This year’s dramatic slide in gasoline prices comes as the oil and gas extraction industry is experiencing its highest net profit margins in more than five years, according to financial analysis from Sageworks.
The industry encompasses a broad range of companies focused on energy exploration, including drillers and those focused on mining and extracting oil from shale and oil sands.
Privately held companies in this industry, on average, are generating a net profit margin of 17.3 percent, according to Sageworks, marking the third year in a row of profit margins in the mid- to high-teens. The average private company profit margin for all industries, meanwhile, was 6.7 percent during the 12-months ending in mid-November.
Sales growth for private oil and gas extractors has also rebounded since 2013, rising to 18.7 percent during the 12-month period ending September 23, up from 3.5 percent the previous year.
“The extraction industry has enjoyed solid margins over the past four years,” says Sageworks analyst Kevin Abbas.
“If the price of oil and gas continues to trend downward, however, we would anticipate a negative impact on margins for extraction companies who will have to fight to maintain their profits.”
An analysis of the oil and gas extraction industry in 2011 by Sageworks shows that profit margins normally follow gasoline prices. Oil prices have declined by 30 percent since June, while a nationwide survey by the American Automobile Association finds the average price of a gallon of regular gasoline has dropped 20 percent, from $3.68 to $2.95, during the same period.
The rising profits and sales growth in the oil and gas extraction industry helped the sector claim the number two spot on the list of best performing private industries for the year.