TheOil, Gas and Consumable Fuels
TheOil, Gas, and Consumable Fuels Industry
Americais known to be the leading producer and supplier of energy, and it isthe largest consumer of energy in the world. Energy companies inAmerica produce natural oil, renewable fuels, oils and electricityfrom energy sources that are clean. Such clean sources of energyinclude nuclear power, the wind, and solar power (Azeltonet al., 2013, pg72).In addition, these American energy companies store, distribute, andas well transmit this energy via complex infrastructural networks,which are supported by numerous emerging services and products forinstance, the smart grid technologies. The country’s high growingconsumer demand as well as the excellent innovations and competitiveworkforce ensures that America is the world’s highest marketattacker in the global energy market. In the oil, gas and consumablefuels sectors, there are various subsectors, including renewableenergy, renewable fuels, oil and gas, coal, nuclear energy, energyefficiency and the Smart Grid, to mention just a few.
Firm’sPerformance in the Industry of Oil, Gas and Consumable Fuels
Theperformance of a firm within its industry of operation can bemeasured using a subjective as well as a self-reported performancequota. This process should be consistent with previous research inwhich the perception of the manager in their firm’s performance canbe viewed as greatly consistent on how the firm performed. Byadaptation of the same indicator, then respondents can be requestedto rate their firm’s performance in relation to their competitors(Besankoet al., 2013, pg88).These respondents can then benchmark the results with regard to theirexpectations in a particular period. The performance measures arethen standardized and later on put together to reflect a global indexof performance.
Inaddition, variables can be included as control variables based on theprevious findings. This then indicates the essential of theirinclusion. The age of the firm is processed into two differentcategories of the older and the younger firms (Besankoet al., 2013, pg108).The size of the firm can be estimated and assessed using a principalcomponent analysis and after that categorized in two sets i.e. largerfirms and small firms. Additionally, entrepreneurial experiences canbe accounted for as predicted in the success of the firm and give anexplanation of the variables in the performance of an entrepreneur.
Inthe anticipation of an acquiescence of a set of response, reversecoding of a number of scale items can be performed. The logic here isthatthe items that have been reverse coded can act as a cognitivespeed bump, which would need a respondent to engage more in acontrolled (instead of an automatic) cognitive procedure (Azeltonet al., 2013, pg150).As a precautionary step, the common method of response bias can becontrolled by making sure the questions that are relating to adependent variable are located away from both the moderator and theindependent variable in the instruction.
Wherean indicator’s performance is shown to accept a criterion-relatedvalidity using a range on both the continuous and categoricalvariable, then it is only the reliability of the scale, which istested for the sample of respondents. In addition, in terms therespondent’s ratio in relation to the questionnaire number of itemsthat is used in a survey, it can be deemed insufficient in testingthe structure of the factor of these scales. Internal consistency canas well be assessed, and the statistics of the item can be calculatedfor each scale, as they are all considered very reliable.
AverageProfit Margin for a Firm in the Industry of Oil, Gas, and ConsumableFuels
Aninvestor seeking for a diversification of portfolio in the sectorspecific fund is able to get many opportunities that are within theenergy sector, more specifically, within companies that are operatingwithin oil and gas drilling industries(Azeltonet al., 2013, pg168).It is very important to conduct an analysis of some specific metricsin order to be able to understand the company’s profitabilitylevels and to be able to make investment decisions, which areinformed. One common measure that is applied in determining theprofitability of a company is the profit margin.
Calculationof a Profit Margin
Aninvestor is required to do a good analysis of the profit margin of acompany or the net margin profit through completion of a simplecalculation, which would be able to determine the revenues. Acompany’s profit margin can be determinedthrough subtraction of thetotal expenses from the total sales and after that dividing thenumber by the total sales of the company. The common stock dividendsare not taken into account through profit margin calculation.However, profit margin calculation does include interest expenses,taxes, and depreciation (Besankoet al., 2013, pg198).The net profit of the company is similarly calculated throughsubtraction of the total expenses out of the total revenues.Afterward, the results are then divided by the revenue totals. Through this, investors can get a deeper understanding of how acompany is able to convert its bottom line revenue to a profit forits shareholders.
ProfitMargin for an Industry in the Oil, Gas, and Consumable Fuel
SinceJanuary 2015, average net profit for firms in the industry of oil andgas has been at 6.1 percent. Averagely, this industry takes intoaccount profit margin for the number of small, mid and large firms.An investor can use information of the company’s profit marginsince it is the closest metrics tracked in a profit analysis. Such aninvestor can as well use the information for not only an individualcompany but also for the entire sector to decide if a certaininvestment would be suitable.
Performanceof firms in the industry
Bothconsumption and production of energy resources are essential to theworld’s economy. All forms of economic activity need resources,whether it is in provision of transport, running of computers or itis in manufacturing of goods. Currently, the energy industry accountsfor more than 4.5% of the outstanding leveraged loans("Oiloutlook to 2025", 2006, pg85).This is in comparison to a decade ago when it was at 3.1%.
TheUnited States oil inventory has be able to expand by about 2.2m bblsw/w as a result of bulds in Rckiesbbls (+2m) and the West Coastbbls(+1m)("Oiloutlook to 2025", 2006, pg168).In overall, stocks in crude oil were higher by almost 10% however, itdraws crushing, PADD II and PADD III allowed WTI a flat price and itspread ensuring it continues its strength.
Measuresfor Profits and the Financial Performance
Financialstatement analyses have found that the net profit margins forcompanies in the oil and gas industry have dropped from 15% to 2%within the last 12 month. It has been seen that the margins for thesecompanies have as well being dropping ever since a precipitousreduction in the price of oil (Azeltonet al., 2013, pg197).As a result, these companies have been left to scramble in reducingtheir spending in production as well as in exploration. For the Oiland gas companies that are privately held, data from Sageworks haveshown that their revenues have grown at a rate of 4.4%.
Twoof the biggest oil companies in the world include The China NationalPetroleum Corp. (Petrochina) and Sinopec. China is the country oforigin for both these two companies.
Thereturn on Equity (ROE) for the two companies
TheROE is important as it measures the rate on the money that has beeninvested by the common stock owners and has been retained by thecompany. It also shows how good the company makes us of the investedfunds for the purpose of growth generation.
TheReturn on Capital (ROC) for the two companies
ROCis important as it measures on how a company generates its cash flowin relative to the capital that it has invested in its businessoperations. At times ROC is as well referred to as Return on InvestedCapital (ROIC).
TheEarnings per Share (EPS) for the two companies
EPSis a very important variable that is used in for determining acompany’s earning power. It is however important for an investor tounderstand that the EPS of a company can as well be manipulated dueto the constant adjusting amortization and depreciation rate.
Anexisting housing stock plays an important role to meet the targets ofthe energy efficiency that have been set. In America, the sector ofnonprofit housing is seen to dominate the housing market, since itrepresents more than 30 percent of total housing stock. This paperfocuses on the efficiency of energy, which is applied in thisindustry, as well as its effect on the performance of energy (Azeltonet al., 2013, pg205).The paper uses research obtained from different monitoring systemsthat contain information on physical as well as the energyperformance in this industry. The methods followed are based on dataanalysis and on statistical modeling of the physical propertiesconcerning the efficiency of energy and the performance of energy inmany households, as well as the different firms that operate in thisindustry. The result of this research gives information on themeasure of the efficiency of energy that is applied to a residentialstock.
Oiloutlook to 2025. (2006). OPECReview,30(4),203-234. http://dx.doi.org/10.1111/j.1468-0076.2006.00169.x
Azelton,A., Investments, F., &Teufel, A. (2013).Fisherinvestments on energy.Hoboken,N.J.: Wiley.
Besanko,D., Dranove, D., &Shanley, M. (2013).Economics ofstrategy.Princeton, N.J: Recording for the Blind & Dyslexic.