonemploying
continued
technology have given rise to an enterprises, as reported by the US Census
increasing number of small operators Bureau. From 2002 to 2015, these
targeting historically economically companies routinely accounted for more
inhibitive shale deposits. Therefore, the than 90.0% of all operators in the
number of industry operators is expected industry (latest data available).
A global industry Oil and natural gas are highly globalized

commodities that serve a variety of This
industry is highly
purposes. Best known for gasoline, oil dependent on global
provides many downstream industries
with component materials that are trends in energy demand
staples of day-to-day life. Additionally,
natural gas is the fuel of choice for a Recent price declines dramatically
sizeable portion of electricity generation influenced this rate, as high levels of
in the United States. Without these supply and weakening demand from
commodities, many facets of the global emerging markets pressured the
economy would not be able to function as commodity. The world price of natural
they do now. Consequently, this industry gas is expected to fall at an annualized
is highly dependent on global trends in rate of 15.5% during the same period for
energy demand. When demand is strong, largely the same reasons. Despite revenue
as it has been during the five years to declines, employment is expected to grow
2019, the industry generally benefits and as the industry (in aggregate) recovers
it becomes more economical to seek new from the 2015-2016 revenue dip.
deposits. However, 2015 and 2016 served Employment in the industry has
as a reminder that supply also plays increased at an estimated annualized rate
an important role in the global of 7.1% to 194,390 workers over the five
commodity market. years to 2019, including steep 14.2%
During the five years to 2019, the and 26.1% increases in 2017 and 2018,
world price of crude oil is expected to respectively. Wages followed accordingly,
decline at an annualized rate of 8.1%. increasing at an annualized rate of 5.5%.
Trade’s growing In late 2015, Congress overturned the Consequently, over the five years to 2019,
importance 40-year-old ban on US crude oil exports exports are expected to have increased at
due to pressure from industry operators. a strong annualized rate of 22.5% to
Advocates of free trade of crude oil expect $87.0 billion, accounting for 21.1% of
US producers will benefit from the ability industry revenue in 2019. Conversely,
to sell products abroad, commanding due to increasing domestic production,
higher prices. According to the latest imports declined at an annualized rate of
report by the US Energy Information 4.6% to $170.4 billion, or 34.3% of
Administration, domestic crude oil domestic demand.
exports are anticipated to average more Furthermore, the OPEC+ largely held to
than 15.1 million barrels per day in 2019. its agreement to cut output until mid-2019,
Trade’s growing which bolstered prices during the first half

importance continued of 2019. As a result, industry revenue is
expected to increase 13.3% in 2019.
Industry The Oil Drilling and Gas Extraction

industry is expected to grow substantially
revenue is expected to grow at an
annualized rate of 7.6% to reach $596.6
Outlook in the five years to 2024. Along with rising billion during the five years to 2024,
output and price of natural gas, recovering including a projected spike of 13.3% in
crude oil prices will likely drive the 2019. This forecast growth rate is inflated,
industry’s strong financial performance. however, due to the sharp fall in industry
Global economic growth will increase revenue in 2015 and 2016. Additionally,
these prices as emerging economies IBISWorld anticipates that industry profit
continue to demand oil and natural gas. will gradually recover over the five years to
Additionally, natural gas will still be a 2024. Gains in revenue will flow through
hotbed for investment as operators to the bottom line as industry operators
continue to extract from basins in North focus on containing costs, with exploration
Dakota and the Appalachians. In light of and production activities becoming more
these favorable conditions, industry efficient as technology improves.
Global demand Global demand for oil is expected to be

controls the industry strong, as world economic growth Revenue is expected
continues to accelerate over the next five
years. Emerging economies will continue to expand alongside
to build essential infrastructure and their continued oil and natural
citizens will increase consumption of
petroleum-based products; therefore,
gas price increases
emerging markets are anticipated to grow
faster than their more developed The rollercoaster conditions that the
counterparts. As global demand industry experienced in recent years are
increases, more companies will serve expected to smooth out over the next five
these emerging economies, slowing years. Early during the period, revenue is
expansion opportunities in the United expected to expand alongside continued
States despite overall higher demand. oil and natural gas price increases and
Nevertheless, the number of growth in output. However, large oil-
establishments in the United States is producing countries will aim to increase
projected to grow at an annualized rate of output following a possible end of
5.9% to 12,862 over the five years to production cuts, which would create new
2024; however, similar to revenue productive capacity. The resulting rise in
estimates, this growth rate is inflated due supply could likely subdue growth in oil
to the struggles during the past five years. prices in the long term. In addition, more
Thus, during the 10-year period from crude oil held by countries in OPEC+
2014 to 2024, the number of would be available during this period,
establishments is expected to rise at a which is typically of lighter and sweeter
slightly slower annualized rate of 4.5%. grade than most refineries seek.
Global demand Surging demand will likely exceed exports are expected to increase at an
controls the industry supply later in the period, however, and annualized rate of 7.7% to $125.8 billion.
US exports will increase over time. The Once again, growth is inflated because
continued
US Energy Information Administration falling prices and revenue in 2015 and
estimates US crude oil exports will 2016 constrained international
exceed 1.2 million barrels per day in the trade. As a percentage of domestic
next decade, up from its 2019 levels. In demand, imports are anticipated
the five years to 2024, imports are to rise only slightly to 34.3%, while
expected to increase at an annualized exports are expected to account for
rate of 7.6% to $245.2 billion, while 21.1% of revenue.
Rising output Local crude oil output is projected to

expand moderately over the next five years Localcrude oil output
as rising crude oil production in the Gulf of
Mexico offsets falling output from mature
is projected to expand
oil fields in Alaska and the lower 48 states. moderately over the next
Some of the increased production will five years
reflect the lifting of a moratorium on new
offshore drilling on the US outer-
continental shelf, in addition to areas in nonrenewable electricity generation
Alaska previously designated as capacity planned for the United States
environmentally sensitive. The moratorium during the period will be produced using
on drilling on the shelf, put in place after an natural gas. New technologies are
oil spill in the 1980s, was lifted in late 2010. expected to enhance natural gas-fired
However, the Gulf of Mexico remains a electricity generation, making it as or
hotbed for hurricane activity, with the more affordable than coal-fired
potential for natural disaster disruption generation, formerly the lowest-cost fuel.
continuing to pose a threat to offshore oil Natural gas also has an environmental
drilling and extraction. advantage over coal and crude oil in that
Natural gas production is also forecast its emission of most pollutants is lower.
to expand. New producing fields, In addition, gas-fired generation has
especially in the Marcellus Shale region much lower capital costs than nuclear
of the Appalachian Basin and the Bakken and coal-based generation, giving it a
Formation in North Dakota, will continue financial advantage in the uncertain
fueling supply growth through 2024. environment surrounding electricity
Additionally, these regions are expected deregulation. Higher levels of natural gas
to spur employment growth, at an output will meet most of the growth in
anticipated annualized rate of 7.5% to demand, but imports will also play an
279,156 workers during the five years to important role. For instance, Canada is
2024. Growing demand for natural gas forecast to continue expanding its exports
will reflect its increasing use in of natural gas to the United States
generating electricity. Most new and through 2024.
Minor competition While biofuels (primarily ethanol, but

also biodiesel) are expected to grow in Biofueloutput levels are
importance over the next five years, likely to remain relatively
output levels are likely to remain
relatively low, meaning these fuels will low
fail to meaningfully displace domestic oil
production. Ethanol is viewed as offering contains standards relating to producing
environmental benefits and also plays a a certain amount of renewable fuel (i.e.
minor role in reducing dependence on the renewable fuel standard, or RFS).
imported crude oil. Most of the ethanol Yearly target volumes are determined by
used in the United States (more than the Environmental Protection Agency.
90.0%) is blended with gasoline to The RFS required 11.1 billion gallons in
produce fuel containing 10.0% ethanol to 2009; however, it is expected to increase
lift the oxygen content of the fuel. to 36.0 billion gallons by 2023. Even so,
In 2007, Congress passed the Energy these requirements will likely not offset
Independence and Security Act, which industry growth in the five years to 2024.
Life Cycle Stage The industry has well-established
products and participants
The industry has begun using new techniques and
technologies to capitalize on new resources
The industry’s major players are responding to
market developments by merging operations
The industry has discovered new resources to extract
Industry Life Cycle The Oil Drilling and Gas Extraction decline. Though the drilling moratorium
industry is in the mature phase of its life has been lifted for deepwater oil
cycle. Industry value added (IVA), a exploration, it will be some time before
Thisindustry measure of the industry’s contribution to increased extraction adds to the
is M
ature the overall economy, is expected to industry’s output at a steady rate.
decline at an annualized rate of 1.0% in However, if output from new oil
the 10-year period to 2024. US GDP, exploration is significant, the industry’s
however, is expected to grow an life cycle may change. At the same time,
annualized 2.1% during the same period. the output of natural gas is expected to
The importance of oil and gas extraction continue expanding. This increase is
will continue to ensure the relevance of expected to provide growth opportunities
this industry. Recent discoveries in the in other downstream industries such as
Bakken oil field in North Dakota and the Coal and Gas Powered Generation
Appalachian basin have bolstered the (IBISWorld report 21111a).
United States’ supply of natural gas Other likely candidates for energy
resources. Improved technologies generation have emerged as well.
enabled companies to use horizontal Technologies that generate biofuels,
drilling and hydraulic fracturing to solar, wind, and other types of renewable
extract previously uneconomical supplies energies seek to displace oil and gas
from shale formations in these regions. energy generation. Most of these
However, growth in domestic oil technologies are in the growth phase of
output is uncertain. Most of the major oil their life cycles; however, it is unlikely
fields in the United States were that they will pose major threats to the
discovered decades ago and are now in industry over the five years to 2024.
Products & Markets

Supply Chain | Products and Services | Demand Determinants
Major Markets | International Trade | Business Locations
Supply Chain KEY BUYING INDUSTRIES

22121 Natural Gas Distribution in the US
This industry distributes natural gas to end users.
32411 Petroleum Refining in the US
Petroleum refineries absorb more than half the industry’s output.
KEY SELLING INDUSTRIES

21311 Oil & Gas Field Services in the US
This industry includes oil and gas well drilling and other support industries.
33121 Metal Pipe & Tube Manufacturing in the US
This industry supplies pipe and tube to oil and gas producers.
33391 Pump & Compressor Manufacturing in the US
This industry supplies pumping equipment to oil and gas producers.
Products and Services Products and services segmentation (2019)
4.9%
Dry natural gas
25.1%
Natural gas liquids
70.0%
Crude oil and lease condensate
Total $413.2bn SOURCE: WWW.IBISWORLD.COM
The Oil Drilling and Gas Extraction until late 2016. However, as natural gas
industry’s main products are crude oil prices recover, IBISWorld expects natural
and natural gas, including both dry gas gas to regain some of its share of industry
and natural gas plant liquids. Generally, revenue. Variation in product share is
it is not unusual for product share in this also affected by production from new
industry to vary markedly during short fields, as it tends to come on stream in
periods of time depending on the pace of fairly large increments, adding to
price movements and output trends. the potential for substantial shifts in
Such is the case with the recent outburst product share.
in natural gas availability, a trend that
has driven prices down as supply has Crude oil
drastically increased. Elevated prices in Crude oil is expected to account for an
crude oil helped it expand its share of estimated 70.0% of total industry
revenue; though the price of oil collapsed revenue in 2019. Crude oil is a naturally
beginning in late 2014 and continuing occurring mixture of hydrocarbons that is
Products & Markets
Products and Services located in geological formations and can of methane. Natural gas is typically found
continued be refined into many consumer products with crude oil and other fossil fuels. In
including gasoline, diesel and plastics. 2019, natural gas is expected to account
High oil prices in the early portion of the for 30.0% of industry revenue, with
past five years helped drive exploration 25.1% of natural gas production in the
and production in unconventional form of natural gas plant liquids. Overall,
resource deposits. According to data from natural gas prices decreased as there
the EIA, crude oil output is expected to have been large natural gas discoveries in
increase at an annualized rate of 3.2% the Appalachian Basin and the Bakken
over the five years to 2024, while formation in North Dakota. Furthermore,
IBISWorld expects the world price of hydraulic fracturing and horizontal
crude oil to increase at an annualized drilling techniques have enabled the
rate of 1.2% during the period, a rate development of previously uneconomical
indicative of a recovery from recent deposits of natural gas resources, thus
price weakness. boosting supply. Consequently, this
increasing supply has constrained price
Natural gas growth for the commodity, a trend that
Natural gas is naturally occurring is expected to reverse over the five years
hydrocarbon gas that primarily consists to 2024.
Demand Demand for oil and gas is largely more energy independence, drilling in
Determinants dependent on consumer demand for this region, alongside other shale
other goods and services incorporating deposits, will drive domestic production.
the use of crude oil or natural gas. For Domestic demand for natural gas is
example, demand for downstream less closely linked to economic
products from energy generation, performance; it also reflects the
transport, industrial goods and even availability of gas to end users. Within
consumer products all have an effect on particular areas, gas usage tends to rise
demand for crude oil and natural gas. rapidly when supply infrastructure
Foremost among these products is becomes available. It then settles to a
transport (especially by road and air), more moderate rate of expansion. An
which accounts for the great bulk of important use for gas is heating and, as a
petroleum product demand. Accordingly, result, demand peaks during the colder
the most significant products made from months of the year. Extreme conditions
crude oil are petroleum and automotive can lead to large rises in demand, which
distillate (or diesel). Other products pushes gas prices up.
include jet fuel, liquefied petroleum As the United States increasingly
gas (LPG), fuel oil, petroleum coke emphasizes energy independence, foreign
and asphalt. shocks to oil supplies are expected to
Furthermore, US crude oil and natural influence domestic demand less than in
gas production is increasingly meeting previous periods. While demand for
domestic demand. Hydraulic fracturing energy is relatively stable, when foreign
and horizontal drilling enables industry producers experience shocks and
operators to tap into rich deposits located uncertainty, domestic producers must act
in shale rock formations, such as those accordingly. For example, the Arab
found in the Bakken formation in North Spring and the 2019 attack on Aramco
Dakota. As the United States pushes for facilities in Abqaiq and Khuaris
Products & Markets
Demand influenced oil price increases as domestic production by spurring

Determinants uncertainty surrounding global oil additional investment in domestic
production increased drastically. High production to offset fears of a decrease in
continued
profile geopolitical volatility influences global supply.
Major Markets Major market segmentation (2019)
8.7%
Utilities
11.1%
Natural Gas Distribution industry 36.2%
Petroleum Refining industry
21.1%
Exports
22.9%
Total $413.2bn Industrial users
The Oil Drilling and Gas Extraction likely benefit this segment moving
industry supplies its natural gas and forward, as refiners purchasing costs
crude oil to a large group of markets, will decline.
though its largest market, by far, is the
Petroleum Refining industry (IBISWorld Natural gas distribution
report 32411), where more than 99.0% of The bulk of natural gas produced in this
the crude oil produced in the United industry is consumed by the United
States is converted into petroleum States; however, the structure of local
products. The oil and gas industry is natural gas consumption is fairly
highly integrated, and fully integrated complex. For example, electricity
companies operate in all phases of oil and generators and industrial users of natural
gas production, including drilling, gas buy mostly from producers, with
transporting, refining and marketing companies in the Natural Gas
petroleum and gas products. Distribution industry (IBISWorld report
22121) providing transport via pipelines.
Oil refining In contrast, most of the natural gas used
The overwhelming importance of the by households and companies in the
Petroleum Refining industry as a market commercial sector is sold and
for crude oil means that its market share transported by companies in the Natural
closely follows the oil product share. Gas Distribution industry. Companies in
However, the recent natural gas boom this industry purchase this gas from
has taken this segment away from its producers and then resell this gas
peak share of over 60.0% of revenue, to retailers.
dropping it to an expected 36.2% in 2019. The Natural Gas Distribution industry
However, the recent slide in oil prices will is expected to have a market share of
Products & Markets
Major Markets 11.1% in 2019. This segment grew over 2019. The industrial sector’s use of
continued the past five years as natural gas became natural gas increased in response to a
more widely available and prices growth in business activity during the
remained low. Over the next five years, economic recovery. Furthermore,
this segment will likely remain steady as industrial users typically require
a share of revenue. large amounts of oil and gas products
to fuel operations, so they typically
Utilities engage in price hedging via futures
Companies in the Coal and Natural Gas contracts to reduce uncertainty in oil
Power industry (IBISWorld report and gas prices.
22111a) are expected to provide 8.7% of
industry revenue in 2019. The volume of Exports
gas used largely increased in the past five Exports are expected to grow strongly at
years, reflecting the positive effect of an annualized rate of 22.5% over the five
increased domestic supply and low years to 2019. The US lifted ban on
natural gas prices. Moving forward, this exports of crude oil and natural gas in
segment is expected to remain relatively 2015 and this opened up a new revenue
steady as a share of revenue. stream for operators in the industry.
Overall, in 2019, exports are expected to
Industrial users account for 21.1% of total revenue, which
Industrial users of gas are expected to is more than three times its 2014 level of
account for 22.9% of industry revenue in just 7.5% of total revenue.
International Trade The United States is expected to import

an estimated $170.4 billion in industry Industry trade balance
product during 2019. Canada is the single
200
Level & Trend major source of oil imports, followed by
xports in the
E Mexico, Saudi Arabia and Colombia. 100
industry are H igh Venezuela, formerly a significant trade 0
and I ncreasing partner for industry materials, has
$ billion
experienced extreme declines in trade -100

Imports in the volume due to the enaction of sanctions -200
industry are on the sovereign. Increased domestic
production of natural gas and oil, -300
Mediumand
combined with a greater emphasis on
Decreasing -400
self-sufficiency in energy commodities, is Year 11 13 15 17 19 21 23 25
expected to constrain the level of imports Exports Imports Balance
over the five years to 2024. Imports are SOURCE: WWW.IBISWORLD.COM
expected to decline at an annualized rate

of 4.6% over the five years to 2019. price drops in 2015, including a 47.2%
IBISWorld expects that imports will fall in the world price of crude oil and a
reverse this trend, and increase at an 34.4% decline in the world price of
annualized rate of 7.6% over the five natural gas, exacerbate the fluctuations in
years to 2024. However, the decline and the level of imports for this industry. The
subsequent growth in imports are both prices of both commodities are expected
attributable to the volatility of crude oil to remain volatile over the next five years.
and natural gas prices. The significant Increasing domestic production is
Products & Markets
International Trade expected to limit imports to only 34.3% 22.5% to an estimated $87.0 billion over
continued of domestic demand in 2019, which the five years to 2019. NAFTA encourages
IBISWorld anticipates will remain stable trade among North American countries,
to 2024. so Canada is the single largest origin of
Canada accounts for the largest share export activity. The Republic of Korea
of industry imports, at an estimated and Japan, in addition to the Netherlands
54.4% of total imports in 2019. After are expected to round out the top four
Canada, Mexico accounts for the second- export destinations for US oil and natural
largest share of total imports at 9.2% of gas in 2019.
the total. These levels decreased over the Under pressure from industry
five years to 2019, and IBISWorld expects advocates, Congress overturned the ban
the decrease is a result of rising energy on US crude oil exports originally enacted
independence in the United States. The in 1975 during its December 2015
North American Free Trade Agreement session. According to a study by the EIA,
(NAFTA) facilitates trade with these an average 15.1 million barrels of crude
countries, and many industry operators oil will be exported per day from the
maintain refining facilities in the United United States in 2019. a number that will
States. Moving forward, IBISWorld rise by over 50.0% in the next decade.
expects these two countries to continue Advocates of the new legislation say
supplying the largest share of domestic producers will benefit from
industry imports. higher prices in foreign markets,
increasing competitiveness.
Exports Geopolitical events influence trade
US exports of oil and natural gas are patterns in the oil and natural gas
expected to rise at an annualized rate of global markets. Due to the prevalence
Exports To... Imports From...

5.2%
Colombia
7.6%
Saudi Arabia
7.4%
Netherlands
7.8% 9.2%
Japan Mexico
12.1%
South Korea
54.4%
Canada
58.6%
Other
14.1%
Canada 23.6%
Other
Year: 2019 Total $87.0bn Total $170.4bn

SIZE OF CHARTS DOES NOT REPRESENT ACTUAL DATA SOURCE: USITC
Products & Markets
International Trade of the OPEC+ in global markets, imports. The boom in oil drilling and
continued the United States has increasingly gas extraction in regions such as the
emphasized self-sufficiency in energy Bakken oil field in North Dakota has
production. While the majority of spurred expenditure in the Oil Drilling
global crude oil is still produced by and Gas Extraction industry over the
OPEC, the United States’ efforts in five years to 2019, and IBISWorld
domestic production have increased its expects exports to continue growing
level of exports and decreased its over the five years to 2024.
Products & Markets
Business Locations 2019
West
AK
0.4 New
England
ME
Great Mid- 0.0
Lakes Atlantic 1 2
NY 3
WA MT ND 0.5
5 4
0.1 1.0 MN
Rocky
1.0 0.1
WI
OR Mountains SD
0.1
Plains 0.0 MI
1.1
PA
2.8
6
7
0.0 ID IA OH 9 8
0.0 WY 2.6
2.1
NE
0.0
IL IN WV VA
2.1 0.6 0.3
West NV
0.3 2.4
KY
UT MO
1.0 NC
0.2
0.7 CO KS 0.2 0.1
5.4 5.2 TN
SC
Southeast
0.2
CA 0.0
2.9
OK AR GA
15.2 1.4 AL 0.1
AZ MS 0.4
0.2 NM
2.4 Southwest 1.0
TX LA
5.5 FL
40.2 0.3
West Establishments (%)
HI Less than 3%
0.0 Additional States (as marked on map) 3% to less than 10%
1 VT 2 NH 3 MA 4 RI 10% to less than 20%
0.0 0.0 0.0 0.0 20% or more
5 CT 6 NJ 7 DE 8 MD 9 DC
0.1 0.0 0.1 0.0 0.0
Products & Markets
Business Locations The geographic spread of the local Oil

Distribution of establishments vs. population
Drilling and Gas Extraction industry
essentially reflects the distribution of oil
60
and gas resources. The importance of
various producing regions varies over 50
time, as reserves come into production 40
and some fields are depleted.
The Southwest accounts for the largest 30
%
share of industry output and revenue. It 20
is expected to comprise 57.9% of industry
locations in 2019. The main producing 10
state within this region is Texas, which 0
accounts for 40.2% of the total number of
West
Great Lakes
Mid-Atlantic
New England
Plains
Rocky Mountains
Southeast
Southwest
producers. The next largest oil and gas
producing region is the Southeast, which
12.5% of establishments call home in
2019. The major producing state in this Establishments
region is Louisiana, which accounts for Population
5.5% of industry locations. SOURCE: WWW.IBISWORLD.COM
Both these regions obtain a

considerable part of their output from oil establishments) and Colorado (5.4% of
and gas fields in the Gulf of Mexico, establishments) are the major producers.
which is exposed to hurricane activity. Production in the Plains (6.9%) is
Hurricanes can severely disrupt output, concentrated in the oil fields of North
as was the case when Hurricanes Katrina Dakota (0.9% of establishments), while
and Rita passed through the region in the output in the Mid-Atlantic (3.4%) is
second half of 2005. Then, in 2008, it concentrated in Pennsylvania’s oil fields
was feared that Hurricanes Gustav and (2.6% of establishments). Output in the
Ike would also damage regional oil and Great Lakes (6.3%) is fairly evenly
gas productive capacity when it struck spread, while New England produces
the Gulf in August and September. very little oil or gas (0.1% of
Although oil platforms and refineries total establishments).
were shut down, no significant In the long term, the importance of the
damage occurred. West is expected to decline because of
The importance of other regions to falling output from Alaska and California.
industry revenue remained fairly The Southwest and Southeast are expected
constant in the past few years. The West to remain the preeminent oil and gas
(3.5% of locations) has two major producing regions, reflecting a focus on
producers, which include Alaska (0.3% of offshore oil and gas fields in the Gulf of
establishments) and California (3.2% of Mexico. However, regulatory changes can
establishments), while in the Rocky greatly influence production in any region,
Mountains (9.3%), Wyoming (2.1% of especially in offshore regions.
Competitive Landscape
Market Share Concentration | Key Success Factors | Cost Structure Benchmarks
Basis of Competition | Barriers to Entry | Industry Globalization
Market Share Concentration in the Oil Drilling and nation, making it difficult for even major
Concentration Gas Extraction industry is low, with the oil companies to control more than a
seven largest companies estimated to small share of output. Over the five years
account for 26.9% of industry revenue. to 2019, market concentration decreased
Level
Nonetheless, the industry is the province slightly as formerly integrated
Concentration in of large companies, most of which companies, such as ConocoPhillips
this industry is L ow have worldwide operations. Low and Hess, divested downstream
concentration reflects the industry’s segments to maximize efficiency
large size and its dispersion across the and operating margins.
Key Success Factors Economies of scale Ability to find new resource deposits
Larger oil and gas deposits are generally Oil and gas production depends on access
more economic to develop. Industry to resources. Producers with access to
IBISWorld identifies players that can acquire these types of new resources have the ability to develop
250 Key Success deposits will outcompete their peers. more oil and gas.
Factors for a
business. The most Downstream ownership links Ability to accommodate
Companies that vertically integrate environmental requirements
important for this
exploration operations essentially Operators must meet environmental
industry are: guarantee themselves a market for their regulations to bring new production
products to be refined. on stream.
Cost Structure Oil and gas production is a high-risk, expensed exploration spending and are
Benchmarks high-return activity. Very few exploration expected to account for 30.0% of revenue
efforts result in a commercially viable oil in 2019. Exploration is the lifeblood of
field, and those that do must cover all companies in the industry because it
expended capital. As a result, the provides reserves for future development.
nature of the industry is such that Over the five years to 2019, purchases as
its major costs are expensed exploration a share of revenue increased slightly.
and depreciation, rather than cash Additionally, the purchase of mineral
operating costs. rights is included in this segment.
Mineral rights enable operators to drill
Wages for and extract crude oil and natural gas
Wages are expected to account for 6.5% on a given plot of land, and they are a
of revenue. Wages share as a percentage necessary cost of business for operators.
of total revenue has increased over the
past five years as revenue dwindled faster Profit
than companies cutting their workforce, Average industry profit, as measured by
especially highly paid positions. Overall, earnings before interest and taxes plus
employment is expected to decrease at an impairment charges, is estimated to
annualized rate of 7.1% over the five years account for 2.8% of revenue in 2019.
to 2019. Profit decreased over the five years to
2019 as the extraction price per barrel of
Purchases crude oil rose as well resources drained.
Purchase costs include machinery, Furthermore, while hydraulic fracturing
chemicals, well infrastructure and and horizontal drilling enable companies
Cost Structure to extract oil and natural gas from Extraction industry include payments to
Benchmarks previously uneconomical wells, the contractors and the midstream sector to
corresponding increase in domestic transport extracted resources.
continued
production of natural gas has led to
historically low natural gas prices. While Marketing
higher oil and gas prices push up revenue, Marketing costs constitute a very
costs proportionally rise as oil and natural minimal share of total industry revenue
gas becomes more difficult to extract and (less than 0.1%) and have remained
prices fall. Over the five years to 2024, steady over the past five years.
profit is expected to recover from recent
weakness as the price of oil rises. Rent
Most operators own the extraction sites
Depreciation and therefore rent accounts for a small
Depreciation typically absorbs 10.0% to percentage (1.5%) of total industry
15.0% of industry revenue, varying revenue.
between years and reflecting the high
levels of capital spending required to Utilities
extract oil and gas. Furthermore, this Utilities costs account for less than 1.3%
segment includes the depletion of oil and of total industry revenue in 2019.
gas reserves. In 2019, depreciation is
expected to account for 11.9% of industry Other
revenue. Substantial cash expenses Other costs include maintenance, repairs,
incurred by the Oil Drilling and Gas contracted labor, administration and
Sector vs. Industry Costs
Average Costs of
all Industries in Industry Costs
sector (2019) (2019)
100
6.1 2.8 n Profit
6.5 n Wages
12.5 n Purchases
80 n Depreciation
30.0 n Marketing
n Rent & Utilities
27.4 n Other
Percentage of revenue
60
11.9
10.6 2.8
40
0.2 4.0
46.0
20 39.2
0
Cost Structure sales support, and are anticipated companies such as BP with outstanding
Benchmarks to account for 46.0% of 2019 revenue. reparations due regarding incidents
Many of the industry’s other costs are such as the Deepwater Horizon
continued
legal and acquisition-related explosion and subsequent spill in
expenditures, in addition to outlier the Gulf of Mexico.
Basis of Competition Producers in the oil and gas industry Supply disruptions or large surges in
essentially compete on the basis of price, demand lift gas prices. However,
Level & Trend though other factors, such as the grade of takeaway capacity, typically classified as
crude oil, the level of impurities it midstream services, also influences the
ompetition
C in this contains and the heating value of gas, amount of petrochemicals operators can
industry is H
ighand also play a role. External competition deliver to market. If production outpaces
the trend is S teady stems from alternative energy sources, takeaway capacity, negative prices, such
such as hydro, solar and nuclear power. as those at the Waha Hub in April 2019,
However, this competition is minimal can result. Typically, gas purchasers
compared with internal competition due reduce demand for gas if the price rise is
to the difficulties in mass producing these sufficiently large and producers attempt
alternative energy sources. to lift gas output. Over the five years to
2019, the price of natural gas has been
Price competition relatively low in the United States as
The price of oil essentially reflects global production has increased. Therefore,
supply and demand conditions. In industry operators must increasingly
particular, prices tend to rise sharply in compete by lowering costs of extraction.
response to supply disruptions, but fall
equally sharply if the price rise produces Oil grades
a moderation in demand growth and/or Different types (or grades) of oil attract
leads other producers to lift their output. different prices depending on the level of
However, industry operators can control demand. Grades range from light to
selling prices to some extent by locking in heavy, dependent on the oil’s specific
long term contracts with downstream gravity, with light crude being the most
refiners and marketers. Additionally, attractive due to its ease to refine and
companies must minimize extraction high resulting yield of refined product.
costs to help bolster margins. Companies Light crude is also easier to extract from
can gain a competitive edge as well by the earth and transport to refineries.
locating and acquiring assets with Worldwide, there are adequate supplies
relatively more accessible oil and gas of heavy crude oils, which are used to
deposits. Companies invest a significant make products such as tar and asphalt.
amount of capital to explore for deposits Alberta’s tar sands, for example, contain
that can be developed, and attempt to significant resources yet to be fully
minimize the acquisition of dry wells, or developed. The price for heavy crude is
wells that appear to have deposits but in typically less than for lighter grades of oil,
fact do not. which can be used to make a greater
The price of gas, which competes with variety of refined downstream products,
oil in some markets, is also influenced by and the extraction of heavier crude is also
global supply and demand factors, more capitally intensive.
though to a lesser extent. Local levels
supply and demand play a much larger Impurities
role in determining gas prices, but the The level of impurities in oil also plays a
mechanism is similar to that for oil. role in the pricing process. Most
Basis of Competition purchasers pay a premium for oil with a Security

continued low level of impurities, such as sulfur. Security of supply and transport costs
These oils typically are called sweet for also forms part of the basis of
their low sulfur contents, due to the lack competition. Most petroleum refiners
of a distinctive sulphur smell. A lower attempt to diversify their sources of
level of impurities offers the petroleum supply to reduce risk. At the same time,
refiners that purchase oil a lower they will tend to favor suppliers where
operating cost and also makes it easier to shipping costs are relatively low.
comply with environmental restrictions. Furthermore, the integrity of wells is
Industry product from the United States, important to maintain. Wells must be
which is dominated by West Texas actively monitored, and the production
Intermediate crude, is classified as both speed of a well also plays a vital role in a
light and sweet. well’s economic success.
Barriers to Entry There are substantial barriers to entry to

the Oil Drilling and Gas Extraction Barriers to Entry checklist
Level & Trend industry. These include the high-risk Competition High
nature of oil and gas exploration and Concentration Low
arriers to Entry
B development, the difficulty in locating Life Cycle Stage Mature
in this industry are economically viable deposits and the Capital Intensity High
Highand S teady large amounts of capital companies Technology Change Medium
require bringing fields into production. Regulation and Policy Heavy
In addition, many of the major oil and Industry Assistance Low
gas producers are vertically integrated
companies, with interests in downstream SOURCE: WWW.IBISWORLD.COM
operations, such as petroleum refining

and marketing. New entrants lacking interest to these companies.
such linkages may find it difficult to Consequently, smaller operators
penetrate the market. can fill a gap in the market by
While the existence of large developing resources that larger
international oil companies in the companies would deem uneconomical.
industry is undoubtedly a significant IBISWorld expects the number of
deterrent to market entry, there are enterprises to fall during the five-year
opportunities available for smaller period, as oil prices remain weak,
companies to enter the market. The size developing new resources remains risky
of the largest industry players means and larger, more stable companies
that smaller projects are not typically of acquire smaller producers.
Industry The level of globalization of the US Oil estimated 34.3% of domestic demand.
Globalization Drilling and Gas Extraction industry is Historically, there were export
high. Major oil producers have operations limitations for the industry, which kept
Level & Trend overseas and key foreign producers such export’s share of revenue low over the
as BP PLC (United Kingdom) and Royal five years to 2019, however, in late 2015,
lobalization
G in this Dutch Shell (The Netherlands/United the US government decided to overturn
industry is H
ighand Kingdom) operate in the US market. the ban on crude petroleum exports.
the trend is S teady Oil companies focus on the most Exports as a share of total revenue
prospective areas for exploration and substantially increased in the industry,
development, and pursue promising oil especially over the past two years on
and gas finds wherever political account of booming demand for less-
conditions permit. The highly risky expensive US crude abroad. In 2019,
nature of exploration, the huge costs exports of crude oil and natural gas are
involved in both exploration and expected to account for 21.1% of
production, and the need to undertake revenue, up from 7.5% in 2014.
often sensitive negotiations regarding IBISWorld expects this trend to
development with governments, tends to continue over the five years to 2024 with
limit participation in the industry to only exports expected to rise at an annualized
large operators with a global perspective. rate of 7.7% over the five years to 2024,
Industry trade is also high in the and industry globalization is expected to
industry, with imports accounting for an remain very high.
International trade is a Trade Globalization Going Global: Oil Drilling & Gas Extraction
major determinant of 2005–2019
an industry’s level of
200 Export Global 200 Export Global
globalization.
Exports offer growth
opportunities for firms. 150 150
Exports/Revenue
Exports/Revenue
However there are legal,

economic and political risks 100 100
associated with dealing in
foreign countries. Oil Drilling &
Import competition can 50 Gas Extraction 50 2019
bring a greater risk for
companies as foreign 0 Local Import 0 Local 2005 Import
producers satisfy domestic 0 40 80 120 160 0 40 80 120 160
demand that local firms Imports/Domestic Demand Imports/Domestic Demand
would otherwise supply.
Major Companies
Chevron Corp. | Exxon Mobil Corporation
BP PLC | ConocoPhillips Company | Other Companies
Major Players ConocoPhillips Company 4.5%

(Market Share) Exxon Mobil Corporation 5.2%
79.0%
Other
BP PLC 4.8%
Chevron Corp. 6.5% SOURCE: WWW.IBISWORLD.COM
Player Performance A successor to the company Standard Oil, in shelf and major deepwater fields,
Chevron Corp. (Chevron) was established including Genesis, Petronius and
under that name in 1984; however, it was Typhoon. In California, production is
Chevron Corp. briefly known as ChevronTexaco after a concentrated in the San Joaquin Valley.
Market Share: 6.5% 2001 merger with Texaco Inc. The Combined, interests in the Gulf and
company is headquartered in San Ramon, California account for nearly 70.0% of
CA, and has operations in North America, the company’s US oil production and
South America, Europe, Africa, the Middle about half its natural gas production.
East, Asia and Australia. In May 2005, the The Gulf of Mexico, where Chevron
company announced it had changed its has substantial acreage, represents one of
name back to Chevron Corp.; however, in the key hydrocarbon development areas
the United States, Chevron also markets close to the continental United States.
under the Texaco brand. The company While the surrounding coast and shallow
employed 48,600 people in 2018 and total waters have been a center for oil
revenue for the company reached $166.3 production for decades, the deepwater
billion for the year. prospects in the Gulf have become
Chevron’s upstream activities, the accessible only recently due to advances
primary driver of company earnings, are in technology. These advances have
concentrated in the Gulf of Mexico, included key improvements in deepwater
California, Louisiana, Texas, New Mexico and horizontal drilling techniques, as
and the Rocky Mountains in the United well as floating and subsea production
States. In the Gulf, the company has systems needed for ultra-deepwater
interests in onshore Louisiana, as well as developments.
Chevron Corp. (US industry-specific segment) - financial performance*

Revenue Operating Income
Year ($ million) (% change) ($ million) (% change)
2014 22,910.0 N/C 3,327.0 N/C
2015 12,748.0 -44.4 -4,055.0 N/C
2016 10,365.0 -18.7 -2,054.0 -49.3
2017 13,242.0 27.8 3,640.0 N/C
2018 22,891.0 72.9 3,278.8 -9.9
2019 26,898.3 17.5 -660.2 N/C
*Estimates
SOURCE: ANNUAL REPORT AND IBISWORLD
Major Companies
Player Performance Financial performance the Permian Basin, where new pipeline
continued During the five years to 2019, revenue takeaway capacity, such as Plains All
from Chevron’s US drilling operations American’s Cactus II pipeline, has relieved
is expected to decrease at an annualized downward takeaway cost pressures and
rate of 3.3% to $26.9 billion. In 2015, increased the rate of well completion
the company’s industry-specific activity in the region. A sizeable portion of
revenue fell 44.4% due to falling Chevron’s natural gas production is
crude oil prices. This trend continued, centered in the Permian, and was
albeit at a slower pace, with revenue materially impacted by a price inversion at
declining an additional 18.7% in 2016. the Waha hub in April 2019. The high
As with many other major players, levels of production increases in the
developments of US shale deposits and region, however, were tempered by
waning demand from emerging markets expected field declines, and net oil-
suppressed crude oil prices as supplies equivalent production in the Permian
steadily increased, pressuring company increased by 155,000 bbl/d for the first
revenue. However, Chevron’s half of 2019, representing a 21.0%
unconventional markets in the United increase from the prior year’s period.
States have steadily improved profit Chevron’s 2019 industry specific revenue
margins as cost pressures slowed in 2018 of $26.9 billion, a 17.5% increase from the
and 2019. Chevron is expected to remain prior year, is expected to account for 6.5%
highly focused on further developments in of total industry market share in 2019.
Player Performance Exxon Mobil Corp. (ExxonMobil) was hydrocarbon sources. It has significant
founded in 1999 after the merger of positions in all major producing regions,
Exxon and Mobil, and is the largest including: Alaska; onshore Gulf Coast,
Exxon Mobil publicly traded oil company in the world. shelf and deepwater areas of the Gulf of
Corporation The company reported 2018 revenue of Mexico; onshore and offshore California;
Market Share: 5.2% $279.3 billion and employed 71,000 and the midcontinent. Exxon’s US
people. The company’s US portfolio is properties contribute 23.9% of the
geographically diverse and spans both company’s oil production and 54.6% of
conventional and unconventional its gas production as of 2018 (latest data
Exxon Mobil (US industry-specific segment) - financial performance*

2014 22,549.0 N/C 5,197.0 N/C
2015 12,585.0 -44.2 -1,079.0 N/C
2016 11,379.0 -9.6 -4,151.0 284.7
2017 15,078.0 32.5 6,622.0 N/C
2018 19,042.0 26.3 1,739.0 -73.7
2019 21,581.5 13.3 1,327.0 -23.7
*Estimates
Major Companies
Player Performance available). Although the revenue makeup from the Bass family for an estimated
continued of US crude has remained relatively $5.6 billion.
stable throughout the five-year period to
2019, the percentage of natural gas has Financial performance
grown alongside the implementation of Revenue for ExxonMobil’s industry-
advanced extraction techniques, such as relevant upstream segment is projected
fracking, in key US shale plays. to decrease at an annualized rate of 0.9%
ExxonMobil operates via three distinct to reach $21.6 billion during the five
segments: upstream (the most relevant to years to 2019. Similar to other major
this industry), downstream and operators, supply gluts and increases in
chemicals. ExxonMobil’s global upstream worldwide crude oil reserves adversely
and chemical companies (as well as its affect revenue. For example, the company
coal and minerals company) are experienced a revenue decline of
headquartered in Houston. The upstream 44.2% in 2015 when oil prices crashed.
segment undertakes industry-relevant Furthermore, the company’s operating
exploration and production activities. profitability has been constrained during
ExxonMobil supplies crude oil and the past five years as it has consistently
natural gas that it extracts to produce booked impairment charges on several
refined products in its petroleum-refining of its properties. For example, in the
and chemical complexes, as well as sells first-quarter of 2017, the company wrote
crude oil and natural gas in the down $2.0 billion in earnings from its
international markets. Due to its high upstream operations on a charge related
level of integration, ExxonMobil records to its Rocky Mountain operations.
a high level of intersegment sales, of However, in 2017, ExxonMobil’s US
which 35.0% was directly between its upstream operations experienced a
upstream and downstream units, significant growth in operating income,
representing the link between production despite asset impairment of $521.0
and refining operations. million, primarily driven by a $7.6 billion
As with other major players, benefit from tax reform in the United
ExxonMobil experienced revenue States. ExxonMobil’s investment in the
decline markedly during the past five global upstream segment increased $20.2
years as oil and natural gas prices billion in 2018, representing a 21.0%
crashed. Capital expenditure costs for the increase from the prior year, and was
company have decreased 25.0% from centered around further development
2015 levels to reach $23.0 billion in 2016, of the Permian Basin. This focus on
following the bottoming of the oil unconventional, tight oil is highlighted
markets at large. However, ExxonMobil through the introduction of 554.6
has engaged in some acquisition activity completed exploratory inland wells,
during the past five years. For example, primarily based in Permian, Marcellus,
in February 2017, the company Bakken and Utica plays in 2018.
completed the acquisition of InterOil ExxonMobil’s 2019 industry specific
Corporation for an estimated $2.5 billion. revenue of $21.6 billion, a 13.3% increase
Furthermore, in January 2017, the from the prior year, is expected to
company announced the acquisition of oil account for 5.2% of total industry market
and gas properties in the Permian Basin share in 2019.
Major Companies
Player Performance BP PLC (BP) is a large, multinational oil oil spill in US history. The disaster
company headquartered in London. It struck when pressure control systems
merged with the US oil company Amoco failed on an exploratory undersea oil
BP PLC at the end of 1998. For a time after the well, causing an oil leak (known as a
Market Share: 4.8% merger, the company was known as BP blowout) and a catastrophic explosion at
Amoco, but after the company acquired the oil platform. The explosion killed 11
the US-based Atlantic Richfield Company platform workers and injured 17 others.
in 2000, it reverted to the simpler name Deepwater Horizon was located 40.0
of BP, bringing all its business under a miles southeast of the Louisiana coast,
common banner. BP employed nearly but now, the blown-out oil well sits under
73,000 people worldwide in 2018, and 5,000 feet of water. The company
generated $303.7 billion in revenue for established and funded the $20.0-billion
the year. Deepwater Horizon Oil Spill Trust in
The bulk of BP’s directly controlled 2010 to pay damages. However, total
reserves of oil are in the United States, fines have continued into the current
with the revenue from extraction period and have totaled $65.0 billion as
representing 18.6% of total company of 2018. BP’s legacy payment structure
revenue. In the United States, BP’s regarding the incident has continued in
production comes from the Gulf of line with management’s guidance,
Mexico, Alaska and onshore operations totaling $3.2 billion in 2018. BP’s
in the lower 48 states. The Gulf of Mexico management provided guidance of just
has grown in importance, while the more $3.0 billion for the year. In 2019,
output of the other two regions has payments are expected total $2.0 billion,
declined. This shift reflects the overall and will step down to $1.0 billion
depletion of traditional oil reserves in annually for the next 14 years. The
Alaska and the lower 48 states. decrease in mandated annual payments,
BP contended with a growing wave of in addition to effective payment planning
community and government anger in the by BP’s management team will reduce
United States following its inability to capital outlays for the firm, which can
stem a massive oil leak at Deepwater successfully be allocated toward
Horizon, one of its operations in the Gulf increasing production, reinstituting
of Mexico. The spill, which started on a policy of growth in North
April 20, 2010, was the largest offshore American markets.
BP PLC (US industry-specific segment) - financial performance*

2014 22,750.8 N/C 5,286.1 N/C
2015 14,387.2 -36.8 197.0 -96.3
2016 11,811.5 -17.9 -192.9 N/C
2017 15,751.9 33.4 2,033.1 N/C
2018 18,512.8 17.5 4,776.0 134.9
2019 19,659.0 6.2 4,622.0 -3.2
*Estimates; Operating Income measured using Cash Flow From Operations

Major Companies
Player Performance Financial performance and gas prices plummeting. In 2016

continued During the five years to 2019, BP’s industry-relevant revenue declined a
industry-relevant revenue is expected further 17.9% as oil prices remained
to decline at an annualized rate of 2.9% weak. However, as global economic
to $19.7 billion. The Deepwater Horizon conditions improve during the next
oil spill has significantly hamstrung five years, demand for energy products
BP’s profitability. In addition to the is anticipated to increase. Conversely,
public outcry and the tarnishing of the increasing domestic production of
company’s reputation, the sheer cost of natural gas and crude oil will serve as
containing the oil spill has hampered dampeners on revenue growth due
the company’s ability to operate on a to depressed prices and increased
more long-term basis. As a result, BP exploration costs as companies scramble
has been selling assets to competitors to locate economical deposits. BP’s
to finance some of the outstanding 2019 revenue of $19.7 billion, an
costs related to the oil spill. Industry- estimated 6.2% increase from 2018,
specific revenue dropped 36.8% in is anticipated to account for 4.8% of
2015 largely due to worldwide oil total industry revenue for the year.
Player Performance Based in Houston, ConocoPhillips called Phillips 66. By separating from its
Company (ConocoPhillips) was formed in downstream businesses, ConocoPhillips
September 2002 from the merger of bolstered its operating margins at the
ConocoPhillips Conoco and the Phillips Petroleum expense of market share. As with many
Company Company. ConocoPhillips has extensive other major players, ConocoPhillips is
Market Share: 4.5% operations overseas and in the United increasingly engaging in the growing
States. In April 2012, ConocoPhillips market for shale gas and oil sands
completed its separation from its refining extraction. In 2018, the company earned
operations, becoming solely an $36.4 billion in total revenue and
exploration and production company. employed 11,400 people.
The company’s downstream and The company primarily divides its
midstream businesses were spun off into business into geographical segments which
an independent, publicly traded company include: Alaska; Lower 48; Canada; Europe
ConocoPhillips (US industry-specific segment) - financial performance*

2014 29,996.0 N/C 2,019.0 N/C
2015 16,264.0 -45.8 -1,928.0 N/C
2016 14,400.0 -11.5 -1,938.0 0.5
2017 17,192.0 19.4 -905.0 -53.3
2018 18,729.0 8.9 3,561.0 N/C
2019 18,581.6 -0.8 3,438.3 -3.4
*Estimates
Major Companies
Player Performance and North Africa; Asia Pacific and Middle exploration and production segment is
continued East; and the Other International segment, expected to decrease at an annualized
which includes marketing activities. Out of rate of 9.1% to $18.6 billion. As with
these segments, exploration and production almost all players in this industry,
activities in Alaska and the Lower 48 states ConocoPhillips experienced record
are industry-relevant. Activities in Alaska years just before the current five-
contributed 22.0% and 1.0% of total liquids year period, only to be followed by
and natural gas production, respectively in volatile price swings resulting in
2018. In contrast, the Lower 48 segment declining revenue in 2015 and 2016.
contributed 30.0% and 27.0% of total Total production for the company
liquids and natural gas production for the reached its highest point during the
same year, with a slight majority of the past five years in 2015 at 605,000
liquids and gas originating in the Gulf barrels of oil and 4.6 billion cubic feet
of Mexico. of natural gas per day. Production
As with other industry operators, dropped in 2017 as the company
ConocoPhillips has experienced a severe focused on its most profitable plays.
decrease in revenue on account of On a cash-flow basis, margins are
challenging pricing conditions in the expected to have contracted
industry. Capital expenditure budget for significantly over the past five years
the company decreased 52.0% in 2016 due to depressed prices of all
from its 2015 level, following two commodities. For this reason, in 2015,
consecutive years of revenue decline. The the company assessed $5.2 billion in
company has also divested assets over the impairment charges. In 2017, the
past five years to reduce debt in order to company experienced a boost in
achieve leaner operations. In 2016, the profitability on account of a non-
company announced an agreement to sell operational tax benefit of $892.0
its Indonesia offshore operations for $1.3 million due to new tax legislation.
billion, in addition to selling an Alaska Average production in Alaska also rose
Beluga River Unit, a natural gas field in 2.0%. In the lower 48 region, the
the Cook Inlet for $134.0 billion. company continued to report a large
Subsequent transactions primarily loss and asset impairment charge of
consisted of divestments of both $2.5 billion, which lowered overall net
undeveloped, in addition to margins. Additionally, ConocoPhillips’
underperforming oil play interest across 2019 capital budget of $6.1 billion
North America. However, in May 2018, included $3.8 billion of capital to
ConocoPhillips completed the acquisition sustain existing production, in addition
of Anadarko Petroleum’s 22.0% interest in to an extra $2.3 billion of growth
the Western North Slope of Alaska, as well capital allocated to short-cycle
as its interest in the Alpine Transportation unconventional extraction programs,
Pipeline, which supports the field with which target nontraditional
takeaway capacity, for $386.0 million hydrocarbons such as coalbed methane,
gas-rich shale and tight sand gas.
Financial performance ConocoPhillips’ 2019 revenue of $18.6
During the five years to 2019, billion is expected to represent 4.5% of
ConocoPhillips’ revenue from its US total industry revenue in 2019.
Major Companies
Other Company Devon Energy Corp. (Devon), divestiture of its Canadian and Barnett
Performance headquartered in Oklahoma City and Shale assets and additional initiatives to
founded in 1971, is an independent increase operational efficiency within a
natural gas and exploration company. more focused geographic breadth in
Devon Energy Corp. The company’s operations are focused order to transform its existing portfolio
Market Share: 2.4% onshore in the United States and Canada. of holdings. Devon recognized $63.0
Most of the company’s assets are located million in restructuring expenses during
in the southern United States, with Texas the first half of 2019, and anticipates
making up the largest share of US assets. additional restructuring charges through
The company also holds assets in the Gulf 2020, primarily following the separation
of Mexico. In total, Devon earned $10.7 of the Barnett Shale from New Devon.
billion in revenue in 2018. Devon The company’s production mix is
produces more than 2.0 billion cubic feet two-thirds natural gas and one-third oil
of natural gas per day. and natural gas liquids. In February 2014,
Following strenuous restructuring Devon completed its acquisition of
efforts, Devon has made significant GeoSouthern Energy’s Eagle Ford shale
progress in shifting existing corporate assets in Texas for $6.0 billion. Devon’s
structure into a leaner company focused industry-relevant operations are expected
on growth, which will be named New to generate revenue of $9.8 billion in
Devon. In the process of doing so, Devon revenue over 2019, which represents 2.4%
began workforce reductions in 1Q19, of total industry revenue for the year.
Other Company Royal Dutch Shell PLC (Royal Dutch billion in 2019, representing a 9.2%
Performance Shell) has extensive operations in the increase from 2018. Most of its oil and
United States. Royal Dutch Shell is the natural gas-producing assets are outside
leading oil and gas producer in the of the United States, positioned to take
Royal Dutch Shell deepwater Gulf of Mexico and is an advantage of emerging market growth.
PLC affiliate of the Royal Dutch/Shell Group, However, the company is not immune to
Market Share: 2.2% which generated $396.6 billion in total the effects of low oil and gas prices, and
revenue in 2018. It operates in this overall industry-specific revenue is
industry through the Shell Exploration & expected to decline at an annualized rate
Production Company (SEPCo), which of 2.7%. This decline is in line with
explores, develops and produces oil and overarching industry price trends within
gas in the United States. the period, particularly the revenue
Its main operations are in the Gulf of decline in 2015 of 44.2% from Royal
Mexico, Texas, Wyoming and California. Dutch Shell’s peak of realized oil prices in
SEPCo also has a majority holding (51.8%) 2014. Compared with the first half of
in Aera Energy LLC, an exploration and 2018, Royal Dutch Shell’s first half of
production joint venture with ExxonMobil, 2019 included lower realized oil prices
which has production operations in and increased depreciation stemming
California. Aera operates 15,000 wells, from field revitalization operations and
producing 170,000 equivalent barrels per associated ramp-up programs. Although
day of heavy oil and gas, nearly 30.0% of these downward pressures were partially
California’s hydrocarbon output. offset by benefits relating to
Royal Dutch Shell’s US industry- implementation of IFRS 16 and a 4.0%
related revenue is expected to reach $9.2 increase in production for the half, Royal
Major Companies
Other Company Dutch Shell’s operating income is revenue of $9.2 billion in 2019 is
Performance expected to decline to $953.9 million in expected to account for 2.2% of total
2019. The company’s industry-relevant industry revenue for the year.
continued
Other Company Hess Corp. (Hess) was founded in 1919 concentrates Hess’ operations entirely
Performance and is headquartered in New York City; in its upstream segments. Hess
its total revenue reached $6.3 billion in primarily operates in the United States
2018. Formerly an integrated oil and in the Bakken oil shale field in North
Hess Corp. gas company, Hess sold its downstream Dakota and offshore in the Gulf of
Market Share: 1.3% marketing and refining segments to Mexico. In 2019, Hess is expected to
Centrica PLC’s subsidiary Direct Energy generate $5.3 billion in industry-
for about $1.0 billion just prior to the specific revenue, giving it a 1.3% share
start of the five year period. This sale of the market.
Operating Conditions
Capital Intensity | Technology & Systems | Revenue Volatility
Regulation & Policy | Industry Assistance
Capital Intensity The Oil Drilling and Gas Extraction

industry is highly capital intensive. In Capital Intensity
Capital units per labor unit
2019, for every dollar spent on wages, the
Level
average industry company will invest an 2.0
The levelof capital estimated $1.83 in capital equipment.
intensity is H
igh This ratio ranks this industry among the 1.5
most capital intensive of all industries.
Companies rely on large-scale capital 1.0
equipment, rather than labor, for output.
However, oil field workers also must be 0.5
highly skilled and trained, which is
reflected in the industry’s very high 0.0
Economy Mining Oil Drilling &
average wage. Gas Extraction
In addition, the substantial capital cost Dotted line shows a high level of capital intensity
of production facilities reflects the need SOURCE: WWW.IBISWORLD.COM
for a high degree of reliability. Facilities

operate constantly and must be resistant and onshore. Additionally, the negative
to corrosion. They must also be able to impact of a well failure can be
withstand extreme weather, both offshore catastrophic, so operators must ensure
Capital Intensity the equipment is properly to continue exhibiting high levels of

continued maintained on a regular basis. capital intensity over the five years
IBISWorld expects the industry to 2024.
Technology and The technology used to recover oil and are about seven times higher than
Systems natural gas from wells has not changed in onshore costs.
the past decade. However, new drilling Fixed platforms, where the legs of
techniques are being used to recover oil structure are embedded in the sea floor,
Level
and gas from deeper deposits than are expensive to erect and their use is
The level
of ever before. generally confined to relatively large oil
technology change Oil and gas are generally recovered by and gas fields. However, the cost of these
is M
edium drilling wells into underground or facilities is extremely sensitive to water
undersea hydrocarbon fields. Initially, depth. For water depths more than 300.0
the internal pressure of the field causes meters, the cost rises exponentially.
the oil or gas to rise to the surface of its Tension leg platform installation costs
own accord. However, as this pressure are less sensitive to water depth, but are
drops, techniques known as enhanced oil not as well suited to large-scale
recovery (EOR) or tertiary recovery are operations. Semisubmersible floating
used to legacy extend well life and expand production facilities were developed in
wellhead output. These include gas the 1970s to provide an economic
injection, thermal injection and chemical solution for production from small,
injection. In combined oil and gas fields, offshore wells in the North Sea. Later that
gas injection is predominant EOR decade, this technology was extended to
method, where natural gas, nitrogen or include converted oil tankers as shuttle
carbon dioxide is injected into the and storage facilities. Floating storage
reservoir improve oil recovery. Nearly all production systems are the least costly
the producing wells in the United States facility for water depths up to about
make use of such methods to improve the 600.0 meters.
oil ‘lift’ from the well. In the United Drilling techniques also play an
States, gas injection accounts for just important role in oil and gas recovery.
below 59.0% of EOR production, with Onshore wells can be drilled successfully
thermal and chemical injection to depths of 8,000 meters (compared
accounting for 40.0% and 1.0%, with just 5,000 meters 50 years ago).
respectively. More speculative techniques Offshore wells can be drilled in water
still being researched, known as depths of 1,000 meters or more.
quaternary oilfield recovery, utilize algae Directional drilling has also led to some
and recycled carbon dioxide, but have of the world’s abandoned oil fields being
largely yet to be proven as commercially brought back into production.
viable options. Horizontally drilled wells increase the
Offshore oil is considerably more surface area of the borehole exposed to
expensive to extract than onshore oil. A the oil reservoir, which enables increased
variety of production wells are used production rates and higher oil
offshore. Factors such as the size of the recovery— particularly in tight
field, the depth of the water and the shale formations, where hydrocarbons
climatic conditions affect the type of well are trapped between a narrow band of
used. On average, offshore drilling costs impermeable subsurface strata. However,
Technology and according to the EIA, drilling costs for further through the advent of
Systems wells using horizontal drilling are about electric fracking, known as e-fracking.
24.0% higher than for conventionally E-fracking creates the potential to lower
continued
drilled wells. An additional benefit of extraction costs in environments of high
directional drilling, allowing more diesel prices, in addition to offering
wellheads to be grouped together, reduced air and noise pollution when
reduces the environmental impact of rigs compared with traditional diesel-based
on the surface. In an offshore operations. This technique utilizes
environment, industry operators have natural gas produced by wells to power
grouped over 40 wells together from a hydraulic fracturing equipment, instead
single platform. of traditional diesel fuel. Although the
The most notable change in technology is still in its infancy, it is being
extraction in recent years is the wider adopted by operators such as Royal
implementation of hydraulic fracturing Dutch Shell and ExxonMobil, and is
(fracking). Although this process has estimated to lower the fuel costs for
been used sporadically since the 1940’s, fracking equipment by nearly 90.0%,
continual refining of extraction process, according to Wells Fargo & Co., which
particularly of the slurry injected into the decreases the total cost of operating shale
wellbore, has enabled this process to wells by between 4.4% to 5.8%. Although
become more economical. Combined e-fracking only accounts for just 3.0% of
with horizontal drilling, fracking enables active fracking operations in 2019, Tudor
extraction companies to tap into new Pickering Holt & Co. predicts that levels
sources of natural gas and oil could reach between 25.0% and 33.0%
encapsulated by low permeable shale over the five year period between 2019
deposits. Fracking has been advanced and 2024.
Revenue Volatility Over the five years to 2019, the Oil Instead, imports tend to bear the brunt of
Drilling and Gas Extraction industry has weak or falling demand, but they can also
exhibited an extremely high level of gain disproportionately as demand rises
Level
revenue volatility. Typically, the revenue when prices are low.
The level of volatility performance of the Oil Drilling and Gas The relatively fixed nature of local
is V
ery High Extraction industry is very volatile and crude oil production means that oil price
sensitive to shifts in both crude oil prices movements feed directly into revenue. In
and natural gas prices, which vary contrast, US natural gas consumption
markedly in response to global supply and production is trending up, but it is
and demand trends. Oil and gas prices also sensitive to both economic
tend to increase sharply during periods of conditions and natural gas prices. Solid
excess demand and fall markedly if economic growth has a positive effect on
excess supply emerges. demand for and production of natural
The volume of US oil production does gas, while economic weakness tends to
not respond strongly to price movements, reduce demand for gas, especially for
particularly price increases. Resource industrial use.
depletion limits the extent to which The effects of shifts in natural gas
output can respond to rising prices. prices on revenue depends on the
Similarly, demand for local crude oil does magnitude of the change. As the supply
not respond strongly to shifts in prices. of natural gas in the United States has
Revenue Volatility risen due to increased production in remains constant, placing pressure

continued North Dakota and Pennsylvania, on revenue in natural gas segments as
companies’ cost of extraction prices fall.
Regulation and Policy The Oil Drilling and Gas Extraction service conditions on a pipeline, and
industry is highly regulated, and the reasonable rates for moving petroleum
federal and state governments are and petroleum products by pipeline.
Level & Trend involved in all stages of production. The federal government also maintains
he level of
T State governments determine which the Strategic Petroleum Reserve (SPR),
Regulation is areas are open to oil exploration and which was established by the Energy
Heavyand the extraction, issue exploration and Policy and Conservation Act of 1975
production leases, and they enforce (EPCA) in response to the oil crises in the
trend is S
teady
environmental legislation. early 1970s, and its development began
The Federal Energy Regulatory in 1977. The purpose of the reserve is to
Commission (FERC) plays a limited role provide a stock of oil that can be drawn
in the oil market. Its authority is confined down in the event of a major shock in the
to regulating the rates and practices of oil market. Only the President has the
companies engaged in interstate authority to order the strategic reserves
transportation (under the Interstate be used. If reserves are distributed, they
Commerce Act and the Energy Policy are sold to bidders in the US market.
Act). It aims to establish fair and Furthermore, the SPR measures the
reasonable rates to encourage maximum amount stored in terms of the number of
use of oil pipelines, which provide a days of imports it could replace.
relatively inexpensive means of bringing The United States also maintains
oil to market. several laws that govern the export of
FERC does not oversee the crude oil products. The Mineral Leasing
construction of oil pipelines or regulate Act of 1920 (MLA) and the EPCA both
the supply and price of oil or oil products. restrict the sale of crude oil abroad. The
Rather, it helps to assure shippers equal MLA also grants the US government with
access to pipeline transportation, equal the ability to manage the mineral rights
Regulation and Policy of public lands, which are leased to provides incentives to continue
continued industry operators. The EPCA grants the production from marginal offshore oil
President the right to restrict the export wells; provides incentives for gas
of energy-related materials to protect production from deep wells in the
domestic supply. However, in December shallow waters of the Gulf of Mexico,
2015, Congress overturned the ban on US depending on gas prices; authorizes the
crude oil exports. granting of royalty relief for leases in
The Energy Policy Act 2005, which deepwater areas, depending on oil prices;
was signed into law in August 2005, provides for the suspension of offshore
contains a range of measures aimed Alaska royalties to promote increased
at increasing US energy self-sufficiency. production; and provides a five-year,
The act offers a range of benefits, or $20.0 million annual authorization to the
potential benefits, to oil and gas Secretary of the Interior to develop a
producers. Among other items, the act program to remediate, reclaim and close
authorizes an expansion of the SPR from orphaned, abandoned or idled wells on
700 million barrels to one billion barrels; federal land.
Industry Assistance The Oil Drilling and Gas Extraction expense 70.0% of these costs, while
industry is not protected by tariffs and independent producers can fully expense
does not receive any nontariff protection; these costs.
Level & Trend however, it does benefit from some The percentage depletion
he level of
T industry-specific policies. allowance permits independent
Industry Assistance Expensing of intangible drilling costs producers to subtract 15.0% of sales
is L owand the enables companies engaged in the from a property as a deduction for the
production of domestic oil and gas to depletion or depreciation of the capital
trend is S teady
treat certain intangible costs of drilling investment in the mineral reserve. It is
and development, such as fuel, labor, only available to small, independent
supplies and repairs as expense items. producers. There is also a 15.0% income
This is an exception to general tax rules, tax credit for the costs of recovering oil
which require capitalization of such costs. through one of several enhanced oil
Integrated oil companies can only recovery methods.
Key Statistics
Industry Data Industry World produc-
Revenue Value Added Establish- Exports Imports Wages Domestic tion of oil
($m) ($m) ments Enterprises Employment ($m) ($m) ($m) Demand (Mil barrels per day)
2010 258,010.7 86,820.9 7,859 6,513 109,199 10,865.2 267,959.7 14,835.9 515,105.2 79.6
2011 317,163.6 108,647.6 8,095 6,628 118,959 13,862.1 320,399.2 16,670.2 623,700.7 104.0
2012 291,473.7 89,441.4 8,064 6,646 125,001 12,624.6 288,071.0 17,447.3 566,920.1 105.0
2013 361,446.0 111,025.4 8,037 6,566 131,789 19,417.7 246,823.7 18,856.7 588,852.0 104.1
2014 420,714.0 145,068.8 8,256 6,646 137,839 31,564.6 215,675.4 20,537.4 604,824.8 96.2
2015 244,565.4 56,533.4 7,906 6,373 135,482 21,339.1 117,467.0 18,625.8 340,693.3 50.8
2016 220,600.8 47,409.4 7,330 5,951 122,140 24,155.9 93,413.0 16,304.7 289,857.9 42.8
2017 265,885.0 58,183.1 7,888 6,352 139,539 46,594.2 124,620.3 18,832.1 343,911.1 52.8
2018 364,798.0 77,185.0 9,070 7,207 175,929 77,612.1 147,607.6 24,162.4 434,793.5 68.3
2019 413,161.9 87,614.6 9,652 7,633 194,390 86,972.8 170,351.6 26,831.2 496,540.7 63.2
2020 468,725.1 100,717.3 10,336 8,137 215,566 98,906.9 192,429.4 29,891.2 562,247.6 62.8
2021 502,917.5 109,097.5 10,880 8,549 230,640 105,995.3 206,907.3 31,999.5 603,829.5 63.6
2022 522,884.9 114,989.6 11,330 8,901 241,812 110,297.9 214,793.3 33,493.6 627,380.3 64.0
2023 551,642.1 120,519.5 11,951 9,384 256,840 116,390.7 226,513.2 35,527.3 661,764.6 65.2
2024 596,550.0 131,299.6 12,862 10,092 279,156 125,787.1 245,227.3 38,575.2 715,990.2 66.9
Sector Rank 1/10 1/10 2/10 2/10 2/10 1/9 1/9 2/10 1/9 N/A
Economy Rank 22/694 29/694 316/694 313/694 181/694 3/217 2/217 65/694 2/217 N/A
Annual Change Industry Establish- Domestic World produc-

Revenue Value Added ments Enterprises Employment Exports Imports Wages Demand tion of oil
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
2011 22.9 25.1 3.0 1.8 8.9 27.6 19.6 12.4 21.1 30.6
2012 -8.1 -17.7 -0.4 0.3 5.1 -8.9 -10.1 4.7 -9.1 1.0
2013 24.0 24.1 -0.3 -1.2 5.4 53.8 -14.3 8.1 3.9 -0.9
2014 16.4 30.7 2.7 1.2 4.6 62.6 -12.6 8.9 2.7 -7.5
2015 -41.9 -61.0 -4.2 -4.1 -1.7 -32.4 -45.5 -9.3 -43.7 -47.2
2016 -9.8 -16.1 -7.3 -6.6 -9.8 13.2 -20.5 -12.5 -14.9 -15.7
2017 20.5 22.7 7.6 6.7 14.2 92.9 33.4 15.5 18.6 23.3
2018 37.2 32.7 15.0 13.5 26.1 66.6 18.4 28.3 26.4 29.4
2019 13.3 13.5 6.4 5.9 10.5 12.1 15.4 11.0 14.2 -7.5
2020 13.4 15.0 7.1 6.6 10.9 13.7 13.0 11.4 13.2 -0.7
2021 7.3 8.3 5.3 5.1 7.0 7.2 7.5 7.1 7.4 1.3
2022 4.0 5.4 4.1 4.1 4.8 4.1 3.8 4.7 3.9 0.6
2023 5.5 4.8 5.5 5.4 6.2 5.5 5.5 6.1 5.5 1.9
2024 8.1 8.9 7.6 7.5 8.7 8.1 8.3 8.6 8.2 2.7
Sector Rank 1/10 1/10 1/10 1/10 1/10 1/9 1/9 1/10 1/9 N/A
Economy Rank 2/694 5/694 21/694 24/694 7/694 8/217 7/217 6/694 7/217 N/A
Key Ratios Imports/ Exports/ Revenue per Share of the

IVA/Revenue Demand Revenue Employee Wages/Revenue Employees Average Wage Economy
(%) (%) (%) ($’000) (%) per Est. ($) (%)
2010 33.65 52.02 4.21 2,362.76 5.75 13.89 135,861.13 0.56
2011 34.26 51.37 4.37 2,666.16 5.26 14.70 140,134.00 0.69
2012 30.69 50.81 4.33 2,331.77 5.99 15.50 139,577.28 0.55
2013 30.72 41.92 5.37 2,742.61 5.22 16.40 143,082.50 0.67
2014 34.48 35.66 7.50 3,052.21 4.88 16.70 148,995.57 0.86
2015 23.12 34.48 8.73 1,805.15 7.62 17.14 137,478.04 0.32
2016 21.49 32.23 10.95 1,806.13 7.39 16.66 133,491.89 0.27
2017 21.88 36.24 17.52 1,905.45 7.08 17.69 134,959.40 0.32
2018 21.16 33.95 21.28 2,073.55 6.62 19.40 137,341.77 0.41
2019 21.21 34.31 21.05 2,125.43 6.49 20.14 138,027.68 0.46
2020 21.49 34.23 21.10 2,174.39 6.38 20.86 138,663.80 0.52
2021 21.69 34.27 21.08 2,180.53 6.36 21.20 138,742.20 0.55
2022 21.99 34.24 21.09 2,162.36 6.41 21.34 138,510.91 0.57
2023 21.85 34.23 21.10 2,147.80 6.44 21.49 138,324.64 0.59
2024 22.01 34.25 21.09 2,136.98 6.47 21.70 138,185.10 0.63
Sector Rank 10/10 2/9 5/9 1/10 10/10 7/10 1/10 1/10
Economy Rank 476/694 76/217 77/217 24/694 622/694 240/694 20/694 29/694
Figures are in inflation-adjusted 2019 dollars. Rank refers to 2019 data. SOURCE: WWW.IBISWORLD.COM
Industry Financial Ratios

Apr 2016 - Mar 2017 by company revenue
Apr 2013 - Apr 2014 - Apr 2015 - Apr 2016 - Small Medium Large
Mar 2014 Mar 2015 Mar 2016 Mar 2017 (<$10m) ($10-50m) (>$50m)
Liquidity Ratios
Current Ratio 1.3 1.7 1.7 1.1 0.7 1.7 1.2
Quick Ratio 1.0 1.3 1.1 0.8 0.6 1.6 0.9
Sales / Receivables (Trade Receivables
Turnover) 10.3 11.3 12.3 12.0 11.9 13.8 9.2
Days’ Receivables 35.4 32.3 29.7 30.4 30.7 26.4 39.7
Cost of Sales / Inventory (Inventory Turnover) n/c n/c n/c n/c n/c n/c 96.8
Days’ Inventory n/a n/a n/a 0.4 0.4 0.4 3.8
Cost of Sales / Payables (Payables Turnover) 7.5 11.3 12.5 11.9 11.0 21.8 9.6
Days’ Payables 48.7 32.3 29.2 30.7 33.2 16.7 38.0
Sales / Working Capital 21.5 8.0 10.8 131.4 -21.3 9.1 63.0
Coverage Ratios
Earnings Before Interest & Taxes (EBIT) /
Interest 3.7 7.7 1.0 1.0 0.2 2.0 3.0
Net Profit + Dep., Depletion, Amort. / Current
Maturities LT Debt 3.0 7.3 n/a n/a n/a n/a n/a
Leverage Ratios
Fixed Assets / Net Worth 1.2 1.0 1.1 1.3 1.2 1.3 1.3
Debt / Net Worth 0.9 0.7 0.7 0.9 0.9 0.7 1.3
Tangible Net Worth 47.0 50.7 44.7 44.7 46.0 54.0 29.8
Operating Ratios
Profit before Taxes / Net Worth, % 10.5 13.7 1.2 -0.1 -0.2 -3.6 6.0
Profit before Taxes / Total Assets, % 4.9 7.2 0.7 -0.4 -0.7 -2.0 2.9
Sales / Net Fixed Assets 0.9 1.4 1.1 0.6 0.5 0.5 0.8
Sales / Total Assets (Asset Turnover) 0.5 0.6 0.4 0.4 0.3 0.4 0.6
Cash Flow & Debt Service Ratios (% of sales)

Cash from Trading 59.5 52.2 47.1 48.8 49.1 49.2 47.4
Cash after Operations 27.4 25.2 21.6 19.8 15.8 20.7 39.0
Net Cash after Operations 25.2 25.5 16.8 15.8 13.7 12.3 38.8
Cash after Debt Amortization 10.5 8.7 5.5 5.9 3.7 9.4 11.7
Debt Service P&I Coverage 5.4 7.2 3.5 2.2 0.9 5.8 3.1
Interest Coverage (Operating Cash) 8.0 11.8 5.2 3.9 0.8 5.8 6.2
Assets, %
Cash & Equivalents 11.2 15.3 14.3 9.4 9.0 10.9 8.6
Trade Receivables (net) 10.3 10.4 9.9 9.0 9.6 6.3 10.3
Inventory 2.4 2.2 3.0 2.1 1.7 2.2 3.2
All Other Current Assets 3.3 4.6 3.8 2.7 3.0 2.7 1.7
Total Current Assets 27.1 32.5 30.9 23.2 23.4 22.2 23.8
Fixed Assets (net) 59.0 51.2 53.6 60.6 57.0 67.6 63.0
Intangibles (net) 3.3 3.7 4.0 1.0 1.1 0.3 1.7
All Other Non-Current Assets 10.6 12.6 11.5 15.2 18.6 10.0 11.6
Total Assets 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Total Assets ($m) 10,773.0 7,582.9 5,576.4 6,915.3 900.1 2,546.7 3,468.5
Liabilities, %
Notes Payable-Short Term 7.2 8.6 9.9 10.9 15.5 8.0 1.1
Current Maturities L/T/D 2.1 1.8 1.4 2.4 2.2 n/a 5.6
Trade Payables 7.1 7.4 6.4 6.2 6.8 2.9 8.5
Income Taxes Payable n/a 0.1 n/a 0.1 0.1 n/a 0.2
All Other Current Liabilities 5.5 6.1 6.5 8.1 7.7 9.8 7.5
Total Current Liabilities 22.0 24.0 24.2 27.8 32.2 20.7 22.8
Long Term Debt 21.3 16.1 17.0 18.5 13.4 17.9 34.2
Deferred Taxes 0.7 0.5 0.8 0.2 0.2 n/a 0.3
All Other Non-Current Liabilities 5.7 5.0 9.3 7.8 7.0 7.1 11.1
Net Worth 50.3 54.4 48.7 45.7 47.1 54.3 31.5
Total Liabilities & Net Worth ($m) 10,773.0 7,582.9 5,576.4 6,915.3 900.1 2,546.7 3,468.5
Maximum Number of Statements Used 195 154 131 127 73 29 25
Source: RMA Annual Statement Studies, rmahq.org. RMA data for all industries is derived directly from more
than 260,000 statements of member financial institutions’ borrowers and prospects.
Note: For a full description of the ratios refer to the Key Statistics chapter online.
Jargon & Glossary
Industry Jargon ETHANOLA form of alcohol used as a fuel, which is OIL FIELDAn underground or undersea deposit of oil
primarily made from grains, such as corn and soybeans. contained within a stable geological formation.
LIQUEFIED NATURAL GAS (LNG)An energy source ORGANIZATION OF PETROLEUM EXPORTING
formed by cooling natural gas to a very low COUNTRIESAbbreviated as OPEC, this global
temperature, at which it becomes liquid. organization, consisting of 12 countries, is designed to
NATURAL GASGases that consist primarily of methane create stability and control in the petroleum markets.
but also include small amounts of heavier hydrocarbons
such as propane and butane.
OFFSHORE PLATFORMSStructures located in the
ocean that are designed to extract oil or gas from
underneath the seabed.
IBISWorld Glossary BARRIERS TO ENTRYHigh barriers to entry mean that INDUSTRY CONCENTRATIONAn indicator of the
new companies struggle to enter an industry, while low dominance of the top four players in an industry.
barriers mean it is easy for new companies to enter an Concentration is considered high if the top players
industry. account for more than 70% of industry revenue.
CAPITAL INTENSITYCompares the amount of money Medium is 40% to 70% of industry revenue. Low is less
spent on capital (plant, machinery and equipment) with than 40%.
that spent on labor. IBISWorld uses the ratio of INDUSTRY REVENUEThe total sales of industry goods
depreciation to wages as a proxy for capital intensity. and services (exclusive of excise and sales tax); subsidies
High capital intensity is more than $0.333 of capital to on production; all other operating income from outside
$1 of labor; medium is $0.125 to $0.333 of capital to $1 the firm (such as commission income, repair and service
of labor; low is less than $0.125 of capital for every $1 of income, and rent, leasing and hiring income); and
labor. capital work done by rental or lease. Receipts from
CONSTANT PRICESThe dollar figures in the Key interest royalties, dividends and the sale of fixed
Statistics table, including forecasts, are adjusted for tangible assets are excluded.
inflation using the current year (i.e. year published) as INDUSTRY VALUE ADDED (IVA)The market value of
the base year. This removes the impact of changes in goods and services produced by the industry minus the
the purchasing power of the dollar, leaving only the cost of goods and services used in production. IVA is
“real” growth or decline in industry metrics. The inflation also described as the industry’s contribution to GDP, or
adjustments in IBISWorld’s reports are made using the profit plus wages and depreciation.
US Bureau of Economic Analysis’ implicit GDP price INTERNATIONAL TRADEThe level of international
deflator. trade is determined by ratios of exports to revenue and
DOMESTIC DEMANDSpending on industry goods and imports to domestic demand. For exports/revenue: low is
services within the United States, regardless of their less than 5%, medium is 5% to 20%, and high is more
country of origin. It is derived by adding imports to than 20%. Imports/domestic demand: low is less than
industry revenue, and then subtracting exports. 5%, medium is 5% to 35%, and high is more than
EMPLOYMENTThe number of permanent, part-time, 35%.
temporary and seasonal employees, working proprietors, LIFE CYCLEAll industries go through periods of growth,
partners, managers and executives within the industry. maturity and decline. IBISWorld determines an
ENTERPRISEA division that is separately managed and industry’s life cycle by considering its growth rate
keeps management accounts. Each enterprise consists (measured by IVA) compared with GDP; the growth rate
of one or more establishments that are under common of the number of establishments; the amount of change
ownership or control. the industry’s products are undergoing; the rate of
technological change; and the level of customer
ESTABLISHMENTThe smallest type of accounting unit
acceptance of industry products and services.
within an enterprise, an establishment is a single
physical location where business is conducted or where NONEMPLOYING ESTABLISHMENTBusinesses with
services or industrial operations are performed. Multiple no paid employment or payroll, also known as
establishments under common control make up an nonemployers. These are mostly set up by self-employed
enterprise. individuals.
EXPORTSTotal value of industry goods and services sold PROFITIBISWorld uses earnings before interest and tax
by US companies to customers abroad. (EBIT) as an indicator of a company’s profitability. It is
calculated as revenue minus expenses, excluding
IMPORTSTotal value of industry goods and services
interest and tax.
brought in from foreign countries to be sold in the
United States.
Jargon & Glossary
IBISWorld Glossary VOLATILITYThe level of volatility is determined by WAGESThe gross total wages and salaries of all
averaging the absolute change in revenue in each of the employees in the industry. The cost of benefits is also
continued past five years. Volatility levels: very high is more than included in this figure.
±20%; high volatility is ±10% to ±20%; moderate
volatility is ±3% to ±10%; and low volatility is less than
±3%.
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WWW.IBISWORLD.

COM Oil Drilling & Gas Extraction in the USDecember 2019 1

It’s a gas: Industry set to return to revenue growth

IBISWorld Industry Report 21111

2 About this Industry 16 International Trade 34 Operating Conditions

www.ibisworld.com | 1-800-330-3772 | info @ibisworld.com

About this Industry

Main Activities The primary activities of this industry are

The major products and services in this industry are

Similar Industries 21311 Oil & Gas Field Services in the US

32411 Petroleum Refining in the US

32511 Petrochemical Manufacturing in the US

32512 Oxygen & Hydrogen Gas Manufacturing in the US

Additional Resources For additional information on this industry

Key Statistics Revenue Annual Growth 14–19 Annual Growth 19–24

$11.6bn $87.0bn 7,633

Products and services segmentation (2019)

Key External Drivers

World price of natural gas

Industry Structure Life Cycle Stage Mature Regulation Level Heavy

World price of crude oil World production of oil

Current The Oil and Gas Extraction industry

products. However, revenue fell 41.9%

A global industry Oil and natural gas are highly globalized

Trade’s growing which bolstered prices during the first half

Industry The Oil Drilling and Gas Extraction

Global demand Global demand for oil is expected to be

Rising output Local crude oil output is projected to

Minor competition While biofuels (primarily ethanol, but

Products & Markets

Supply Chain KEY BUYING INDUSTRIES

KEY SELLING INDUSTRIES

Products and Services Products and services segmentation (2019)

Total $413.2bn SOURCE: WWW.IBISWORLD.COM

Products & Markets

Products & Markets

Demand influenced oil price increases as domestic production by spurring

Major Markets Major market segmentation (2019)

Products & Markets

International Trade The United States is expected to import

experienced extreme declines in trade -100

expected to decline at an annualized rate

Products & Markets

Exports To... Imports From...

Year: 2019 Total $87.0bn Total $170.4bn

Products & Markets

Products & Markets

Business Locations 2019

West Establishments (%)

Products & Markets

Business Locations The geographic spread of the local Oil

Both these regions obtain a

Sector vs. Industry Costs

Basis of Competition purchasers pay a premium for oil with a Security

Barriers to Entry There are substantial barriers to entry to

operations, such as petroleum refining

However there are legal,

Major Players ConocoPhillips Company 4.5%

Chevron Corp. (US industry-specific segment) - financial performance*

Exxon Mobil (US industry-specific segment) - financial performance*

BP PLC (US industry-specific segment) - financial performance*

*Estimates; Operating Income measured using Cash Flow From Operations

Player Performance Financial performance and gas prices plummeting. In 2016

COM Oil Drilling & Gas Extraction in the USDecember 2019 1