What are independent oil and gas companies?

I saw a feature on energy companies by Bloomberg.com and the term 'independent oil and gas company' was mentioned. I've heard the term used as lot, but never really thought about the definition and meaning.

I could probably list quite a few independents and think that this term usually applies to exploration and production companies. (EG: Hess Corp, Occidental Petroleum, Suncor Energy, Apache Corp, Encana, Talisman Energy, Canadian Natural Resources etc).

Now, as companies have diversified into renewables, and in some cases midstream and downstream activities, would they still be independent?

Can an independent also be a major? Is there a formal definition, perhaps with cut offs in size? A mom and pop wildcatter would be independent right? The more that I think about this topics, the more questions pop into my head. This seems like a good topic for the community to chew on a little.

Comments

  • I don't think that there's a technical definition of an oil independent, its more of a loose term that describes upstream companies. Upstream means close to the source, as in the exploration, drilling and extraction bit.

    That means that to qualify as an independent, then company won't be involved in things like pipelines, processing or gas forecourts and other marketing and distribution. These are mid and downstream activities. The biggest companies that do all of these things are called integrated oil companies.

    The majors are integrated oil companies, even though they're involved in E&P, so the best definition of an independent oil and gas company would be those who only work at the wellhead.

    When considering the differences, we know that super majors are the biggest, but independents aren't necessarily small in comparison. I think that the largest independent oil and gas company is Andarko, and they're worth tens of millions. Some super majors are 10X that, but there are small integrated companies around.

  • edited March 2018

    Thats right Kev, an independent company is only involved in the exploration and extraction or hydrocarbons. It's true that they can be all sizes, from a small family business or proprietorship, to BHP Billiton, or even China National Offshore Oil Corporation (CNOOC) which is usually in the global top 20 largest oil company lists.

    There are some numbers that can be mentioned by way of categorising an independent oil company. Its not so much about the size of the company, but how few mid and downstream activities they are involved in. The IRS in the USA defines an independent as a company that has refining capacities under 50,000 barrels per day, or their retail revenue is less than $5m annually.

    On average, the integrated companies are much larger than the independents, but there are far more independents in existence. Perhaps 80-90% of all oil companies are independents.

    Independent oil companies are really valuable to the industry, and to society because they're the ones driving innovation. Whilst it's true that some technology and techniques are developed by Universities or super majors, the most frequent step changes are created by independents, who are quite literally, at the cutting edge!

    This is achieved by:

    • A laser like focus and specialisation in a narrow aspect of the business.
    • A risk taking (financial not physical) spirit of adventure that isn't shared by the majors.
    • An ability to be nimble and make fast changes and adjustments.
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