IHS Energy 50, 2014: Midstream and service sectors gain over 20% in value riding unconventionals

2014 IHS Energy 50: midstream and service sectors gain over 20% in value with top 15 midstream companies seeing continuous double-digit growth for the last five years driven by North America unconventional production. Top 15 services companies rode the same wave.

The IHS Energy 50 (formerly the PFC Energy 50) is the definitive ranking of the world's leading publicly traded energy companies by market capitalization. The listing includes companies from nine sectors: International Oil Companies; National Oil Companies; Exploration & Production; Midstream/Infrastructure; Refining & Marketing; Gas & Power Utilities; Oilfield & Drilling Services; Equipment, Engineering & Construction; and Alternative Energy.

The 2014 IHS Energy 50 report was published Monday, January 27. We conclude our series of blog posts on the IHS Energy 50 by looking at the shift in value to the midstream and service sectors, each of which as a class saw growth in market capitalization in excess of 20% in 2013.

Please note that the Energy 50 reports on the previous year's figures so these were the numbers reported at the end of 2013.

Midstream and Oilfield Services Companies Gain Value

As a class, the Top 15 Midstream and Top 15 Oilfield Services companies were top performers in 2013, gaining 26% and 22% respectively in combined market capitalization. Historically, value will shift from one sector to another and one geographic area to another. E&P and Equipment and EPC companies saw a similar global surge as the market was starting to figure out the unconventional boom in 2008-2009. Midstream companies grow as those volumes are brought to market and service sector companies begin showing growth as additional high-tech solutions are needed for increasingly difficult acreage.

The top 15 Midstream list was dominated by North American players benefiting from the surge in North American unconventional production. While North America has historically seen demand in the center of the country met by foreign imports, the surge in production from the Bakken in North Dakota and tight oil in Alberta has led to a reversal in the trade - and unique new opportunities for the midstream sector to capitalize. Midstream companies have benefited from this consistently in recent years - with the 2013 Top 15 Midstream companies seeing continuous double-digit growth as a class for the last five years.

Service sector companies rode this same wave, depending on their services, with companies that focused primarily in onshore developments performing exceptionally well. Technology underscored much of this growth in value - as exploration and production companies pursue more difficult acreage, they require more technologically-heavy solutions, a call the service sector companies have answered with numerous solutions.

North American E&P and R&M Players Growth

As a group, the other Top 15 companies in respective sectors did not perform as well as the Oilfield Services and Midstream set, but digging into the results geographically reveals unsurprising growth for North American players. Refining & marketing and exploration & production companies in North America recorded 33% and 26% growth respectively in market capitalization with their peers elsewhere losing 10% and 6% in value, respectively. This speaks directly to the "seesaw" of investment moving from one part of the world to another in search of the next major play.

Posted 11 February 2014

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.