IHS Energy 50: An introduction and review of last year

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.

Before releasing the 2014 IHS Energy 50 report on January 27, we take a quick look back at a few of the results of the 2013 report, especially as it pertains to unconventional plays (please note that the Energy 50 reports on the previous year's figures so these were the numbers reported at the end of 2012).

Ripple Effect In recent years, unconventional oil and gas has impacted company values in new and surprising ways. Differentials between coastal and inland crude prices widened in 2012 as a lack of infrastructure to move crude to global markets created discounts as wide as $30-50/bbl between more landlocked oil and WTI/Brent.

While North American oil and gas production posted impressive volume growth and attracted substantial investment, value creation was more elusive: the Top 15 E&P list - dominated by companies with substantial North America portfolios, many with gas-heavy weighting - showed an average decline of 4% in share price in 2012 as markets continued to punish weak gas prices.

Unconventional North American plays had a ripple effect throughout the industry. The top 15 Refining & Marketing companies in 2012 - dominated by North American players - posted a 40% average increase in market capitalization during the year. Well-positioned refiners earned higher returns than during the mid 2000s "golden age" of refining. Specialization on certain sectors took advantage of this: ConocoPhillips spun off its downstream business as Phillips 66 in 2012, following the trail blazed by Marathon in 2011. The resulting smaller and more focused companies have become leaders in their segments, with ConocoPhillips holding pole position in the E&P segment and Phillips 66 and Marathon Petroleum both in the top five Refining & Marketing companies.

Overview for all Sectors - No Big Changes in 2012 Outside North American plays, the industry showed lackluster returns. Through 2012, the value of the Energy 50 remained largely unchanged, with the combined market capitalization of the top 50 energy companies at $3.5 trillion, a slight 0.8% decline from the previous 12 months. Although market cap for the group as a whole has generally followed the price of crude, these indices disconnected during the 2008-10 financial crisis. In 2011-12 they converged again but at a "new normal" of generally lower company valuations.

Of special note, IOCs and NOCs saw a mixed performance during the year: among IOCs, the strongest share price performance came from LUKOIL (+29%), Husky (+21%) and Eni (+17%). The loss of its assets in Argentina resulted in a 34% share price decline for Repsol in 2012. Other negative performance came from TNK-BP (-31%), Sasol (-10%) and Shell (-6%). The combined value of the top five NOCs on the PFC Energy 50 remained steady at $725 billion, following a 17% drop from 2010 to 2011. Unlike previous years when NOCs trended up or down together, 2012 performance was highly differentiated. Second to Ecopetrol's 43% gain in share price, Rosneft posted a 25% share price increase following a year of bold strategic moves and CNOOC gained 24%.

Please look for the release of the full 2014 IHS Energy 50 on this blog next week, Monday, January 27.

Energy 50 from 2013

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.