PFC Energy 50: Bigger and Better Than Ever

Every January, we publish the PFC Energy 50 rating of the world’s top publicly traded energy companies. This year’s PFC Energy 50 had a combined market capitalization of over $5 trillion, 45% more than a year ago, and the largest value gain in the list’s history.

While about half of the companies have been regulars on the list since we first published it 10 years ago, every year’s list tells a new story. Past trends have included the declining value of the sector in the low oil price years, the years of consolidation within the oil and gas industry and with the power sector, and the emergence of new players.

This year’s most visible story is the rise of the “traded National Oil Companies (NOCs).” Among the companies creating the most value last year were those that enjoy both privileged access to resources and access to capital markets, such as Petrochina, Sinopec, Petrobras, CNOOC, PTT, ONGC and newly floated Ecopetrol.

Another surprise was the fast growth of the alternative energy sector. Iberdrola Renovables, a late-year spin-off from the Spanish utility, became the first alternative energy company to join the PFC Energy 50, and the companies in the first-ever PFC Energy Top 15 Alternative Energy list displayed the year’s most exciting growth records.

Top Segment Performers by YOY Share Price Growth
% Share Price Change (YOY)

Unlike many other lists, the PFC Energy 50 is less about past performance than future potential. High earnings multiples for NOCs – valued at 20 times trailing 12-month earnings, compared with a 12-times average multiple for IOCs – reflect the market’s confidence in their superior ability to grow reserves and production in the future. Another determinant of future growth is how much companies invest in the research and development that will be essential to expanding energy supplies and maintaining affordability in the years ahead. Another first this year was the our list of the Top 15 R&D spenders among the PFC Energy 50 companies. Here Royal Dutch Shell, in fourth place on the market capitalization ranking, was in first place with an investment of over $1 billion in R&D. Baker Hughes, which spent 3.6% in 2007 of revenues on R&D, made the highest relative investment. But, as a whole, the energy sector still spends far too little on research and development. Although these are the largest companies in the world, they are routinely outspent by companies in the pharmaceutical, electronics, and even automotive industries. Much of the R&D these companies conduct is energy-related.

Who will be the members of the PFC Energy 50 in the future? Will we be shuffling the same old companies? It is much more likely that we will be surprised again: by new consolidations, by brand-new companies. They may be IPOs of NOCs, like Ecopetrol in 2007. But they could be companies from outside the traditional energy sector that successfully apply the new technologies they invest in so heavily.

Key Conclusions:

The combined value of the PFC Energy 50 companies grew by 45%, to $5 trillion, the largest jump in the list’s history.

The greatest gainers were not the traditional energy companies, but the traded NOCs and the Alternative Energy sector.

While some PFC Energy 50 companies make substantial investments in R&D, these are dwarfed by the spending in other industries. Companies from other industries that successfully apply new technologies to energy could find themselves joining the PFC Energy 50 in the future.

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Lew Watts is President and CEO of PFC Energy. For further information on this article contact Enews_lwatts@pfcenergy.com.