IHS Energy 50: Part 1

In 2013, demonstrating the continuing attraction of liquids rich North American unconventional plays, the stock market rewarded companies with significant investments in these plays, namely EOG Resources.

The listings

The IHS Energy 50 has for 15 years served as the definitive ranking of the world’s leading publicly traded energy companies by market capitalisation. According to the ranking, services companies with significant investments in North America saw their earnings grow significantly. The Top 15 Service Sector companies rose in value by 25%, reflecting industry demand and global optimisation about new developments. Halliburton, one of the top performers, posted a 47% increase in its shares price value. Schlumberger also saw its price grow by 30%.

Unsurprisingly, some strategically positioned North American midstream companies, which are a critical link in the unconventional energy value chain, also saw their value grow significantly. Enterprise grew in market value by 37%. Like their service sector cousins, the midstream companies also were star performers in 2013, with the 2013 Top 15 Midstream companies gathering a 26% rise in value above returns for the same set in 2012.

IOCs

The giant International Oil Companies are not to be forgotten and maintained their top rankings on the IHS Energy 50 list by delivering steady growth and the highest market capitalisations. BG grew 31% and Repsol grew its value by 27% in 2013. The group of 16 companies in the IOC category posted a combined market capitalisation of US$ 1.7 trillion at the end of 2013, slightly more than 10% above their 2012 value.

Market capitalisation

The listings showed little change in overall market capitalisation in 2013, ending with a combined total of US$ 3.78 trillion, which is 0.8% more than the vale of the same set of companies a year ago.

In terms of year over year market capitalisation, National Oil Companies (NOCs) fared poorly with 9 companies on the list dropping in market value by 16%, and as a group, falling bellow US$ 1 trillion for the first time since 2008.

NOCs

According to IHS, investors became increasingly concerned that NOC companies’ privileged access to resources is often tied to expectations that they will build value, not only for shareholders, as other companies must, but also for the parent state and key sectors of the host economy, a heavy burden for any one company to bear. Following some years of impressive market cap growth, the two Latin American NOCs in the Energy 50 suffered the greatest one year market decline.

Comments on the ranking

Atul Arya, senior vice president of Energy Insight at IHS said, ‘The 2014 IHS Energy 50 Ranking of the world’s top energy companies tells a very compelling story of how the market appeared to reward companies that prioritised North American investments in 2013 while divesting elsewhere. This value also was evident not only in the upstream sector, but also in downstream operations. The availability of low cost feedstocks from inexpensive domestic crude supply also benefitted the five predominantly US refiners among the top 15 refining and marketing companies on our list, which saw a combined market cap increase of 33%. This increase in value compared with a combined decline in value of 10% for the rest of refiners on the list, which is a significant value gap.’

Daniel Trapp, senior energy analyst at IHS and principal author of the report said, ‘While economic and geopolitical uncertainty will certainly continue driving energy company values, it is clear that a thought out and well executed strategy positively affects value. This was particularly true with companies that refocused on North America in 2013, notably Occidental, which saw its value expand 24%, and ConocoPhillips, which grew 23% in value. While US refiners benefitted from geography, their positions allowed them stellar growth, which has sparked questions for their leadership about what to do with the higher profits.’

Adapted from a press release by Claira Lloyd.

Read the article online at: https://www.hydrocarbonengineering.com/gas-processing/28012014/ihs_energy_50_part_1_113/