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ENERGY INTELLIGENCE TOP 100 GLOBAL NOC AND IOC RANKINGS

Comparative performance assessments of the world’s leading energy companies.

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Key Findings

  • The Top 100 is on the cusp of transformational change, with corporate strategy set to be illuminated as much by gains in output, reserves and rankings as much as their declines.
  • Independent companies, particularly US shale players, may have already peaked in both number and volumes, possibly serving as a leading indicator for broader longer-term industry restructuring.
  • Covid-19 may be the catalyst for overdue consolidation, but asset quality and faith in the oil market will remain important in driving the size and duration of the next wave of M&A.
The Calm Before the Storm

The oil and gas industry is cyclical, but history will find that 2019 was the calm before the storm. The latest Energy Intelligence Top 100: Global NOC and IOC Rankings reflect an industry on the cusp of transformational change. Companies have understood for some time that transition was inevitable but had no idea just how much the tectonic impact of the twin Covid-19 and oil market crises of 2020 would accelerate that change. Top 100 companies are ranked annually according to performance in six operational metrics: oil and gas reserves, oil and gas production, product sales and refinery distillation capacity. Rankings are calculated each fall from the previous year’s data to include those reporting results late in the year.

Oil production for this group was flat, although growth continued in the US shale patch—albeit at a slightly slower rate. Gas production also grew more slowly as significant new liquefaction capacity worsened global LNG oversupply. But what would become a monumentally weak LNG market still proved to be more resilient than the oil market when the Covid-19 crisis hit in early 2020.

Saudi Aramco, NIOC and CNPC retain the No. 1, No. 2 and No. 3 spots, respectively. North American companies—and US shale players specifically—may have peaked in both number and production volumes as consolidation pace gains momentum. More broadly, the industry is likely in the middle of a multiyear turning point as it reorients itself for the energy transition. Change will not materialize overnight, but corporate growth in future editions could very well be measured equally by those whose output, reserves and ranking decline as much as they grow.
Downstream Supports Top NOCs While Supermajors Prepare for Change

Top 10 membership remains unchanged: Saudi Aramco, NIOC, CNPC, Exxon Mobil, BP, Rosneft, Royal Dutch Shell, PDVSA, Gazprom and Total). Yet, top NOC performance was mixed as pressure on several of these companies, which was evident in the last edition, continues. Saudi Aramco, one year after downward reserve revisions associated with its initial public offering, remains remarkably stable in the top spot—even as it continues to lead Opec-plus market management. The company has been building its downstream segment, however, with acquisitions and consolidation of refinery ownership boosting its operational footprint. In Iran, US sanctions, as expected, have throttled NIOC’s oil production. But downstream operations remain resilient. The same can be said for PDVSA, which, despite the slow burn of Venezuela’s economic meltdown, retains a robust downstream—for now. But this has not been enough to keep the company from declining two spots to an all-time low of No. 8 as its oil output implodes. PDVSA now trails Exxon, BP and Shell in the rankings.

Supermajors have stabilized after delivering important gains last year, but it could very well be the last year of stability. Each company has held its ground, helped by organic production gains from both US operations and ongoing ramp-up of global gas projects in Egypt, Oman, Azerbaijan, Russia and Australia supporting the group’s 4% oil output growth and 2% gas output growth. Yet, this does not mask greater challenges for the industry. Supermajors, along with their smaller, listed Regional Integrated and Independent brethren that make up roughly half of the Top 100 universe, were out of favor with investors prior to the coronavirus pandemic. Now, these companies are finding themselves slashing spending and revisiting short-term priorities to shore up balance sheets and protect free cash flow—with some also needing to fund long-term transition strategies. Even then, it is not clear that the sector will ever be loved again. Exxon’s ejection from the Dow Jones Industrial Average after more than 90 years is not simply a reflection of the company’s difficulties but emblematic of a sector that now constitutes only 3% of the S&P 500.

Chevron’s 2020 acquisition of Noble Energy, which ends its run in this edition at No. 55, will likely catapult the company back into the top 10 after six years in exile at No. 11. However, much greater change will be required to burnish the reputation of Chevron and its peers as so-called “gas producers.” For several years, supermajors’ collective gas share of total output has been stubbornly stagnant at around 42%, where it will likely remain without greater gas development at oil’s expense.

Arguably, BP’s story is the most significant as a harbinger of longer-term change. Shell (No. 7) and Total (No. 9) had been on the front lines of evolving transition strategies featuring low-carbon electricity value chain development. But BP’s own transition strategy announcement, featuring a 10-year plan for a 40% reduction in oil and gas production and 30% lower refining output by 2030, captured the industry’s attention
US Independents: Past Their Peak

US-focused independents continue to drive movement among the remaining Top 100 companies. This bloc of 23, which is a well-established subgroup of Independent E&Ps, produces around 6% of the world’s oil. Larger independents are working to balance optimization of US shale patch operations with larger, conventional overseas project developments. Many smaller pure players continue their scramble to generate positive free cash flow long after investors have lost their patience. Still, despite mounting pressure over the last several years, it will likely be the 2020 oil market crisis that generates the most meaningful change in the sector. Chesapeake Energy, which managed to advance two spots to No. 55 and has survived crushing debt through turbulent times, was the largest—and probably least surprising—company to file for bankruptcy protection in 2020.
The larger independents still deliver mixed rankings results. Yet, for some, this is as much about strategic reorientation as it is about performance—and possibly an example of what to expect from larger international oil companies. Excluding Occidental Petroleum, this subgroup’s oil output grew by 8% while other metrics stagnated on asset sales, lower gas production and gas reserve revisions. This both reflects and reinforces the strategies of those seeking to reduce exposure to US gas in favor of liquids-oriented strategies. Pure-play US shale operators delivered a similar, albeit stronger growth profile driven in large part by acquisitions. Even excluding two sizable mergers, oil production growth was still a strong 6%—made even more remarkable by the loss of QEP Resources from the Top 100.

Newly minted Ovintiv, formerly Encana, delivered the strongest advancement among the entire Top 100 group in this edition. The company jumped from No. 60 to No. 43 following its acquisition of Newfield Exploration, re-entering the top 50 for the first time since Encana spun off Cenovus Energy in 2009. Also, in the US shale patch, Diamondback Energy and Oxy advanced meaningfully as well on their own acquisitions. Diamondback, which entered the Top 100 last year, jumped 12 spots from No. 91 to No. 79 through its merger with Energen. Occidental’s high-profile $57 billion takeover of Anadarko pushed its ranking from No. 42 to No. 37. (Acquisitions played a more meaningful role outside the US shale patch as well in this edition, with both Wintershall Dea and PTT advancing 13 and 11 spots, respectively.)

Acquisitions were not the only advancement driver, with organic growth helping Cabot Oil & Gas (#68), CNX Resources (No. 76) and Pioneer Natural Resources (No. 73) advance as well. Remarkably, Cabot and CNX, both Appalachian players, delivered stronger gas results in a languishing gas price environment. Dominion South prices averaged only $2.10 per million Btu, and regional gas production has been flat for the better part of a year. The same cannot be said for regional rivals EQT (No. 54), Antero Resources (No. 44), Range Resources (No. 48) and Southwestern Energy (which remains at No. 52). But EQT’s October 2020 acquisition of Chevron’s Appalachia resources (following rumors of an approach to CNX) reinforces faith in the region—particularly as lower US gas output helps support prices heading into 2021.

Among other decliners, Devon Energy stands out. The company was pushed out of the top 50 for the first time ever, dropping from No. 44 to No. 70—the largest decline in this edition—following sale of its Barnett Shale and Canadian assets. While debt reduction was part of the rationale, the divestitures contribute to an ongoing effort to refocus attention on the Permian. This strategy will be strengthened by the company’s merger with WPX Energy, which will likely help it regain some ground in next year’s edition.
Covid Consolidation Catalyst?

The uptick in large-scale M&A activity in the second half of 2020 is raising questions about short-term necessity versus long-term prudence. Consolidation was on the docket for US shale players for quite some time prior to the pandemic as a textbook example of too many companies and too much capital generating too little value, pushed by both ongoing financial difficulty and volatile oil prices. In this edition, this group represents 16% of Top 100 companies but only 4% of oil production. But oil prices remain stuck at the $40 per barrel level, and our forecast for around $51/bbl West Texas Intermediate in 2021 will be insufficient for the whole sector to recover. Furthermore, the rapidly changing shape and timing of oil demand growth following the pandemic will push the broader industry at-large to answer similar capital allocation questions.

Mergers of similarly sized companies in the vein of what we have seen in the Permian Basin are as much a matter of survival of the counterparties than anything else. Recent tie-ups have been all-stock transactions, reflecting the premium on cash and questions about long-term value. The extent to which other shale operators provide the same attraction as those combining right now may determine whether this consolidation wave emerging in second-half 2020 may be over before it really starts.

The ConocoPhillips-Concho Resources deal is no less a matter of strategic fit and lower production costs than the tie-ups of similarly sized companies. But it is also a bet on oil at a time when demand is poised to be structurally reshaped. Speakers at the October 2020 Energy Intelligence Forum suggested that a recovering oil market—which we expect could reach $75-$80/bbl by mid-decade—driven by current spending pullback and expectations for lower supply growth, could provide the elixir that restores equity market affection for the sector. However, if demand erodes as quickly as many expect, it may already be too late—and NOCs with low-cost oil will be ready to fill the gap.
AN INDUSTRY REDEFINED: ENERGY IN AN EVOLVING WORLD