Oil prices have quadrupled since 2001. But many of the world’s largest international oil companies have not kept pace. Instead, their operating cash flows have only doubled over the same period. And most of their stock market valuations have trailed even further behind, underperforming the broader stock market as a group by about 65 percent.
There’s an important lesson for oil and gas firms here – but it may not be what you think. Even before the recent downturn in the oil market, most international oil companies were no longer capturing the value of rising commodity prices for shareholders, especially oil prices. That new development alone should set off alarms in the executive suites of international oil majors, since it potentially undermines the reason why most investors want to own stakes in them.