Historically, Big Oil has been a structurally strong value creator, favored by investors for growing and preserving long-term wealth. Global in reach, massive in scale, and able to manage complexity and mitigate risk, leading oil and gas companies have generated superior shareholder returns across the business cycle. From 1999 through 2004, Big Oil created an annual total shareholder return (TSR) of 6.7%, compared with –2.3% for the broad market. Similarly, from 2004 through 2009, which includes the 2008–2009 oil-price collapse, Big Oil yielded 7.3% yearly to its owners while the S&P 500 returned a mere 0.4%. Since 2009, however, the pattern of returns has eroded. From 2009 through October 2015, Big Oil generated an annual return of 2.9% while the S&P 500 yielded 13.6%. Even before the 2014 oil-price drop in the post-2009 market recovery, Big Oil’s returns trailed the total return of the S&P by more than 10 percentage points annually. (See Exhibit 1.)
We define Big Oil as the nine major oil companies: Chevron, ExxonMobil, Royal Dutch Shell, Total, BP, ConocoPhillips, Statoil, Eni, and Repsol.