Once you understand what the benchmarks look like and how they're comprised, Fisher Investments believes you can analyze the main players and key performance drivers in each sub-industry. And we begin with Oil, Gas, & Consumable Fuels (O&G).
In general, O&G firms explore for, produce, transport, store, and refine oil and natural gas. As Fisher Investments mentioned in Chapter 1, these firms make up the integrated process -- the upstream, midstream, and downstream activities. By far, these firms as an industry make up the majority of the Energy sector's market capitalization, including familiar supermajor integrated oil firms like Exxon Mobil, Chevron, Royal Dutch Shell, and BP. Fisher Investments believes this industry is the most directly affected by energy commodity prices. Its sub-industries are:
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Integrated Oil & Gas (upstream and downstream)
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Oil & Gas Exploration & Production (upstream
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Oil & Gas Refining & Marketing (downstream)
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Oil & Gas Storage & Transportation (midstream)
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Coal & Consumable Fuels (coal and uranium mining)
The Integrated Oil & Gas sub-industry is where you find the supermajors and other IOCs, engaged in both upstream and downstream activities. In other words, these firms explore for and produce oil and natural gas, refine them into various petroleum products, and sell them through retail gas stations -- all parts of the integrated process.
IOCs are some of the largest firms in the world, including the world's largest publicly traded firm, Exxon Mobil (as of December 31, 2007). In periods of high energy prices, IOCs are historically some of the most financially healthy in the world, typified by tremendous cash flows, low debt, and high credit ratings.
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