The largest U.S. and European oil companies are pursuing a strategy that no longer appeals to shareholders, according to Paul Sankey, an analyst at Deutsche Bank AG.
Energy producers that combine exploration, production, shipping, refining and petrochemicals have become targets for investor cynicism, Sankey wrote yesterday in a report entitled “Death of the Oil Major.” Companies having “aggressive growth plans” or breakup potential are in vogue, he wrote.
As the CHART OF THE DAY illustrates, an index of what he called the “big six” integrated oil companies trailed the MSCI World Energy Index during the past two years as stocks climbed. Exxon Mobil Corp. (XOM), Chevron Corp. (CVX), ConocoPhillips (COP), BP Plc (BP/), Royal Dutch Shell Plc (RDSA) and Total SA (FP) compose the big six, and each was equally weighted in the index as of Dec. 31, 2010.
“The companies can no longer undertake their original business model,” Sankey wrote. Only ExxonMobil has increased returns through integration and only Chevron has done so with “large-scale exploration success,” the report said. The latter was tied to deepwater exploration in the Gulf of Mexico, which will be less lucrative in the aftermath of BP’s Macondo well disaster last year, he wrote.
During the past decade, the big six were left behind in three of the biggest energy discoveries, Sankey wrote. He cited finds off the coasts of Brazil and West Africa, along with U.S. fields tapped with so-called unconventional drilling methods.
Natural-gas development has become a focus for these companies, according to Sankey, as many of the most promising sites for energy exploration are controlled by members of OPEC and government-owned producers. “We are entering the era of the Natgas Major,” he wrote.
(To save a copy of the chart, click here.)
To contact the editor responsible for this story: James Greiff at firstname.lastname@example.org