- A Study of Total Shareholder Returns in the Energy Sector
from 2019 to 2023 Reveals Significant Performance
Differences
- Average Annual Returns Range from 6% to 48% Across
Energy Subsectors
- Within Subsectors, the Gap Between Top- and
Bottom-Performing Companies Averages 30%
BOSTON, June 20,
2024 /PRNewswire/ -- Over the last five years, energy
top performers consistently created more value than their direct
peers in the same macroeconomic context. Average annual total
shareholder returns (TSR) between 2019 and 2023 ranged from 6% to
48% across subsectors, with an average of 12% for the overall
sector. Within subsectors, there was an average 30% gap between the
top- and bottom-performing companies. These are among the findings
of a new report published today by Boston Consulting Group
(BCG) titled Six Lessons from Energy's Top Performers:
Energy Value Creators 2024. The publication is based on a
study of 150 of the largest energy companies, worth
$5.1 trillion in market
capitalization.
The clean tech subsector was in the lead, with a five-year
average TSR of 48%, driven by accelerated earnings growth and a
strong outlook. Regulated utilities had an average TSR of
6% over the period, but also showed a 23% difference in
average annual returns between the top and bottom performers,
surprisingly large given the regulated returns environment. The
average TSR of integrated oil and gas companies was 10%, with the
advantage of higher commodity prices countered by contracting
valuation multiples.
Despite a challenging macroeconomic environment including higher
inflation, volatile commodity prices, and changing policy and
regulatory dynamics, some companies generated standout returns
compared with their peers. In clean energy, top performers created
ten times more value than the market index cumulatively during the
five years covered by the study. In oil and gas, the leaders
outperformed by approximately 400%, and in utilities by 77%.
"The ability to deliver superior shareholder value during the
energy transition is a litmus test for strategic excellence,
outstanding execution, and resilience," said Rebecca Fitz, BCG partner and associate
director, and coauthor of the report. "But this outstanding
performance is the result of long-term capital allocation
decisions. The most successful companies balance capital
investment, shareholder distributions, and balance sheet
optimization to enhance shareholder returns."
The report looks at the factors that have enabled top performers
to achieve superior TSR, including:
- Revenue growth and delivery: Top performers delivered double
the revenue growth of their peers by managing capital projects to
reduce risk and fine-tuning business models and portfolio
strategies to maximize earnings.
- Cost management: Leading performers were 35% more likely to
achieve cost savings, by implementing proactive strategic cost
reduction programs to enhance earnings and build portfolio
resilience.
- Balance-sheet health: The top TSR performers were twice as
likely to allocate capital to improve balance sheets. They actively
reduced debt and maintained financial health.
- Shareholder payouts: Top energy companies were 40%
more likely to maintain shareholder payouts through cycles.
- Valuation multiple stability: Leading companies were 30% more
likely to have a growing valuation through maintaining de-risked
earnings growth, consistent payouts, and balance sheet
health.
- Deal-Making: Eighty percent of top performers used
transactions to actively manage their portfolios.
Download the publication here:
https://www.bcg.com/publications/2024/six-lessons-from-top-energy-companies
Media Contact:
Eric
Gregoire
gregoire.eric@bcg.com
About Boston Consulting Group
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SOURCE Boston Consulting Group (BCG)