ENERGY FIRMS DOMINATE THE CHRONICLE 100.
Energy companies again dominated the Chronicle 100 ranking of Houston’s top-performing companies in 2018, buoyed by rising oil prices.
The top 10 reads like a who’s who of the city’s oil and gas heavyweights with ConocoPhillips coming in at No. 1 and the likes of Cheniere Energy, Plains
All American Pipeline, Marathon Oil and Occidental Petroleum filling out the top ten.
Brendt, the international oil benchmark, averaged $71 a barrel last year, a 31 percent increase from 2017. But success was not a foregone conclusion: Many of the newer breed of oil companies — those focused on shale oil — found themselves struggling. One of the biggest names in that group, Apache Corp., was absent entirely because it failed to turn a profit last year.
“The market was really hot on U.S. shale companies following the downturn when production growth was all the rage, but the wheels have come off now,” said Roy Martin, an oil analyst with the research firm Wood Mackenzie. “These diversified independents like Conoco and Occidental have really strong global portfolios as well as domestic assets, and the high level message is they transformed their portfolios and cost structures from the downturn.”
The annual Chronicle 100 rankings are calculated by S&P Global Market
Intelligence to gauge how Houston companies compare in terms of financial and stock performance.
To be considered, a company must be traded on a major stock exchange and have turned a profit. Unlike recent rankings in which the downturn in oil prices disqualified too many companies to make a full list of 100 companies, this year’s ranking includes a full compliment.
The rankings are based on four metrics: total revenue, revenue growth, earnings per share growth and shareholder return, favoring companies that have improved their fortunes from the previous year, either because they had a particularly good year or the previous year was especially bad.
To wit, Sysco, the food services firm, counted the second-highest revenues at $59.6 billion and the 20thbest return on investment, but it ranked 33rd on the Chronicle 100 because their results were not all that much different from 2017.
Insperity, a human resources contractor, earned its investors a 64 percent return in 2018. That was second best return on the list, but it’s 16 percent growth in revenue lagged behind energy companies riding betterthan-expected commodity prices, resulting in a Chronicle 100 ranking of 20th.
“You’re talking about companies that sell into national and regional markets, and those have been doing really well for a number of years,” said Robert Gilmer, director of the University of Houston’s Institute for Regional Forecasting. “The two big things that drive Houston are the national economy and oil. And oil is far more volatile so (in this year’s list) it looks like it plays a bigger role than it does.”
In such a volatile sector of the economy, keeping one’s place atop the heap is no easy feat.
Despite the struggles of many companies drilling in U.S. shale fields right now, EOG Resources managed to land the 19th spot on the Chronicle 100, with revenue growth of 54 percent.
Two spots behind EOG was another hydraulic fracturing-focused firm, Magnolia Oil and Gas Corp., which gave investors a 9 percent return. Launched by former Occidental CEO Steve Chazen last year, the firm’s sales pitch has been a more cautious approach to a shale industry dominated by executives looking to drill as much as they can as fast as they can.
“We have very little debt, and we don’t spend all our cash drilling,” Chazen said. “A lot of (our competitors) are overleveraged, and there’s no easy way out of that. There’s no public market to raise equity because the guys are unprofitable.”
Can energy companies continue their dominance over the city’s other industries in 2019?
That will largely depend on the price of oil, which for now is projected to end this year at an average price of $69 a barrel for the European benchmark Brendt, slightly below last year.
“2018 sort of marks the point where Houston turned the corner,” Gilmer said. “We’ve recovered from the bust, and we’re right back on track.”
“The two big things that drive Houston are the national economy and oil.” Robert Gilmer, director of the University of Houston’s Institute for Regional Forecasting