It was no surprise that many major oil companies' 2000 performances broke records, with steadily improving North American natural gas prices combined with crude oil prices that remained relatively strong worldwide. But overseas majors without significant North American gas exposure also did unusually well upstream, and overall. Other companies also received an upward kick from U.S. downstream results that also broke records despite higher feedstock costs because of exceptionally strong refining margins. The result was earnings (before special items) 116.9% higher in 2000 than in 1999 for 19 majors worldwide, according to Petroleum Finance Week newsletter's scoreboard. Profitability climbed on revenues that rose 40.5% year-to-year. While the survey incorporates results for six more non-U.S. multinationals for the first time, the total was not significantly different than for BP, Royal Dutch/Shell and the U.S. majors. "Overall, it was phenomenal," observes Kate Warne, who follows the majors for <$iEdward Jones > in St. Louis. "Most of the improvement was due to higher commodity prices. But many of them came in above what I anticipated. It showed that they were able to take advantage of better oil and gas prices. The companies also showed continued operating discipline, which they had implemented when commodity prices were low. It was an excellent sign because it showed that they weren't ready to relax controls once commodity prices improved." "It was an unusual year," says David Wheeler of <$iDeutsche Bank Alex. Brown Securities > in New York. "You had rising oil prices alongside rising downstream earnings. Usually, they head in opposite directions. Overall, refining and marketing also reached record levels domestically. There was some squeeze in marketing. But this was the highest downstream profitability in more than 10 years." "Last year was about the upstream. It also was about the downstream, particularly in the U.S.," notes Mark Flannery, who follows the majors for <$iCredit Suisse First Boston Corp >. in New York. "Refining margins were strong not only on the West Coast, where we expected, but also on the East and Gulf coasts. In 2000, they were more than double what we saw in 1999. They gave some of that up in marketing. It must have been galling for a major oil company to make no money at the pump and still be attacked for high gasoline prices." 2000 was a good year for domestic integrated oils as well, like <$iAmerada Hess Corp. > and <$iConoco Inc. > "They typically are more levered on a commodity price basis. That cuts both ways. When these exceptionally good conditions change, that advantage will go away," Flannery says. But most of the upward momentum came from exploration and production, where total operating income jumped 124.9% on production that rose 6.2% year-to-year. "The U.S. majors were more exposed to North American natural gas than the Europeans, with the exception of BP," Flannery says. "In some respects, it's hard to consider that company European, since more than half of its assets now are in North America. That let it benefit from higher natural gas prices." Second-tier European multinationals like <$iTotalFinaElf > and <$iEni > didn't have that advantage, he adds. Acquisitions helped several of these companies increase production and benefit from higher oil prices. Eni's upstream output rose 11.6% from 1999's daily average with the addition of <$iBritish Borneo >'s holdings in May 2000 and will climb further during 2001 when it completes its acquisition of Lasmo Plc. The addition of <$iSaga Petroleum > to <$iNorsk Hydro > helped that Norwegian major boost its production 21.5% year-to-year. <$iRepsol YPF >'s average daily upstream output jumped 53% from 1999 as a result of the Spanish multinational absorbing the Argentinean major as its E&P earnings increased 202%. Among the U.S. majors, <$iPhillips Petroleum > registered the biggest upstream gains in both operating income and production after it bought <$iArco >'s Alaskan E&P holdings from BP in June. The acquisition doubled Phillips' reserves. In 2001, with a full year's production from the Alaskan assets, the major expects its average daily worldwide production to be up approximately 15% from 2000, says Phillips chairman Jim Mulva. Other majors achieved record results through the drillbit as well. During 2000, Conoco accelerated its growth with major discoveries in Vietnam, the Gulf of Mexico and the U.K., and higher production; the completion of key projects in Venezuela, the U.S. and the Far East; and acquisitions in North America and the North Sea, according to Conoco chairman Archie W. Dunham. <$iChevron Corp. > experienced worldwide E&P results that particularly pleased Dave O'Reilly, chairman. Reserve additions replaced production more than 150%. "These production and reserve-addition successes are the direct results of our long-term international upstream growth strategy and the excellence of our technical staffs in capital project selection and execution," he says. None of the majors are about to embark on an upstream spending spree. "It was a supernormal year, way above mid-cycle," says Flannery. "Interestingly, a lot of the larger companies aren't being carried away by it and are remaining reasonably disciplined. They are not asking if oil will remain at $30 or $35 per barrel because they all know that it can't. Their questions are whether it will drop to $18 or $20, or if it will hover around $25 and what that would mean."