As oil traders eagerly await OPEC's final verdict on the production cuts, and as Riyadh puts the final touches on the Aramco IPO, some of the largest players in oil and gas are about to wrap up one of their best years.
Others, as it happens, could have done better.
Here are the top and the bottom companies in oil and gas this year based on share price performance:
Hess Corp and the Guyana Windfall
Hess' shares surged by more than 50 percent in just the first eight months of 2019 and then continued up. This was thanks to one single prospect, and it wasn't in the Permian. It was in Guyana, where Hess is a minority partner of Exxon, and the two have been making discovery after discovery offshore the tiny South American country.
After the latest discovery, Exxon and Hess have tapped some 5.5 billion barrels in oil reserves. Just how important this is for investors is evident in the fact that the share price of the company has continued to rise despite the fact that it has been in the red for two consecutive quarters now.
Shell and the Gas Wealth
When Shell bought BG Group for $53 billion in 2016, becoming the largest gas company in the world, it attracted a lot of criticism. Now, thanks to its natural gas exposure and specifically its LNG exposure, Shell is one of the best-performing stocks in the industry in the year to date. It is also the biggest public oil company by production, which stood at 3.8 million barrels of oil equivalent per day at the end of the third quarter.
The Anglo-Dutch major is not just one of the biggest LNG producers, but also one of the biggest LNG shippers globally. It is also among the top performers in terms of revenue, ranking second in the world after China's Sinopec. Shell is also actively expanding in renewables and energy storage, preparing the ground for future domination in the energy industry, too.
Total and the Smart Way
France's only oil supermajor Total has been among the top performers in the industry over the past five years despite the 2014 price crash. It was also among the top-performing oil stocks this year thanks to its continued strict cost discipline and its focus on diversifying into anything that is not oil while working to boost its oil output as well. This stood at 2.8 million barrels of oil equivalent this year, but it will be higher next year as the company recently started up a field in Brazil's prolific pre-salt zone.
The company has an extensive presence in LNG too, with 12 assets producing and another eight under construction. Total has LNG interests across the world, from Canada through Mozambique and Papua New Guinea to Russia. Its annual output is 40 million tons of LNG.
Chevron and the Importance of Discipline
Chevron is one of the biggest players in the Permian, and it shows. It is also one of the lowest-cost producers in the shale patch, and this gives it an additional advantage over its higher-cost competitors. Chevron has placed a special emphasis on its home shale operations with several strategic asset sales in Europe and Canada to better expand at home. To date, it has 1.7 million net acres in the Permian with reserves of an estimated 11.2 billion barrels of oil equivalent.
The company has been pumping over 3 million bpd of oil equivalent for a year now. Yet unlike pure-play shale producers, Chevron has other operations, too, and these have contributed to its outperformance as well, including the Wheatstone LNG project in Australia. But Chevron has also been very strict about cost control and shareholder returns, which has paid off.
At the other end of the performance scale are the companies that did not perform as well as their peers for a variety of reasons, including a lack of luck and the fickleness of the market.
Exxon and the Stubborn Share Price
Exxon was among the four worst performers on the Dow Jones Industrial Average this year, with its shares only gaining about 1 percent since January. That's in stark contrast to the performance of its Guyana partner Hess, and analysts have blamed this mostly on oil prices.
Exxon, however, has been having other problems, too, notably with investors that doubt its long-term prospects in the face of growing environmentalist and regulatory pressure that recently culminated in a lawsuit in which the New York Attorney General accused Exxon of misleading investors about the effects of climate change on the sustainability of its business.
BP and the Ghost of Disaster
BP recovered remarkably well from the Deepwater Horizon disaster eight years ago even though it ended up saddled with a compensation bill in excess of $60 billion. Now, it is also facing dividend payouts that are higher than its earnings.
Debt is another problem that has dragged BP's stock down this year. Because of slimmer profit margins and despite the company's boasts, it breaks even at $50 a barrel. BP has been unable to pay down its debt consistently.
Like its peers, the supermajor has been targeted by environmentalists and regulators to clean up its act, and that has not been helpful with investor confidence. The latest here was an accusation of "greenwashing" its business with a major ad campaign.
Permian Independents and the Burden of Debt
In what may be a twist, the last entry on the worst performers' list is not a single company, but a group. A lot has been said about U.S. shale and its contribution to global oil supply growth. The companies responsible for this supply growth, however, are, for the most part, running on fumes.
Debt-fueled growth has stripped most of the maneuvering space in case prices drop and, like back in 2014, has left many on the brink of collapse should the price situation change for the worse. Notably, this is despite stable prices and low production costs. This state of affairs has highlighted how interdependent the world of oil producers is. If the OPEC+ meeting today fails to result in deeper cuts, prices will tank, and U.S. shale majors will be hit harder than the integrated companies. This was made abundantly clear after Thursday's OPEC meeting: the news of an agreement on deeper cuts moved prices only modestly and for a very short time.
By Irina Slav for Oilprice.com
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