Which is the best energy company?
Richard Stavros is Fortnightly's Executive Editor.
What might have been a seemingly simple question to answer in the energy industry of 20 years ago is today fraught with difficulty. With the divestitures, spin-offs and convergence mergers of the late 1990s and early 2000s that were spurred by deregulation, no longer do we have cookie-cutter, vertically integrated utilities in all parts of the country (if we ever did).
Rather, some of what we do have today includes E&P (exploration and production) firms that own electric or gas utilities, pipelines that own power plants, and electric utilities that have entered the E&P business.
With the August signing of the Energy Policy Act of 2005, which includes repeal of the Public Utility Holding Company Act, many industry watchers say further consolidation is all but assured.
In fact, many predict the energy industry not only will consolidate, but will converge as well with outsiders such as investment banks, insurance companies, private equity firms, oil majors, and retailers. And it is this continued consolidation trend in the industry that demands a new grounded in finance to discuss and identify industry performance and value.
One method, known as operational benchmarking analysis, while still effective at making comparisons of individual assets, has become increasingly difficult to use in comparing companies with ever-changing asset mixes. Thus, our readers have asked for a type of analysis that more truly communicates value to future investors, future owners, energy asset operators, regulators, and consumers.