PFC 50: energy merchants drop from the ranks, while non-US firms take top spots

Non-US companies continued to dominate the top spots in the second quarter ranking of the world's 50 largest energy firms, while natural gas-power merchant firms continued to fall from the ranks.

By OGJ editors

HOUSTON, July 24 -- Non-US companies continued to dominate the top spots in the second quarter ranking of the world's 50 largest energy firms, while natural gas-power merchant firms continued to fall from the ranks. These same merchant firms populated some of the loftiest places on the list early in 2001 (OGJ, Jan. 29, 2001, p. 28). In addition, mergers and acquisitions activity was strong during the second quarter, while other noteworthy activities included certain companies making securities offerings.

The most recent Energy 50 ranking—released earlier this month by Petroleum Finance Co. (PFC), Washington, DC—is a quarterly assessment based on the companies' market capitalization.

"In the US, scrutiny from credit rating agencies, government investigations of trading and accounting practices, and poor fundamentals continue to plague the merchant energy sector," PFC said, adding, "The downturn over the past year has erased about $115 billion of equity value from this PFC 50 sector."

Top performers, newcomers
Due to the downturn in the energy merchant sector, Tulsa-based Williams Cos. Inc. and Dynegy Inc. of Houston, fell from the rankings of the Energy 50 in the second quarter, PFC noted. Houston-based El Paso Corp., meanwhile, fell 30 spots to just above the cutoff point, reaching 47.

Russian companies OAO Gazprom, OAO Lukoil, and OAO Yukos all continued to scale the Energy 50 rankings, PFC noted. European and Japanese utilities—including Germany's E.On AG, Spain's Iberdrola SA, and Japan's Kansai Electric Power Co. Inc. and Chubu Electric Power Co. Inc.—also performed strongly, with many of these firms posting returns higher than 10%, PFC said.

Newcomers to the Energy 50 listing were China's CNOOC Ltd. at position 46, and newly merged EnCana Corp., Calgary, entering the list at the No. 30 spot.

M&A activity
M&A activity during the second quarter was strong. Topping the list of notable transactions, ENI SPA and Germany's EnBW AG made a move in late June to acquire jointly a controlling interest in GSV Gasversorgung Süddeutschland GMBH, a major German natural gas transporting and marketing company (OGJ Online, July 9, 2002).

In April UK utilities National Grid Group PLC and Lattice Group PLC announced plans to merge, forming a new company called National Grid Transco. The deal is expected to close in the fall.

In the US, the US Securities and Exchange Commission has approved E.On's acquisition of the UK's Powergen PLC. The acquisition was subject to SEC approval because the deal includes Powergen subsidiary LG&E Energy Corp., Louisville, Ky. (OGJ Online, Nov. 6, 2001).

Also in the US, Conoco Inc.—in order to close fully its acquisition of Gulf Canada Resources Ltd.—made a tender offer for the remaining shares of Gulf Indonesia Resources Ltd. (OGJ Online, May 28, 2002).

Security offerings
Houston-based El Paso Corp. and Brazil's Petroleo Brasileiro SA (Petrobras) were among the firms making security offerings in the second quarter. El Paso sold 45 million shares of common stock—valued at $900 million—while issuing $500 million worth of convertible securities at the same time.

Petrobras's board approved an offering for the company to raise $1 billion of preferred stock and $500 million of convertible bonds whenever market conditions will permit, PFC noted.

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