Energy companies return to their chart-topping ways
AFTER years in the financial doldrums, Houston’s energy companies re-emerged last year, climbing at last out of the oil crash that had weighed on their finances since 2014. With crude prices rebounding and consistent growth across the chemical and refining sectors, this year’s Chronicle 100 ranking of the city’s top-performing companies is beginning to look like the days of old. Nine of the 10 top-performing companies in the rankings came from the energy sector, with exploration and production companies — entirely absent from last year’s rankings — taking three of those spots.
Coming in at No. 1 is Westlake Chemical Corp., the chemical and plastics manufacturer, which gave its shareholders a more than 90 percent return in 2017. And rounding out the rest of the list were energy companies such as refiners CVR Energy and Phillips 66, exploration and production company EOG Resources and liquefied natural gas exporter Cheniere Energy.
“It’s tailwinds for us, and what’s happening in the Permian is nothing short of amazing,” CVR Energy CEO Dave Lamp said, referring to the shale drilling and production boom in West Texas’ Permian Basin. “I think it’s pretty constructive for Houston.”
But the effects of the oil bust, which spread beyond the oil and gas industry in a city that calls itself the energy capital of the world, still linger for some companies, despite the rebound in oil prices.
The annual Chronicle 100 rankings are calculated by S&P Global Market Intelligence to gauge how companies compare in terms of financial and stock performance. The rankings are based on four metrics: total revenue, revenue growth, earnings per share growth and shareholder return.
In order to be considered, a company must be traded on a major stock exchange and have turned a profit the previous year. As has been the case in recent years, there were not 100 companies in the Houston area that met that criteria, in effect making this year’s rankings the Chronicle 91, an improvement over last year’s Chronicle 69.
Absent are some of Houston’s
biggest corporate names, including the oil field services providers Halliburton, which lost $468 million in 2017, and Baker Hughes, which lost $242 million, and exploration and production company ConocoPhillips, which posted a $793 million loss.
“In 2017, it was good news and not-so-good news,” said Robert Gilmer, director of the University of Houston Bauer Institute for Regional Forecasting. “OPEC came back as a swing producer and was able to get those prices back up again. And then by the time you got to summer, the price of oil was back down at $45 and stayed that way for a while.”
Even so, Gilmer said, the area’s economy as a whole performed well in 2017.
Jobs were up for the first time in three years, slowly cutting into the 75,000 energy positions lost in Houston during the downturn.
The strong U.S. economic expansion also boosted the bottom line of many Houston companies that sell goods and services nationally.
That enabled Sterling Construction, which builds across the Western U.S., to claim the ninth spot on the Chronicle 100, giving its investors a more than 90 percent rate of return. Service Corporation International, the national funeral home supplier, reached No. 20 in the rankings by growing its earnings per share ratio more than 200 percent.
“If you look at most of the companies not tied to oil,” Gilmer said, “they’ve done fine the last several years.”
While oil prices remained well below their 2014 peak above $100 a barrel, they were good enough to propel exploration and production companies like Par Pacific Holdings and Occidental Petroleum Corp. — both of which tripled their earnings per share ratio — into the top 10.
EOG, which didn’t make last year’s rankings, came in at No. 6 by increasing its revenue by almost 50 percent to $11.2 billion.
EOG CEO Bill Thomas said higher prices are driving development, but to succeed over the long term, oil and gas industry companies need to bring down their costs so as to survive the boom-andbust cycles that scare away investors.
“We want to be competitive with any industry in any sector,” he said.
For now, with oil trading around $65 a barrel, the industry and Houston’s economy are sitting pretty.
But how long that will remain the case is anybody’s guess. Last year, when prices increased, Texas oil companies responded by quickly drilling more wells, eventually driving crude prices back down.
“The producers this year have all sworn themselves to discipline. They’ve taken the 12-step pledge,” Gilmer said. “Whether they can avoid making the same mistakes again, that will be the big question.”