Top Oil and Gas Companies
Top Oil and Gas Companies
Top Oil and Gas Companies
Performance Analysis of Top Oil and Gas Companies Worldwide with reference to Oil
Prices
Indrani Hazarika
Abstract
Oil and gas industries is one of the largest industries worldwide and is involved in the exploration,
extraction, refining, transport and marketing of oil and gas products. The present study has been
undertaken to analyze the profitability, liquidity, financial health and efficiency of top five oil and gas
companies worldwide based on revenue, net income and market value as per the values stated in the
2014 Financial Times, Global 500 list and principal operations with reference to crude oil prices from
2007 to 2014. Simple linear regression analysis has been employed to determine the statistical
significance and degree of dependence between fluctuating crude oil prices and financial
performance indicators. The present study revealed that fluctuating oil prices do not significantly
impact the profitability, liquidity, efficiency and financial health of top oil and gas companies.
Introduction:
Oil and gas industries is one of the largest industries worldwide and is involved in the exploration,
extraction, refining, transport and marketing of oil and gas products. Many industries are heavily
dependent on oil and gas products in the form of energy, fuel or raw materials for chemical products.
The present study has been undertaken to analyze the financial performance of top five
Journal of Energy and Economic Development, 1(1), 62-78, August 2015 63
oil and gas companies based on revenue, net income and market value as per the values stated in
the 2014 Financial Times, Global 500 list and principal operations with reference to crude oil
prices from 2007 to 2014. (Refer Fig1, 2, 3 and 4). Like prices of other commodities the crude
oil price experiences wide fluctuations in times of shortage or oversupply. The history of oil
prices (Fig 5) dates back to 152 years of economic and political events that shaped the price,
wars, economy, domestic policy, OPEC (Organization of Petroleum Exporting Countries) and
price controls.
Fig.1 2014 Top 10 Oil and Gas Companies Worldwide based on Revenue
Fig.2 2014 Top 10 Oil and Gas Companies Worldwide based on Net Income
Fig.4 2013 Principal operations of the major oil companies (1,000 b/d)
100
80
60
40
20
2000
0
1972
2014
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2002
2004
2006
2008
2010
2012
1970
1. Literature Review
Strong (1991) considers the world major oil companies and analyses the ability of oil equities
portfolios to hedge oil price risk and constructs portfolios aimed at maximizing sensitivity to oil price
changes and at diversifying away other risk. Huang et.al (1996) states that at the micro level, changes
in the price of oil, a key factor in the production process, affect financial performance or cash flows
of firms, in turn influencing firms' dividend payments, retained earnings, and equity prices. Sadorsky
(1999) documents the fact that if the volatility of either demand shocks or supply shocks increases,
this will yield higher volatility in both aggregate stock market returns and oil prices. Aleisa et al.
(2003) also examines the equity returns of firms operating in oil exploration, refinery and marketing.
Giovannini, Grasso, Lanza and Manera (2004) investigates the correlations of volatilities in the stock
price returns and their determinants for the most important integrated oil companies, namely Bp
(BP), Chevron-Texaco (CVX), Eni (ENI), Exxon-Mobil (XOM), Royal Dutch (RD) and Total-Fina
Elf (TFE). They measure the actual co-risk in stock returns and their determinants “within” and
“between” the different oil companies. Hammoudeh et al. (2004) use univariate and multivariate
GARCH to examine volatility persistence in the crude oil market and its effect on the equity return
volatility of the S&P oil sector indices. Lanza et al. (2004) investigates the correlations of volatilities
in the stock price returns and their determinants for the most important integrated oil companies.
Boyer and Filion (2007) analyze the factors that explain the Canadian oil and gas company stock
returns. Kilian and Park (2009) examines the different shocks' impact on the U.S. stock market.
Elyasini, Mansur, Odusami (2011) examine the impact of changes in the oil returns and oil return
volatility on excess stock returns and return volatilities of thirteen U.S. industries using the GARCH
(1,1) technique. They find strong evidence in support of the view that oil price fluctuations constitute
industry level as nine of the thirteen sectors analyzed includes oil related industry (Oil Extraction
and Petroleum Refinery) which shows statistically significant relationships between oil-futures
return distribution and industry excess return. Ready (2013) develops a novel method for
classifying oil price changes as supply or demand driven and documents several new facts about
2. Research Objective: The present study is undertaken to analyze the financial performance in
terms of profitability, efficiency, liquidity and financial health of top five oil and gas companies
worldwide based on revenues, net income, market value and principal operations with reference
3. Financial Performance Indicators: The following ratios have been analyzed with
reference to the top oil and gas companies worldwide from 2007 to 2014. (Refer Table I)
3.1 Profitability Ratios- A class of financial metrics that are used to assess a business's ability to
generate earnings as compared to its expenses and other relevant costs incurred during a specific
period of time.
3.1.1 Return on Assets (ROA) - ROA gives an idea as to how efficient management is at
3.1.2 Return on Equity (ROE) - ROE measures a corporation's profitability by revealing how
much profit a company generates with the money shareholders have invested (Ref Fig 7 and
Appendix II)
3.1.3 Return on Capital (ROC): ROC measures the return that an investment generates for
3.2 Efficiency Ratio: Efficiency Ratios are used to analyze how well a company uses its assets
3.2.1 Asset Turnover Ratio (ATR): The Asset Turnover ratio is an indicator of the efficiency
with which a company is deploying its assets and a higher ratio is recommended (Refer
Appendix IV).
3.2.2 Inventory Turnover Ratios (ITR): The inventory turnover ratio is a common measure of
the firm’s operational efficiency in the management of its asset. (Refer Appendix V).
3.2.3 Receivables Turnover Ratios (RTR): Accounts receivable turnover ratio is an efficiency
measurement that helps management analyze its receivable. A low turnover ratio represents an
opportunity to collect excessively old accounts receivable that are unnecessarily tying up
3.3 Liquidity Ratio (LR): Liquidity ratios are the ratios that measure the ability of a company to
3.3.1 Current Ratio (CER): The current ratio is a liquidity and efficiency ratio that measures a
firm's ability to pay off its short-term liabilities with its current assets. A current ratio between 1
3.4. Debt Equity Ratio (DER): The debt-to-equity ratio is a financial ratio indicating the relative
proportion of shareholders' equity and debt used to finance a company's assets. A ratio of 0.3 or
3.5 First purchase price: The price for domestic crude oil reported by the company that owns
the crude oil the first time it is removed from the lease boundary
Journal of Energy and Economic Development, 1(1), 62-78, August 2015 68
Table 1
20.00%
14.59% 13.83%
10.00%
2.04%
0.00%
British Chevron Gazprom Royal Sinopec Exxon Petro China
Petroleum Dutch Mobil
4. Research Methodology:
The study is based on the financial performance of top 5 oil and gas companies worldwide based
on revenue, net income and market value with reference to profitability, efficiency, financial
health and liquidity from 2007 to 2014 considering global crisis and post global crisis period.
The present study also analyses the impact of U.S. crude oil First Purchase Price (Dollars per
4.1 Research Questions: The research question addressed in the present study is whether
fluctuating oil prices impact the profitability, efficiency, liquidity and financial health of top oil
4.2 Sample Design: For the present study financial data of the top oil and gas companies
worldwide namely British Petroleum, Chevron, Exxon Mobil, Royal Dutch Shell, Gazprom,
Sinopec and Petro China has been collected from the company websites, annual reports and
Morning Star, Inc (http://financials.morningstar.com/ratios). The crude oil price has been
collected from the Independent Data Analysis of U.S. Energy Information Administration.
4.3. Data Analysis: The financial data of the oil and gas companies has been analyzed with the
help of Data Analysis in Excel using Significance F and R square in simple regression analysis
Journal of Energy and Economic Development, 1(1), 62-78, August 2015 70
where the independent variable is the crude oil price and financial performance indicators are
dependent variables. The following model is repeatedly used for the study to establish the relation
between the dependent variables and single independent variable for five observations in the oil and
gas companies. Equation: = 0 + 1 1 + µ where β0 is the intercept and independent variable X is
the crude oil price and dependent variable Y represents the financial indicators: ATR, ITR, RTR,
DER and ROA and µ represent the estimated standard deviation of the error term µ.
5. Findings: The correlation coefficient as shown in Table II between the independent variable
crude oil and dependent variables for oil and gas companies’ worldwide are all less than 0.5
except for the efficiency ratios in British Petroleum, Royal Dutch Shell, Gazprom, Petro China
and Sinopec.
The regression results in Table III shows that R Squared is less than 0.2 (95% Confidence
Level) for all dependent variables except for the efficiency ratios of British Petroleum, Royal
Dutch Shell, Petro China and Sinopec where the value of p is equal or less than 0.05 which is
statistically significant. Around 60 % changes in the efficiency ratios of these companies are
Existing literature on oil price shocks and returns states that there is no evidence of the oil price risk
in the U.S. and Japan, Hamao (1988). Huang et al. (1996) find evidence that oil futures returns
positively lead individual oil company and petroleum industry stock returns. Giovannini,, Grasso,
Lanza and Manera (2004) found that the correlation of shocks to the volatilities in STOCK equations
are the highest for British Petroleum, Chevron, Exxon Mobil, Total Fina and Royal Dutch Shell.
Boyer and Fillion (2007) states that stock returns of Canadian oil and gas companies
Journal of Energy and Economic Development, 1(1), 62-78, August 2015 71
are sensitive to five market based and fundamental factors and one of the market based factors is
the oil prices. Overall they find that Canadian oil and gas company stock returns are positively
associated with the appreciation of crude oil and natural gas prices.
Conclusion:
The present study analyzed the financial data with reference to profitability, liquidity, financial
health and efficiency of top oil and gas worldwide companies based on market value, net income
and revenue. Existing literature on oil and gas companies find that stock prices are positively
associated with the appreciation of crude oil prices. But in the present study it is revealed that
fluctuating oil prices do not significantly impact the profitability, liquidity, efficiency and
Table 1I
Correlation Coefficient between crude oil price and Financial Performance Indicators
Name of ROA ROE ROC ATO ITO ART CR DER
Company
Table III
Regression Results between crude oil price and Financial Performance Indicator
Oil ATR ITR RTR DER ROA
Company
R2 p R2 p R2 P R2 p R2 p
BP 0.6 0.03 0.5 0.05 0.4 0.08 0.03 0.6 0.06 0.5
Chevron 0.04 0.63 0.2 0.2 0.27 0.2 0.03 0.68 0.36 0.15
Gazprom 0.33 0.17 NA NA 0.01 0.8 0.4 0.1 0.002 0.9
Royal 0.60 0.03 0.65 0.02 0.53 0.06 0.4 0.12 0.23 0.2
Dutch
Shell
Sinopec 0.3 0.13 0.56 0.04 0.32 0.18 0.15 0.3 0.17 0.3
Exxon 0.07 0.5 0.3 0.16 0.08 0.5 0.18 0.3 0.25 0.2
Mobil
Petro 0.70 0.01 0.63 0.03 0.004 0.8 0.03 0.7 0.06 0.5
China
References:
Aleisa, E., Dibooglu, S., & Hammoudeh, S. (2003). Relationships among U.S. oil prices and
oil industry equity indices. International Review of Economics and Finance, 15, 1-29.
Boyer, M., & Filion, D. (2007). Common and fundamental factors in stock returns of Canadian
oil and gas companies. Energy Economics, 428- 453.
Giovannini, M., Grasso, M., Lanza, A., & Manera, M. (April 2004). Conditional Correlation in
the Returns on Oil Companies Stock Prices and their Determinants. International Energy
Markets.
Hamao, Y. (1988). An empirical examination of the arbitrage pricing theory using Japanese
Data. Japan and the World Economy, 1, 3-56.
Hammoudeh, S., Dibooglu, S., & Aleisa, E. (2004). Relationships among US oil prices and oil
industry equity indices. International Review of Economics and Finance, 13, 427 - 453.
Huang, R., Masulis, R., & Stoll, H. (1996). Energy shocks and financial markets. Journal
of Futures Market, 16, 1-27.
Kilian, L., & Park, C. (2009). The impact of oil prices shocks and the US stock market. 50(4),
1267- 1287.
Lanza, A., Manera, M., Grasso, M., & Giovannini, M. (2004). Long run models of oil stock
prices. Environmental Modelling and Software , forthcoming.
Journal of Energy and Economic Development, 1(1), 62-78, August 2015 73
Sadorsky, P. (1999). Oil prices shocks and the stock market activity. Energy Economics, 21, 449-
469.
Sadorsky, P. (2001). Risk factors in stock returns of Canadian oil and gas companies. Energy
Economics, 23, 17-28.
Strong, J. (1991). Using oil share portfolios to hedge oil price risk. Quarterly Review
of Economics and Business, 31, 48-63.
Appendixes:
Appendix 1
Return on Assets of the Top Oil and Gas Companies world wide
British Royal Exxon Petro
Year Petroleum Chevron Gazprom Dutch Sinopec Mobil China
2007 9.19% 13.28% 10.30% 12.41% 5.71% 17.61% 15.09%
2008 9.11% 15.44% 10.64% 9.52% -21.74% 19.24% 10.15%
2009 7.14% 6.44% 10.04% 4.36% 5.54% 8.36% 7.82%
2010 -1.46% 10.89% 11.01% 6.55% 9.48% 11.37% 9.01%
2011 9.09% 13.64% 12.98% 9.26% 3.23% 12.96% 7.44%
2012 3.90% 11.83% 10.30% 7.54% -4.55% 13.50% 5.64%
2013 7.74% 8.88% 8.93% 4.56% 5.62% 9.57% 5.75%
2014 1.28% 7.40% 6.29% 4.19% 3.20% 9.34% 4.57%
Average 5.75% 10.98% 10.06% 7.30% 0.81% 12.74% 8.18%
Appendix II
Return on Equity of the Top Oil and Gas Companies world wide
British Royal Exxon Petro
YEAR Petroleum Chevron Gazprom Dutch Sinopec Mobil China
2007 23.39% 25.60% 15.39% 27.28% 8.26% 34.47% 22.08%
2008 22.88% 29.23% 17.37% 20.92% -36.54% 38.53% 15.01%
2009 17.19% 11.74% 15.70% 9.49% 11.16% 17.25% 12.62%
2010 -3.78% 19.31% 16.73% 14.15% 17.02% 23.67% 15.68%
2011 24.90% 23.75% 19.06% 19.47% 5.39% 27.26% 13.70%
2012 10.08% 20.30% 14.92% 14.86% -9% 28.03% 11.16%
2013 18.93% 15% 12.86% 8.88% 12.17% 19.17% 11.18%
2014 3.14% 12.65% 9.03% 8.45% 7.84% 18.67% 9.20%
Average 14.59% 19.70% 15.13% 15.44% 2.04% 25.88% 13.83%
Appendix III
Journal of Energy and Economic Development, 1(1), 62-78, August 2015 74
Return on Capital of the Top Oil and Gas Companies world wide
YEAR British Royal Sinopec Exxon Petro
Petroleum Chevron Gazprom Dutch Mobil China
2007 18.50% 23.05% 13.22% 24.05% 7.40% 32.24% 20.30%
2008 17.76% 26.61% 13.78% 18.53% -23.73% 35.99% 13.56%
2009 13.29% 10.61% 13% 7.98% 7.92% 16.19% 10.52%
2010 -2.11% 17.40% 13.76% 11.46% 13.17% 21.72% 12.29%
2011 17.93% 21.68% 16.09% 16.01% 4.89% 24.74% 11.07%
2012 7.61% 18.68% 12.83% 12.72% -4.86% 25.84% 9.10%
2013 14.90% 13.46% 11.16% 7.46% 8.83% 17.42% 9.40%
2014 2.76% 10.92% 11.14% 7.36% 5.49% 16.34% 5.99%
Average 11.33% 17.88% 13.12% 13.2% 2.39% 23.81% 11.53%
Appendix IV
Asset Turnover Ratio of the Top Oil and Gas Companies world wide
YEAR British Royal Sinopec Exxon Petro
Petroleum Chevron Gazprom Dutch Mobil China
2007 1.27 1.57 0.38 1.41 1.9 1.75 0.87
2008 1.58 1.76 0.47 1.66 2.15 2.03 0.95
2009 1.05 1.05 0.39 0.99 1.8 1.35 0.77
2010 1.19 1.17 0.41 1.23 2.47 1.43 0.94
2011 1.37 1.29 0.46 1.45 3.02 1.54 1.12
2012 1.31 1.09 0.41 1.37 2.6 1.45 1.07
2013 1.31 0.94 0.41 1.28 2.89 1.29 1
2014 1.22 0.82 0.4 1.21 1.87 1.18 0.91
Average 1.28 1.21 0.41 1.33 2.33 1.50 0.95
Journal of Energy and Economic Development, 1(1), 62-78, August 2015 75
Appendix V
Inventory Turnover Ratio of the Top Oil and Gas Companies world wide
YEAR British Royal Sinopec Exxon Petro
Petroleum Chevron Gazprom Dutch Mobil China
2007 10 30.42 - 10.91 11.26 21.36 4.76
2008 13.7 31.79 - 15.64 14.15 25.41 6.28
2009 9.68 18.98 - 9.77 7.91 16.02 4.79
2010 11.5 24.62 - 10.84 11.97 19.06 6.37
2011 11.94 27.17 - 13.60 16.07 21.91 7.74
2012 12.22 24.09 3.56 13.25 12.21 20.54 7.12
2013 11.41 21.51 2.9 12.55 11.48 18.56 6.64
2014 12.99 18.58 2.59 14.38 14.78 16.26 7.6
Average 11.68 24.64 3.01 12.62 12.47 19.89 6.41
Appendix VI
Receivable Turnover Ratio of the Top Oil and Gas Companies world wide
YEAR British Gazprom Royal Exxon Petro
Petroleum Chevron Dutch Sinopec Mobil China
2007 8.63 11.02 8.44 9.71 30.68 13.15 62.11
2008 12.52 14.26 9.37 7.37 52.77 17.31 60.09
2009 9.09 10.23 7.6 4.03 97.16 13.4 44.76
2010 9.16 10.66 9.06 5.84 187.08 12.79 39.72
2011 9.65 11.92 9.89 6.48 912.76 13.72 40.55
2012 11.17 11.31 8 8.05 809.74 14.39 37.12
2013 12.04 10.74 7.47 11.59 874.49 16.12 35.15
2014 10.12 11.05 4.18 8.84 22.15 8.5 24.15
Average 10.29 11.39 8 7.74 373.35 13.67 42.9
Journal of Energy and Economic Development, 1(1), 62-78, August 2015 76
Appendix VII:
Current Ratio of the Top Oil and Gas Companies world wide
YEAR British Gazprom Royal Sinopec Exxon Petro
Petroleum Chevron Dutch Mobil China
2007 1.02 1.17 1.44 1.22 1.08 1.47 1.17
2008 0.95 1.14 1.63 1.1 0.49 1.47 0.85
2009 1.14 1.42 1.61 1.14 0.63 1.06 0.76
2010 1.17 1.68 1.85 1.12 0.81 0.94 0.67
2011 1.16 1.58 1.71 1.17 0.79 0.94 0.68
2012 1.43 1.63 1.62 1.18 0.68 1.01 0.72
2013 1.33 1.52 2.06 1.11 0.8 0.83 0.67
2014 1.37 1.32 2.24 1.16 0.6 0.82 0.76
Average 1.19 1.43 1.76 1.15 0.73 1.06 0.78
Appendix VIII
Debt Equity Ratio of the Top Oil and Gas Companies world wide
YEAR British Gazprom Royal Sinopec Exxon Petro
Petroleum Chevron Dutch Mobil China
2007 0.17 0.08 0.25 0.1 0.03 0.06 0.06
2008 0.19 0.07 0.2 0.11 0.03 0.06 0.04
2009 0.25 0.11 0.22 0.23 0.02 0.06 0.15
2010 0.32 0.11 0.18 0.23 0.01 0.08 0.2
2011 0.32 0.08 0.16 0.18 0.01 0.06 0.19
2012 0.33 0.09 0.14 0.16 0.08 0.05 0.29
2013 0.32 0.13 0.16 0.2 0.04 0.04 0.27
2014 0.41 0.16 0.21 0.22 0.03 0.07 0.45
Average 0.28 0.10 0.19 0.17 0.03 0.06 0.2
Biography and Author Information
Email: [email protected]
Educational Background
Doctor of Philosophy: Obtained Ph.D in the area of taxation from Gauhati University,
Guwahati, India in 2003.
Journal of Energy and Economic Development, 1(1), 62-78, August 2015 77
Thesis titled “An analytical study on the flexibility of Indian Tax Structure with special reference to
Direct Tax
Master Degree: Discipline Commerce with specialization in Finance, Accountancy and Taxation
from Gauhati University, Guwahati in 1996.
Major Field of Study:- Accounting and Finance
Professional Qualification
Qualified as a Chartered Accountant from “ The Institute of Chartered Accountants of
India” in 2006
Obtained the IFRS Certification from ICAI in 2013.
Presently undergoing SAP Certification
Evasion and Social Norms International Conference | July 23–26, 2009 | University of Muenster,
Germany | Conference Proceedings’, [3] “Corporate Social Responsibility: - An inevitable
tool for business sustainability and growth” “Business Assam” Quarterly Journal of Assam
Chambers of Commerce (India) April 2013. Her current and previous research interests
include Oil Prices causes and effects on Airline Industry and Oil Companies, IFRS, Audit
Reengineering, Profitability Analysis of Banks, Revenue Recognition Principles with
Journal of Energy and Economic Development, 1(1), 62-78, August 2015 78
reference to Real Estate Companies, Fair Value Accounting, Tax Evasion, Financial
Reporting, Earnings Quality, Cost Control and Cost Reduction, EVA and MVA.