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Energy producers hurting more than midstream businesses amid market slump

While trends involving stocks for Oklahoma-based companies evolve over time, periods of market stress tend to make those trends really pop.

Wednesday was no exception as markets gave up Tuesday’s gains and then some, continuing a recent slide.

Publicly traded companies in Oklahoma are dominated by energy-related firms, but not all are faring equally in this volatile market.

A disparity in market capitalization values between exploration and production companies and their midstream counterparts was widely apparent.

Midstreams rule

The top-ranked company in Oklahoma for market capitalization Wednesday afternoon (at nearly $19.4 billion) was Tulsa-based Williams, a midstream company that gathers and processes natural gas in basins where it is produced and moves the commodity throughout the country using a network of interstate lines it owns and operates.

Four of the top six ranked companies for market capitalization in Oklahoma on Wednesday, in fact, were all midstream operators.

ONEOK carried a market capitalization of about $14.9 billion, ranking it second, while Magellan Midstream Partners (nearly $10 billion) held the fourth best market capitalization for the day.

Oklahoma City-based OGE Energy, which owns Oklahoma Gas and Electric Co. and is a 50% general partner and 25.5% limited partner in Enable Midstream Partners, held fifth position for the day with a market capitalization near $6.8 billion.

ONE Gas (about $4.2 billion) was sixth.

Zac Reynolds, the chief investment officer at Full Sail Capital in Oklahoma City, said midstream companies are less sensitive to commodity prices than they used to be because of take-or-pay contracts executed with companies that are customers. That helps improve value for investors.

But he added those agreements are somewhat of a double-edged sword, given some midstream operators could lose those arrangements if an exploration or production company were to close its doors.

“The last time we had an energy shakeout, that was a concern among investors about whether or not exploration and production companies could make good on their contracts.”

What was third in market capitalization Wednesday? Paycom Software, which carried a capitalization of about $13 billion for the day.


Energy exploration and production companies make up a significant number of the publicly traded companies in Oklahoma.

On Wednesday, their market

capitalizations ranged from about $3.2 billion for Continental Resources and Devon Energy to $4.6 million for Mid-Con Energy Partners.

Beyond the E&Ps, midstreams such as Enable, NGL Energy Partners and Cypress Energy Partners all carried market capitalizations within that broader range Wednesday, as did service companies such as Blue Knight Energy Partners, Matrix Service Co., Helmerich & Payne and Mammoth Energy Services.

Bank of Oklahoma and BancFirst also carried market capitalizations on Wednesday within that range.

‘Just one measure’

Analysts Wednesday stressed investors should remember a company’s market capitalization is just a simple equation where the value of a company’s share is multiplied by the number of shares it has outstanding.

The measure is just one aspect of a company’s performance a smart investor should consider when pondering where to put his or her money, they said.

“I think what retail investors sometimes overlook are individual companies’ stories,” Reynolds remarked.

Clearly, share values are an indicator, but so is a sober assessment of the economic sector where the company earns its dollars.

The energy sector’s attractiveness to investors has been waning for years, a trend accelerated earlier this year after mega-investor BlackRock announced it would steer clear of environmental risks in future investment decisions.

Toss in concerns about a softening demand for crude oil because of slowing economies, the coronavirus scare and a price war between Saudi Arabia and Russia as they fight to gain market share of global crude markets?

Together, those make energy companies a downright scary place to park your money.

“Anytime you have panic selling like this, I am never surprised by how low stock values go,” said Jake Dollarhide, CEO of Tulsa-based Longbow Asset Management.

“It is not based on the story of the company, or its current or projected earnings or dividends,” Dollarhide said. “Panic selling is panic selling, throwing out the kitchen sink blindly, not taking anything else into consideration and going to cash because you are scared.”

Others question whether investors are jumping the gun.

Robert C. Dauffenbach, director of the Center for Economic and Management Research at the University of Oklahoma's Price College of Business, said it is unprecedented to see such a massive loss of value out of markets in such a short time.

“We don’t know how deep this goes. We do know it is going to get worse, so the depth and breadth are unknowns, and unknowns are something the market abhors," Dauffenbach said.

“But to decide today that a company is worth half what it was two weeks ago? That is just nonsensical to me.”

Jack Money

Jack Money has worked for The Oklahoman for more than 20 years. During that time, he has worked for the paper’s city, state, metro and business news desks, including serving for a while as an assistant city editor. Money has won state and regional... Read more ›