‘We managed to make it through’
Falling oil prices crushed corporate revenue streams across Houston last year, plunging sales in the region to even lower levels than in the Great Recession eight years ago. Energy prices have recovered somewhat this year, easing the financial sting for the oil and gas companies that cut tens of thousands of jobs across the region. But in 2016, revenue for Houston’s 100 biggest public companies dropped to $561.7 billion, down from the $976.7 billion they collected at the height of the oil boom in 2014, according to rankings prepared for the Houston Chronicle.
Sixty-five of those companies, from topranked refiner Phillips 66 to next-to-last oil equipment maker Frank’s International, reported lower revenue last year compared with the year before. In 2009, during the nation’s worst economic recession in decades, revenue fell for all but 13 of Houston’s top companies, but sales still came in at $619.9 billion and increased 7 percent the following year.
The oil market collapse that began in the summer of 2014 depressed sales in both 2015 and 2016, leaving the oil companies that dominate the list of the biggest Houston
companies with far less cash for investments, employee wages and expenses. In those years, oil companies cut one in three oil workers across the state, and only in recent months have workers trickled back into the industry as oil prices rise and companies send drilling rigs back into U.S. oil patches.
“This has been a really tough extended downturn,” said Andy Hendricks, chief executive of Houston drilling and pressure pumping contractor Patterson-UTI Energy.
With oil prices relatively stable around $50 a barrel, Houston’s slate of oil producers have turned a corner, and economists expect global demand for oil, natural gas and petrochemicals to continue rising this year. But an economic boost from a massive wave of construction of petrochemical facilities in the Houston area will soon begin to wane as new projects are completed, said Robert Dye, chief economist at Comerica Bank in Dallas.
“Though oil has stabilized, it isn’t $90 a barrel, and it probably isn’t going to be for a long time,” Dye said. “It’s probably going to take a long time for this sense we have of a recovery in Houston to have a measurable effect.”
Of all Houston’s businesses, the oil downturn hit Houston’s energy services sector the hardest last year. Patterson-UTI Energy’s revenue fell 51.6 percent to $916 million, the largest fall for any Houston company that supplies equipment and crews for U.S. oil producers. It was followed by oil equipment makers National Oilwell Varco, down 50.9 percent, and Frank’s International, also down 50 percent.
Revenue for Schlumberger, Halliburton and Baker Hughes, the world’s three largest oil field services companies, also fell dramatically, coming in at a combined $53.5 billion, down from $106.1 billion in 2014.
Still, Patterson-UTI and others are poised for a comeback as demand for drilling rigs and hydraulic fracturing equipment picks up amid higher oil prices.
“We managed to make it through,” Hendricks said. “We were a smaller company during the downturn, but we’ve been recruiting and hiring back since, as our rig count has been going back up.”
Last year, one energy company stood out. Cheniere Energy, the liquefied natural gas exporter, collected $1.3 billion in sales, nearly five times higher than the previous year, as it shipped its first cargoes overseas from its LNG hub in Louisiana. Oil producer Noble Energy saw revenue rise nearly 10 percent to $3.4 billion last year. And power company Dynegy increased its revenue 11.6 percent to $4.3 billion.
Outside the energy industry, sales for food distributor Sysco Corp. were up 8.6 percent; garbage handler Waste Management, up 5 percent; and car retailer Group 1 Automotive, up 2.4 percent. Revenues also increased for wireless communication services giant Crown Castle International Corp., American National Insurance Co., funeral services provider Service Corporation International, and real estate companies Camden Property Trust and LGI Homes.
After Cheniere, the biggest revenue increase came for Kraton Corp., which makes polymers, the building blocks for plastics and resins. Its sales climbed 68.6 percent to $1.7 billion.
Spark Energy, an energy marketing company that sells electricity contracts, made its debut in the Chronicle’s revenue rankings this year, coming in at No. 95 with a 53 percent sales increase to $547 million.
The 18-year-old company, which sells electricity across 19 states, thrived during the energy slump because it was able to buy natural gas for lower prices, bringing down its supply costs. Since it went public in 2014, the company has scooped up 10 smaller energy marketing rivals, and it expects revenues to top $750 million this year.
Spark also purchases renewable energy credits and offers renewable power contracts that have grown in popularity even in pockets of Houston. While turmoil pervaded most of Houston’s energy industry last year, Spark CEO Nathan Kroeker remembers 2016 as Spark’s best year ever.
“When everyone’s hanging their head because of low commodity prices, we’re celebrating,” Kroeker said.