This year the Forbes Global 2000 saw a new entry at the top of the list of oil and gas firms with the debut of Saudi Aramco. It appeared at tied for fifth overall and #1 in the oil and gas industry. While Aramco sales are only ranked fourth-highest overall, it achieved the most profit of all public businesses in 2019. It also boasts the highest market value of any company in the world. However, holding it back from a higher overall ranking were its assets, which are ranked only 90th. Though Aramco has a concession to produce oil and gas in Saudi Arabia, the government actually owns the reserves in the ground.
It was well known that Aramco achieves the largest profit globally, even before its initial public offering in December 2019. It is also fundamentally different from the other oil and gas giants on the Forbes Global 2000. Aramco’s business is much more upstream-heavy, meaning more of its revenue comes from the production of crude oil compared to other firms which profit greatly from the sale of refined product and petrochemicals. Aramco is also expanding in downstream, but its outsized production numbers make it a different type of operation. Furthermore, Aramco has lower costs than its competitors, with a declared lifting cost of only $2.80 per barrel. At the same time, more than 98% of Aramco is still government-owned, and it has a responsibility to the government, funding a majority of the government budget. Aramco’s first quarter numbers for 2020 were not included in the rankings, because it did not report until May 12.
This year’s list once again shows the diversity of top oil and gas firms. ExxonMobil surpassed Royal Dutch Shell to take the second spot in the industry rankings, followed by Total and PetroChina. That means the top five firms are Saudi, American, Dutch, French and Chinese. In the top 15 firms, there are three Russian, two American, two Chinese, a Saudi, a Dutch, a French, a Norwegian, an Indian, a Canadian, a Brazilian, and a Hong Kong firm. The oil and gas industry is truly global. (Note: These rankings are influenced by Q1 reporting dates, because some companies have already reported their poor financial numbers for the beginning of 2020, while others have not).
We can see some hints about how the industry is being shaken by the fall in oil demand and prices in 2020, by looking at examples of companies that reported their Q1 numbers earlier. For instance, BP is ranked 32nd in this year’s Forbes Global 2000 ranking of oil and gas companies, but it was in the top 10 last year. Its fall can be explained by the timing of its Q1 reporting.
The big question is what will happen on next year’s list. While the coronavirus pandemic has threatened almost all industries, oil and gas has been particularly hurt by the collapse of demand and the market’s reaction to producers’ squabbles that sent prices plummeting. With the price of the global oil benchmark, Brent, hovering only in the $20s, oil businesses big and small are suffering. Oil prices only really began to fall on March 9, but those three weeks at the end of the first quarter meant that some oil majors faced quarterly losses for the first time in decades. Q2 is expected to be significantly worse.
It is unlikely that the oil and gas industry will be so prominent on next year’s Forbes Global 2000. This year, 13 of the top 100 companies were from the oil and gas industry, but in 2019 the average daily closing price for Brent was just over $64. On April 30, it was about $25.