Changes in Market Capitalization Growth
No one industry sector stands out for one- and three-year market capitalization growth, although infrastructure companies continued their positive performance after a particularly strong three years. European utilities saw a pronounced retreat in market capitalization, feeling the combined effect of sluggish European economies and European deregulation, the effects of which has eaten into many of these companies’ traditional business models. Of special note, Ecopetrol (+44% in the last year alone, with +37% over the last three) benefited from continually favorable above-ground conditions in Colombia.
Capturing Value from North America Price Differentials
THe greatest gainers from North American price differentials were refiners with inland assets that could add significant value to discounted crudes: HollyFrontier (+105%), Marathon Petroleum (+84%), Tesoro (+83%) and Valero (+57%). In E&P, EOG Resources attracted investors with its high oil to gas ratio, resulting in a 20% share price gain in 2012. Midstream/Infrastructure companies able to play these spreads posted the strongest performance: Sunoco Logistics (+26%), Magellan Midstream (+23%) and Plains All American (+21%) captured additional value by controlling links between unconventional plays and coastal demand centers, while peers without such connections lost substantial value.
Segment Share Price Leaders
Segment leaders saw higher share price growth in 2012 than the leaders of 2011—and the top three performers in each segment were all in positive territory. Further, all of the top performers posted relatively similar rises, reflecting general confidence in the market instead of specific companies outperforming peers.Refining & Marketing companies did particularly well, with HollyFrontier (+105%), Marathon Petroleum (+84%) and Tesoro (+83%) leading the group. All of the top performing integrated IOCs and NOCs did well in 2012, with performance of the third highest company—Eni, which saw growth of 17%—equal to the top performer of 2011.
Some Barrels are Better than Others
The market valuation of Colombian traded NOC Ecopetrol has risen at an impressive rate since its IPO in 2007. From #33 on the PFC Energy 50 list five years ago with a market capitalization of $36.6 billion, the company has grown at a 28% compound growth rate to a valuation of $126.6 billion, putting it in #6 position this year. The charts above compare the valuations of the top 10 PFC Energy 50 companies with their proved reserves and oil equivalent production levels, providing a lesson in which barrels markets currently like better than others.