The fortunes of the oil and gas industry are inextricably linked to the price of crude.The sector outperformed the S&P 500 Index from December 2007 through mid-2014,tracking the commodity price rally.But the weakness in the oil price that began in mid-2014 and continued through 2017 was a major headwind,causing the sector to underperform the index during this period.In our inaugural report on value creators in the oil and gas industry,”Value Creation in Oil and Gas 2018: Managing the Price Cycle,”we found that median total shareholder return(TSR)over the downturn was flat for the sector but 12% for the S&P 500 Index.Because of the weak crude price,the oil sector was also near the bottom of the 33 industries in the Boston Consulting Group(BCG)2018 Value Creators Rankings.But on closer inspection,a more nuanced picture emerged.We found that downstream players performed well,benefiting from stronger crack spreads driven by refined product demand.However,companies with large upstream operations or those focused on upstream,including the majors and E&P companies,were hurt by the”lower-for-longer”price environment.
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