Oil, gas industry boosts broader state economy BY ADAM WILMOTH Energy Editor awilmoth@opubco.com
Oklahoma’s booming oil and natural gas industry continued to boost the broader state economy over the past year. The growth created thousands of new jobs and the first Oklahoma Inc. industry sweep as energy firms represent all of the top 10 companies on the list. While energy companies have dominated the top 10 for the past several years, the current list also is different in that it represents a broad spectrum of the oil and gas economy. Last year, six of the eight energy companies in the top 10 were midstream partnerships. The year before, oil and natural gas producers represented the bulk of the list. This year, the top 10 is comprised of four producers, three midstream firms and three services companies. “With oil prices being above $90 for much of the past year and strengthening natural gas prices, you’re seeing a lot of activity from producers, and services are needed for that as well,” said Greg Womack, president of Edmond-based Womack SEE BOOST, PAGE 2S
ILLUSTRATION BY CHRIS SCHOELEN, THE OKLAHOMAN GRAPHICS
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THE OKLAHOMAN | NEWSOK.COM
OKLAHOMA INC.
Boost: Oil, gas boom fuels Companies state economy, hiring ranked on 3 measures FROM PAGE 1S
Investment Advisers Inc. “Then you need to have a place to store it and transport it. It feeds off itself.”
Ranking methods For more than 15 years, The Oklahoman, with the help of S&P Capital IQ, has ranked the state’s publicly traded companies using a system aimed at evaluating profitable growth. Companies are ranked on three measures, and those with the best composite score rise to the top. To measure growth, S&P ranked each company according to how quickly its revenues grew in the year ending June 30. New Source Energy Partners led that category as the startup firm boasted a 127 percent rise in revenue. To gauge profitability, each company was ranked according to its percentage change in earnings per share over the period. Devon Energy Corp. claimed the top spot in that category with a 194 percent jump in earnings per share. The Oklahoma Inc. rankings also consider change in share price, including dividends, over the period. By that measure, Matrix Service Co. generated the best reward for its shareholders, with an improvement of almost 111 percent. Typically, it’s tough for any one company to excel in all three rankings, which helps weed out firms that get a rankings boost in a category by rebounding from a tough year. We take the rankings and average them to produce our overall list. Panhandle Oil and Gas Inc. claimed the top overall ranking, despite not leading in any category. The company’s balanced growth placed it in the top 10 in all three categories and the top four in two factors.
The ongoing oil and natural gas boom continued to drive the state economy over the past year, creating tens of thousands of new jobs and directing hundreds of millions of dollars into state coffers. The energy industry has accounted for about 20 percent of all the jobs in the state and almost two-thirds of the jobs created since the recession ended in 2010, Oklahoma City University economist Russell Evans said. “When you look at the economic impact of the oil and gas industry, it dwarfs almost anything else we look at,” said Evans, executive director of Oklahoma City University’s Steven C. Agee Economic Research and Policy Institute. “Oklahoma’s economy is founded upon an energy-based economy.” The boom also propelled most of the state’s energy companies to strong gains over the past year as the industry swept the Oklahoma Inc. top 10. “It confirms the story we’ve been telling — that Oklahoma City has become the center of domestic oil and gas exploration,” said Roy Williams, president of the Greater Oklahoma City Chamber of Commerce. “Houston is the international center, but when you look at what’s going on in the United States, we are the leader now.” The booming energy industry also has led to growth in other sectors, Evans said. “Eighty percent of the manufacturing job growth over the past three years were from machinery manufacturing and fabricated metal production, which are devoted almost entirely to storage tanks, pipe manufacturing, valves and other parts for the oil and gas industry,” he said. The energy sector also has led to increased activity in trucking and other transportation jobs, he said.
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37
26 10 37 24 NR 29 14 6 15 28 3 5 12 4 1 27 36 2 8 34 13 35 31 11 32 16 17 9 18 7 20 22 30 23 19 21 33
While Oklahoma has benefited from the growth of the oil and natural gas sector, there are some concerns that the state is returning to a situation where it is too dependent on one segment of the economy. Evans said industry trends have reduced that risk. “I don’t think there is a concern,” he said. “A lack of diversity is not as bad as we think, and we are much more diverse than we think because we have a diverse skill set. Energy companies are employing IT specialists, database engineers and accountants. These are occupations that offer transferable skills. They may be going to work in the oil and natural gas industry, but it is a much more diverse labor pool today.” The growth of the oil and gas industry also has led other skilled workers to the state, Williams said. “It’s not unusual at all for a petroleum engineer being recruited to an oil company in Oklahoma to have a trailing spouse who might be a medical researcher or who might be connected to the aviation and aerospace industry. That helps us in diversification,” Williams said. Williams said Oklahoma also has benefited from the hundreds of companies that have started or moved to Oklahoma to support the oil and natural gas industry. “They’re crucial,” he said. “Early on in the energy industry development, we didn’t have those companies, so our companies had to go out of state. That bleeds your economy when you have to make purchases to companies out of state. It’s really important that you have that second and third tier of suppliers.” ADAM WILMOTH, ENERGY EDITOR
NM: Not meaningful
Score
Prior Rank Rank Company Name
9 8 3 2 10 5 6 7 1
Steve Lackmeyer slackmeyer@ opubco.com
BUSINESS WRITER
Devon Energy Center is shown with the Myriad Gardens in the foreground.
One Year Total Return (Stock and dividends) in percent Rank
98.3 110.5 55.1 54.5 29.7 61.6 59.7 56.8 33.4 93.5 53.1 38.5 83.6 90.9 52.5 50.7 37.0 55.6 48.5 -2.0 40.0 39.0 50.2 51.8 25.0 29.8 86.0 27.9 35.9 7.2 17.4 11.2 20.8 26.2 25.2 6.6 12.7
2 1 11 12 26 7 8 9 24 3 13 21 6 4 14 16 22 10 18 37 19 20 17 15 30 25 5 27 23 35 32 34 31 28 29 36 33
Percent Change in Revenues ‘13 to ‘14
34.9 37.1 42.8 34.2 126.9 13.3 25.3 64.8 52.6 16.4 6.0 47.0 18.0 7.4 118.4 7.0 -0.8 3.6 49.0 22.8 3.8 9.6 -38.6 2.4 19.2 -6.2 -6.8 11.2 3.4 3.8 -33.4 7.6 8.8 5.6 -4.0 -7.6 -8.3
Rank
Percent Change in Earnings Per Share ‘13 to ‘14
Rank
Market Value (in Millions) June 30, 2014
‘14 Total Revenues (in Millions)
‘14 Net Income (in Millions)
Empire Petroleum Corp. Nitro Petroleum Inc. Reserve Petroleum Co. Greystone Logistics Inc. Foundation Healthcare Inc. Enxnet Inc. St. Joseph Inc. Webco Industries Inc. PSM Holdings Inc.
Score
2.33 3.67 3.67 4.33 4.33 5.33 6.00 6.00 7.67
One Year Total Return (Stock and dividends) in percent Rank
147.9 -63.6 53.7 11.1 140.5 -36.2 -52.9 -10.8 -60.0
1 9 3 4 2 6 7 5 8
‘14 Return on Average Equity (in percent)
9 153.5 4 461.63 74.92 21.42 21.4 8 91.5 7 866.01 1,154.29 35.62 14.3 7 193.5 1 32,474.60 13,573.00 1,635.00 7.8 10 138.5 5 20,628.50 19,606.00 701.00 4.0 1 192.0 2 421.98 84.91 19.92 12.3 16 119.5 6 3,412.86 1,486.31 196.83 9.0 11 49.0 13 19,082.79 2,136.32 704.44 42.5 3 -10.2 27 1,787.49 1,015.22 39.15 16.3 4 58.5 12 5,369.08 370.08 195.21 10.4 15 5.0 23 14,160.64 13,942.21 308.19 22.5 23 80.5 8 1,230.15 331.74 39.47 23.9 6 18.2 18 12,077.80 1,159.03 335.80 6.4 14 -13.6 29 29,412.19 3,502.75 630.09 15.9 21 -5.8 25 12,563.10 3,599.20 699.82 15.3 2 -93.8 34 3,785.61 11,961.93 25.31 1.9 22 32.4 14 4,452.97 680.61 61.66 5.8 30 176.1 3 941.15 706.57 70.35 17.7 27 17.6 19 427.70 124.32 20.04 11.7 5 -104.5 35 3,362.16 1,796.18 -2.73 -0.3 12 65.6 11 46.16 80.05 -20.33 NM 25 24.0 16 3,454.94 2,244.53 440.03 50.4 18 0.0 24 15.76 27.28 0.53 4.1 37 74.5 9 3,536.00 1,776.48 -206.56 -14.8 29 8.8 21 1,197.02 547.38 41.28 70.0 13 7.7 22 14,585.48 12,811.68 924.48 18.0 32 72.1 10 337.66 90.68 20.47 7.9 33 -41.9 31 43,482.86 6,710.00 370.00 5.9 17 -7.2 26 280.63 117.48 10.27 11.4 28 9.9 20 953.19 276.47 57.69 10.3 26 20.7 17 3,878.52 2,244.14 257.68 51.4 36 24.6 15 7,785.87 2,404.30 422.9 14.3 20 -66.7 32 211.59 196.69 23.35 NM 19 -111.8 36 27.66 32.11 -0.28 -0.7 24 -344.4 37 4,856.12 3,116.00 -1,204.00 -26.2 31 -86.8 33 424.83 141.34 5.22 1.6 34 -11.4 28 4,614.44 1,320.32 301.19 9.7 35 -31.1 30 23,813.00 6,511.00 1,074.00 10.8
Industry Sector
Energy Energy Energy Energy Energy Energy Energy Energy Energy Energy Manufacturing Energy Energy Energy Energy Energy Manufacturing Energy Energy Energy Energy Service Energy Service Energy Financial/Banks Energy Manufacturing Financial/Banks Energy Energy Energy Technology Energy Energy Financial/Banks Energy
SOURCE: S&P CAPITAL IQ
TIES: Percent change in earnings per share was used as a tiebreaker.
Top OTC companies 1 2 3 4 5 6 7 8 9
City’s publicly traded energy companies help power renaissance
PHOTO BY PAUL B. SOUTHERLAND, THE OKLAHOMAN
Panhandle Oil & Gas Inc. 5.00 Matrix Service Co. 5.33 Devon Energy Corp. 6.33 Chesapeake Energy Corp. 9.00 New Source Energy Partners LP 9.67 Unit Corp. 9.67 Magellan Midstream Partners 10.67 Rose Rock Midstream LP 13.00 Gulfport Energy Corp. 13.33 ONEOK Inc. 13.67 AAON Inc. 14.67 Access Midstream Partners LP 15.00 Continental Resources Inc. 16.33 Helmerich & Payne Inc. 16.67 NGL Energy Partners LP 16.67 Laredo Petroleum Inc. 17.33 LSB Industries Inc. 18.33 Compressco Partners LP 18.67 SemGroup Corp. 19.33 PostRock Energy Corp. 20.00 Alliance Resource Partners LP 20.00 Educational Development Corp. 20.67 SandRidge Energy Inc. 21.00 Sonic Corp. 21.67 ONEOK Partners LP 21.67 Southwest Bancorp Inc. 22.33 Williams Cos Inc. 23.00 Orchids Paper Products Co. 23.33 BancFirst Corp. 23.67 Alliance Holdings GP LP 26.00 OGE Energy Corp. 27.67 Blueknight Energy Partners LP 28.67 ADDvantage Technologies Group 28.67 WPX Energy Inc. 29.67 Apco Oil and Gas International 31.00 BOK Financial Corp. 32.67 Williams Partners LP 32.67
NR: Not ranked
PHOTO BY JIM BECKEL, THE OKLAHOMAN
Diversity in sector
Top major companies Prior Rank Rank Company Name
A view of the south face of Devon Tower as seen from Myriad Botanical Gardens. At left is the Crystal Bridge Tropical Conservatory.
Percent Change in Revenues ‘13 to ‘14
Percent Change in Earnings Per Share ‘13 to ‘14 Rank
Rank
Market Value (in Millions) June 30, 2014
0.0 56.9 19.3 -5.0 37.4 0.0 -85.5 -10.2 -26.8
4 44.4 1 102.2 3 19.4 5 25.0 2 -1500.0 4 0.0 8 28.6 6 -82.1 7 -400.0
2 1 5 4 9 6 3 7 8
2.270 1.483 71.550 13.055 86.518 2.075 5.114 81.370 3.534
‘14 Total Revenues (in Millions)
0.000 0.626 20.869 22.785 94.837 0.000 0.054 402.870 15.482
‘14 Net Income (in Millions)
-0.214 -0.426 6.618 2.792 -23.039 -0.135 -0.571 1.329 -5.448
‘14 Return on Average Equity (in percent)
-127.8 -37.4 20.4 NM NM NM NM 0.8 -95.3
Industry Sector
Energy Energy Energy Manufacturing Service Technology Service Manufacturing Financial/Banks
SOURCE: S&P CAPITAL IQ
The downtown skyline, already dramatically transformed by the 50story Devon Energy Center, is set to grow again with development of a new 25-story headquarters for OGE Energy Corp. and potentially three additional related towers. OGE Energy Corp.’s growing presence is just a continuation of decades of its involvement downtown. Early on in the current 20-year revival, the company was lighting up the Myriad Gardens during the Christmas holidays and sponsoring festivities throughout the year. Energy is flowing through downtown thanks to the presence of a vibrant collection of public energy corporation headquarters in Oklahoma City. Jane Jenkins, president of Downtown Oklahoma City Inc., credits the city’s publicly traded energy companies with creating a community that is attracting major new employers including a new energy research center being built just east of downtown by General Electric Co. “The public energy companies (are) not only important to our state, they are very important to our local community,” Jenkins said. “They sponsor events, they provide volunteers, they give an identity to our city, they provide leadership to our boards and commissions.” Devon Energy Corp., SandRidge Energy, Inc., and Chesapeake Energy Corp.,have all donated millions toward development of boathouses and recreational venues along the Oklahoma River. The growing list of festivities during the annual Downtown In December celebrations includes free movie Mondays at Harkins Theater in Bricktown, sponsored by Continental Resources, Inc., the SandRidge Santa Run and SandRidge tree lighting festival, snow tubing at the Chickasaw Bricktown Ballpark sponsored by Chesapeake, the Devon Ice Rink and Saturdays with Santa, both sponsored by Devon. “Oklahoma City as an energy capital is so important, and the quality of the companies we have here have built the city into a credible, quality energy center,” Jenkins said.
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OKLAHOMA INC.
SUNDAY, NOVEMBER 2, 2014
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Production growth drives Panhandle to top NO. 1 | OIL AND NATURAL GAS PRODUCER HAS RECORD YEAR Eight years after renaming and transforming the company, Oklahoma Citybased Panhandle Oil and Gas Inc. has experienced a record year, shooting to the top of the Oklahoma Inc. rankings as the oil and natural gas producer has expanded its reach into oil-rich south Texas. The success also marks Panhandle’s transition from an almost exclusive natural gas producer to a more balanced portfolio of oil and natural gas. The company accentuated the effort in June when it completed an $80 million purchase in south Texas’ oilrich Eagle Ford basin. “We had been looking for a reasonably-sized acquisition for a while,” CEO Michael Coffman said. “We had looked at several acquisitions in the Bakken, but we were outbid. Then we got to looking at the Eagle Ford, which we consider the best oil play in the country. It has the lowest cost and doesn’t have the weather issues of the Bakken. We can take the oil out via pipelines instead of having to put it on trains or trucks.” Panhandle claimed the top overall ranking despite
Adam Wilmoth
awilmoth@ opubco.com
ENERGY EDITOR
not leading in any category. The company’s balanced growth placed it in the top 10 in all three categories and the top four in two factors. “They’re positioned well in good areas that are experiencing really good production,” said Greg Womack, president of Edmond-based Womack Investment Advisers Inc.
Changing focus Formerly known as Panhandle Royalty, the company began as a royalty trust with royalty interests scattered throughout Oklahoma. In 2006, the company changed its name and focus as it began buying additional interests in wells and began looking beyond its legacy royalty holdings. But Panhandle still is not your typical oil and natural gas producer. The company does not
Michael Coffman is the CEO of Panhandle Oil and Gas in Oklahoma City.
drill or operate wells. Instead, it buys nonoperating interest in wells other companies drill. As a result, the company is much leaner than most its size. “I think the market over the past several years has become a little more understanding of the nonoperator business model,” Coffman said. “When I first stated doing analyst conferences and presenta-
tions 10 years ago, the non-operator model was not well received. But over the past three or four years, there have been other nonoperator companies that have done fairly well with it. We’re pretty well received now, especially in our mineral acreages.” Coffman said he expects the company to continue to see strong returns for at least the next several years.
PHOTO BY PAUL HELLSTERN, THE OKLAHOMAN
“We have a very large inventory of locations to be drilled,” he said. “We have a lot of running room to invest with cash flow. We don’t see a big change in our business model in the next few years.”
Interest in natural gas More asset purchases also are possible, Coffman said. While the company has invested heavily in oil
over the past few years, Coffman said his team is still interested in natural gas. “We’re bullish on natural gas in the long term,” he said. “I would suspect another purchase would be in the cards eventually. We are always continuing to look. That could be an oil project, or it could be a natural gas project. We’re a little bit agnostic on that.”
Matrix Service sees growth, but keeps small company feel NO. 2 | DIVERSIFICATION IS KEY, CHIEF FINANCIAL OFFICER SAYS TULSA — Matrix Service Co. is trying to do it all. Rather than focusing on one of its business segments, the energyfocused construction company aims to grow them all. Chief Financial Officer Kevin Cavanah said Matrix’s stock performance, which is part of a statebest total return of more than 110 percent, is a sign of its progress in executing its overall strategy. He said Matrix officials huddled several years ago to identify opportunities for each of the company’s businesses. “It really unified the company, so we were all working toward the same goals,” Cavanah said. “There’s been a really focused effort on achieving our goals, combined with some really good market tailwinds.”
‘Well-diversified’ Matrix has four segments: storage solutions, electric infrastructure, oil, gas and chemicals, and industrial, which includes work for the iron and steel, mining and fertilizer industries. Cavanah said diversification is the key for Matrix, which will work to grow its storage business, while trying to take advantage of compelling growth opportunities in other segments. “We’re going to continue to focus on growing those, too, and keeping a well-diversified industrial construction company,” he said. Matrix, which went public in the early 1990s, is celebrating its 30th anniversary. It has grown organically and through strategic acquisitions. “It’s a good company with a good future,” Cavanah said. Matrix has about 5,000 employees and $1.2 billion in revenue, he said, but it has maintained its small company feel. Cavanah said safety is one of the company’s core values, impacting all levels of its operations. “It’s got to be a proactive, consistent approach,” he said. “We’re striving for zero incidents.”
Jay F. Marks jmarks@ opubco.com
BUSINESS WRITER
Cavanah said that goal is achievable and vital in protecting Matrix’s No. 1 resource, its employees. “We want them to leave work every day in the same condition they came to work in,” he said. “Their safety is paramount.” Matrix has worked throughout the United States and Canada, Cavanah said, choosing not to move beyond those borders. He said Matrix is eying opportunities in Mexico after its recent energy reforms after previously considering work in Central and South America, but officials are pleased with the domestic projects available to the company.
‘Core capabilities’ Cavanah said Matrix has grown by about 20 percent a year over the past three years, bolstered by some acquisitions. He said he still expects double-digit growth from all four of its segments as officials aim to increase profitability. “We’re going to try to stay to our core capabilities,” Cavanah said. He said Matrix tries to maintain a strong balance sheet while keeping its culture and executing its growth strategy. Cavanah said Matrix intends to continue expanding so it can improve on its business. The company recently added a California construction company that Cavanah called an important acquisition since it gives Matrix a footprint in the oil-rich Bakersfield area. Officials intend to grow that business when it is combined with Matrix’s resources. Cavanah said acquisitions give Matrix the people it needs to continue its success. “In the construction business, that’s what you’re acquiring,” he said.
Matrix Service Co. employees remove and replace the fluid catalytic cracking unit regenerator head at a refinery. PHOTO PROVIDED
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OKLAHOMA INC.
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Profits soar at new-look Devon Energy NO. 3 | COMPANY RENEWS ITS FOCUS ON OIL PRODUCTION Strong oil prices and a renewed focus on oil production led Oklahoma City-based Devon Energy Corp.’s profits and stock price to soar over the past year. By far the most improved Oklahoma Inc. company, Devon surged to No. 3, up from last of 37 one year ago. The company claimed the top spot in percent change in earnings per share at 194 percent. It also settled at No. 7 in percent change in revenues at 43 percent and No. 11 in total return on stocks and dividend at 55.1. “We did a number of transactions over the past year or so that were very impactful and transformational,” CEO John Richels said. “Today, we are a much more focused company, focused on big areas with a lot of running room. That’s what’s allowed us to increase margins. We’ve focused our capital and people on really, really
These water storage units are being used in a Devon Energy fracking operation a few miles east of Perry.
Adam Wilmoth
awilmoth@ opubco.com
ENERGY EDITOR
good core areas in some of the best plays in North America.” As part of the refocusing effort, Devon has sold more than $5 billion in assets while spending more than $6 billion in areas that produce more oil and natural gas. “We sold all the assets that didn’t have the kind of scale, that didn’t have the scope to move the needle for a Devon-sized company even if we put the money on it,” Richels said. “They were good assets, but they didn’t have largescale characteristics. And we got good prices for them.” Devon executives previously have said they wanted to maintain a balance of natural gas, natural gas
COMPANY PROFILES 1. PANHANDLE OIL & GAS INC. • Address: 5400 N Grand Blvd., Suite 300, Grand Centre Suite, Oklahoma City, OK 73112 • Phone: 948-1560 • Website: www.pan handleoilandgas.com • At the top: Michael C. Coffman • Market cap: $462 million • Industry: Crude petroleum and natural gas • Summary: Panhandle Oil and Gas Inc. owns mineral interests, both working and royalty, in oil and gas-producing properties in 10 states.
2. MATRIX SERVICE CO. • Address: 5100 E Skelly Drive, Suite 700, Tulsa, OK 74135 • Phone: (918) 838-8822 • Website: www.matrixservicecompany.com • Ticker: MTRX • Exchange: NAS • At the top: John R. Hewitt • Market cap: $866 million • Industry: Oil and gas field services • Summary: Matrix Service Co. provides construction, repair, and maintenance services mainly to the petroleum and power industries.
3. DEVON ENERGY CORP. • Address: 333 W. Sheridan Ave., Oklahoma City, OK, 73102 • Phone: 235-3611 • Website: www.devon energy.com • Ticker: DVN • Exchange: NYSE • At the top: John Richels • Market cap: $32.5 billion • Industry: Crude petroleum and natural gas • Summary: Devon Energy Corp. focuses on exploration and production assets in Oklahoma, Texas, Wyoming and western Canada.
4. CHESAPEAKE ENERGY CORP. • Address: 6100 N Western Ave., Oklahoma City, OK 73118 • Phone: 935-8000 • Website: www.chk.com • Ticker: CHK • Exchange: NYSE • At the top: Doug D. Lawler • Market cap: $20.6 billion • Industry: Crude petroleum and natural gas • Summary: Chesapeake Energy Corp. builds oil and natural gas reserves through the acquisition and development of oil and gas assets across the U.S.
5. NEW SOURCE ENERGY PARTNERS LP • Address: 914 N Broadway, Suite 230, Oklahoma City, OK 73102 • Phone: 272-3028 • Website: www.new source.com • Ticker: NSLP • Exchange: NYSE • At the top: Kristian B. Kos • Market cap: $422 million • Industry: Crude petroleum and natural gas • Summary: New Source Energy Partners develops and produces from oil and natural gas properties that extend across conventional resource reservoirs in east-central Oklahoma.
OKC CENTRAL
Covering downtown brick by brick STEVE LACKMEYER at http://blog.newsok.com/okccentral/
PHOTO BY PAUL HELLSTERN, THE OKLAHOMAN ARCHIVES
liquids and oil production, as well as a mix of light and heavy oils. “A few years ago, partly because of our own success in opening up shale gas, we got a little skewed on the gas side. We were producing 70 percent natural gas and 30 percent oil and liquids,” Richels said. “We undertook to transform our asset base to get a better balance. By the time
we finish this year, we will have made a very dramatic change to the point we’re producing 60 percent oil and about 40 percent natural gas and natural gas liquids.” Devon also recently spun off most of its pipelines and other midstream assets into EnLink Midstream Partners, a Dallasbased master limited partnership Devon controls.
“We knew we had very valuable assets in midstream,” Richels said. “Putting it into a vehicle like EnLink put the public market on that value.” While Devon has changed up its production mix and the parts of the country it is focusing on, one thing that hasn’t changed is the focus on technology, Chief Operating Officer Dave Hager
said. “What we’re finding as an industry is that with advances in technology, we are able to recover hydrocarbons much quicker than before,” Hager said. “Wells produce at a higher rate and are recovering a higher percentage of the hydrocarbons in place. That is allowing a much more efficient development of the region.”
THE OKLAHOMAN | NEWSOK.COM
COMPANY PROFILES 6. UNIT CORP. • Address: 7130 S Lewis, Suite 1000, Tulsa, OK 74136 • Phone: (918) 493-7700 • Website: www.unitcorp.com • Ticker: UNT • Exchange: NYSE • At the top: Larry D. Pinkston • Market cap: $3.41 billion • Industry: Crude petroleum and natural gas • Summary: Unit Corp conducts onshore drilling of oil and natural gas wells for customers in the Gulf Coast, Mid-Continent and Rocky Mountain regions of the U.S.
SUNDAY, NOVEMBER 2, 2014
OKLAHOMA INC.
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Chesapeake climbs on improved debt, profitability NO. 4 | ‘IT’S BEEN AN EXCITING YEAR,’ ENERGY COMPANY CEO SAYS
7. MAGELLAN MIDSTREAM PARTNERS LP • Address: One Williams Center, Tulsa, OK 74121 • Phone: (918) 574-7000 • Website: www.magellanlp.com • Ticker: MMP • Exchange: NYSE • At the top: Michael N. Mears • Market cap: $19.1 billion • Industry: Crude petroleum pipelines. • Summary: Magellan Midstream Partners is an energy infrastructure enterprise with ammonia and petroleum products storage, transportation and distribution assets.
8. ROSE ROCK MIDSTREAM LP • Address: 2 Warren Place, 6120 S Yale Ave. Suite 700, Tulsa, OK 74136 • Phone: (918) 524-7700 • Website: www.rrmidstream.com • Ticker: RRMS • Exchange: NYSE • At the top: Carlin G. Conner • Market cap: $1.8 billion • Industry: Crude oil gathering, transport and storage • Summary: Rose Rock Midstream LP engages in the business of crude oil gathering, transportation, storage and marketing.
9. GULFPORT ENERGY CORP. • Address: 14313 N May Ave., Oklahoma City, OK 73134 • Phone: 848-8807 • Website: www.gulf portenergy.com • Ticker: GPOR • Exchange: NAS • At the top: Michael G. Moore • Market cap: $5.4 billion • Industry: Crude petroleum and natural gas. • Summary: Gulfport Energy Corp. is an oil and natural gas exploration and production company.
10. ONEOK INC. • Address: 100 W 5th St., Tulsa, OK 74103 • Phone: (918) 588-7000 • Website: www.oneok.com • Ticker: OKE • Exchange: NYSE • At the top: Terry K. Spencer • Market cap: $14.2 billion • Industry: Gas transmission and distribution. • Summary: ONEOK Inc. focuses on marketing natural gas across the U.S.
11. AAON INC • Address: 2425 S Yukon Ave., Tulsa, OK 74107 • Phone: (918) 583-2266 • Website: www.aaon.com • Ticker: AAON • Exchange: NAS • At the top: Norman H. Asbjornson • Market cap: $1.2 billion • Industry: Refrigeration and heating equipment • Summary: AAON makes and markets air conditioning and heating equipment for commercial and industrial buildings, primarily in the U.S.
12. ACCESS MIDSTREAM PARTNERS LP • Address: 525 Central Park Drive, Oklahoma City, OK 73105 • Phone: 877-413-1023 • Website: www.accessmidstream.com • Ticker: ACMP • Exchange: NYSE • At the top: J. Mike Stice • Market cap: $12.1 billion • Industry: Natural gas gathering and processing • Summary: Access Midstream Partners LP is a midstream gathering company that owns, operates, develops and acquires natural gas, natural gas liquids (NGLs) and oil gathering assets in the U.S.
13. CONTINENTAL RESOURCES INC. • Address: 20 N Broadway, Oklahoma City, OK 73102 • Phone: 234-9000 • Website: www.clr.com • Ticker: CLR • Exchange: NYSE • At the top: Harold Hamm • Market cap: $29.4 billion • Industry: Crude petroleum and natural gas • Summary: Continental Resources Inc. engages in the exploration, exploitation and production of oil and natural gas properties primarily in the U.S.
14. HELMERICH & PAYNE INC. • Address: 1437 S Boulder Ave. Suite 1400, Tulsa, OK 74119 • Phone: (918) 742-5531 • Website: www.hpinc.com • Ticker: HP • Exchange: NYSE • At the top: John W. Lindsay • Market cap: $12.6 billion • Industry: Drilling oil and gas wells • Summary: Helmerich & Payne Inc. engages in the contract drilling of oil and gas wells in the United States and internationally.
Chesapeake Energy Corp., CEO Doug Lawler is seen inside of the company’s offices in Oklahoma City. PHOTO BY STEVE GOOCH, THE OKLAHOMAN
After a rough 2013 full of shareholder revolt and management changes, Oklahoma City-based Chesapeake Energy Corp. has rebounded with growing profits, a climbing share price and an improving debt rating. Chesapeake rocketed to No. 4 on this year’s Oklahoma Inc. list — up from No. 24 one year ago — because of a 138 percent jump in earnings per share, a 55 percent improvement in total return on stock and dividends and a 34 percent gain in revenues. “It’s been an exciting year at Chesapeake,” CEO Doug Lawler said. “We’ve seen so much improvement across all parts of the business. I’ve been pleased and excited with the speed in which this transformation has taken place. It’s been exciting and a fun thing to see.” The effort has gained attention on Wall Street. Chesapeake’s debt is now rated “Ba1,” one notch below investment grade, which begins at “Baa3.” In October, Moody’s Investors Service raised the company’s debt ratings outlook to positive, up from stable. Chesapeake announced last month that it has agreed to sell natural gas assets in Pennsylvania and West Virginia to Southern Energy Co. for almost $5.4 billion. “This large asset sale greatly increases Chesapeake’s financial flexibility to pursue future leverage reduction and invest in its core growth properties,” said Pete Speer, Moody’s senior vice president. “The positive rating outlook reflects the company’s potential to strengthen its financial profile and improve its operating cost structure and investment returns to levels consistent with a ‘Baa3’ rating over the next year to 18 months.” The decision on whether to raise the debt rating will be based on whether the performance and financial improvements continue. “If Chesapeake can increase its cash margins and returns while continuing to achieve its organic reserve and production growth targets and improving its leverage metrics, then the ratings could be upgraded to ‘Baa3,’” the report stated. An improved debt rating and general stability were among the main goals Lawler announced when he took over at Chesapeake in May 2013. He said last month he is not surprised by what he has seen, but he has been pleased with the timing. “It’s been much faster than I expected,” he said. “That’s attributable to the quality of the employees,
Adam Wilmoth
awilmoth@ opubco.com
ENERGY EDITOR
and the desire to grow for value is strong in the organization. We’ve seen material improvements in cost reduction, continuing with reductions in completion, finding and development costs. We’re plowing ahead at full speed in significant gains.” The activist shareholders who prompted so many changes less than two years ago are still heavily invested in Chesapeake, but they have changed their status to
“passive” investors. “We have an excellent relationship with our shareholders,” Lawler said. “We’re very focused on shareholder return. We are all aligned and on the same page. We have to do the best we can every day. That’s how we drive value. Our shareholders have been extremely supportive of everything we’re doing.” Despite the growth Chesapeake has seen over the past two years, Lawler said the company is still early in its strategy. “I truly believe we are just getting started,” he said. “We’re seeing continued opportunities for investment in our efficiency. We’re seeing great work done by our technical teams in exploration op-
portunities. Profitability is beginning to improve. We’re continuing to look at opportunities to further strengthen our balance sheet. We also are looking at other growth opportunities.” Lawler said he expects 2015 to be another key year for Chesapeake. “2013 was a very strong transitional year; 2014 has been a strong foundational year,” he said. “As we look forward to 2015 and beyond, that’s where you can expect to see great E&P (exploration and production) leadership. It’s an exciting time. We have a lot more clarity in the direction we’re headed. We are consistently going to drive performance for our shareholders.”
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COMPANY PROFILES 15. NGL ENERGY PARTNERS LP • Address: 6120 S Yale Ave., Suite 805, Tulsa, OK 74136 • Phone: (918) 481-1119 • Website: www.nglenergy partners.com • Ticker: NGL • Exchange: NYSE • At the top: H. Michael Krimbill • Market cap: $3.8 billion • Industry: Petroleum bulk stations and terminals • Summary: NGL Energy Partners retails, wholesales and stores propane and other natural gas liquids.
16. LAREDO PETROLEUM HOLDINGS INC. • Address: 15 W 6th St., Suite., 1800, Tulsa, OK 74119 • Phone: (918) 5134570 • Website: www.laredo petro.com • Ticker: LPI • Exchange: NYSE • At the top: Randy A. Foutch • Market cap: $4.5 billion • Industry: Crude petroleum and natural gas • Summary: Laredo Petroleum Holdings Inc. is engaged in the exploration, development and acquisition of oil and natural gas properties in the Permian and Mid-Continent regions of the U.S.
17. LSB INDUSTRIES INC. • Address: 16 S Pennsylvania Ave., Oklahoma City, OK 73107 • Phone: 235-4546 • Website: www.lsbindustries.com • Ticker: LXU • Exchange: NYSE • At the top: Jack E. Golsen • Market cap: $941 million • Industry: Nitrogenous fertilizers • Summary: LSB Industries Inc. makes a wide variety of chemicals (including nitric acid) and climate-control products. Its chemicals segment makes nitrate fertilizers and acids for agricultural, mining, and industrial markets. The climate-control division makes hydronic fan coils and a variety of heat pumps. Additionally, its industrial products segment distributes industrial milling, drilling, turning and fabricating machines.
18. COMPRESSCO PARTNERS LP • Address: 101 Park Ave., Suite 1200, Oklahoma City, OK 73102 • Phone: 677-0221 • Website: www.compressco .com • Ticker: GSJK • Exchange: NAS • At the top: Ronald J. Foster • Market cap: $428 million • Industry: Oil and gas field services • Summary: Compressco Partners LP offers compression, liquids separation and gas metering services, as well as the GasJack units that perform these operations.
19. SEMGROUP CORP. • Address: 6120 S Yale Ave., Suite 700, Tulsa, OK 74136 • Phone: (918) 524-8100 • Website: www.semgroupcorp.com • Ticker: SEMG • Exchange: NYSE • At the top: Carlin G. Conner • Market cap: $3.4 billion • Industry: Petroleum gathering and processing • Summary: SemGroup Corp. moves oil and gas from the wellhead to the marketplace.
20. POSTROCK ENERGY CORP. • Address: 210 Park Ave. Oklahoma City, OK 73102 • Phone: 600-7704 • Website: www.pstr.com • Ticker: PSTR • Exchange: NAS • At the top: Terry W. Carter • Market cap: $46.2 million • Industry: Crude petroleum and natural gas • Summary: PostRock Energy Corp. is an integrated independent energy company engaged in the acquisition, exploration, development, production and transportation of oil and natural gas.
21. ALLIANCE RESOURCE PARTNERS LP • Address: 1717 S Boulder Ave., Suite 400, Tulsa, OK 74119 • Phone: (918) 295-7600 • Website: www.arlp.com • Ticker: ARLP • Exchange: NAS • At the top: Joseph W. Craft III • Market cap: $3.5 billion • Industry: Bituminous Coal and Lignite Surface Mining • Summary: Alliance Resource Partners LP engages in the production and marketing of coal for utilities and industrial users in the United States.
22. EDUCATIONAL DEVELOPMENT CORP. • Address: 10302 E 55th Place, Tulsa, OK 74146 • Phone: (800) 475-4522 • Website: www.edcpub.com • Ticker: EDUC • Exchange: NAS • At the top: Randall W. White • Market cap: $15.8 million • Industry: Book Publishing • Summary: Educational Development Corp. is the exclusive U.S. distributor of a line of about 1,500 children’s books published by the U.K.’s Usborne Publishing Ltd.
OKLAHOMA INC.
THE OKLAHOMAN | NEWSOK.COM
New Source earnings grow with partnership after IPO NO. 5 | COMPANY HAS ADDED HUNDREDS OF WORKERS SINCE ’13 Adam Wilmoth
awilmoth@ opubco.com
ENERGY EDITOR
Just a year and a half after launching its initial public offering, Oklahoma City-based New Source Energy Inc. has expanded to hundreds of employees throughout the country as it continues to grow in the active energy sector. New Source now has 400 full-time employees and 350 contractors, up from just eight employees at the time of its IPO in March 2013. The company is producing oil and natural gas in Oklahoma, and its services company is active in most of the country’s largest fields, including the Marcellus, Utica, Eagle Ford and Permian. “We’re at the beginning, the bottom of the first inning,” CEO Kristian Kos said. “We love the value proposition we offer our customers on the service side. We have a fantastic pedigree customer base. It’s not sexy. It’s not the easy stuff. It’s a lot of wrench-turning. We pride ourselves in being eager to do the heavy lifting.” New Source landed at No. 5 on its first listing on Oklahoma Inc. The company boasted a 127 percent increase in revenue, 192 percent increase in earnings per share and a 30 percent increase in total return on stocks and dividends. “They’ve done extremely well since they went public. They’ve grown substantially,” said Greg Womack, president of Edmond-based Womack Investment Advisers Inc. Kos and Dikran Tourian, president of the partnership’s oilfield services and midstream division, met in 2007 through a mutual friend. The three had breakfast together every Saturday morning for more than a year before the friend moved to Wyoming. “When he left, Dikran and I kept going to breakfast,” Kos said. “Both of us were working for ourselves. We were the same age, had the same philosophies and goals. We were a great sounding board for each other.” When Kos and Tourian started New Source, they fronted the risk. “We didn’t have a silver spoon,” Kos said. “Maybe we weren’t smart enough to recognize the risk we were taking.”
‘Out of our pocket’ When the partnership completed its initial public offering, Kos and Tourian distributed 32 percent of the stock to employees. “Every single person got something,” Kos said. “None of our lawyers or bankers or people we had come across had seen that. We wanted to make sure it was from out of our pocket, not the company. Through that, we have grown a successful organization.” The partnership already has experienced significant growth, but its management has much loftier goals. “We see a lot of opportunities ahead,” Kos said. “Our aspiration over the decades is to evolve into an integrated energy company. That will take many years to come to fruition.
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Dikron Tourian, president of New Source Energy Partners’ oilfield services and midstream division, and CEO Kristian Kos are shown at the partnership’s Oklahoma City headquarters. PHOTO BY ADAM WILMOTH, THE OKLAHOMAN
“This is an exceptionally large industry we’re playing in. It will take many years to execute. We’re talking about huge investments, massive market caps and deployment of capital. We need to be prudent in how we put
this together.” New Source already has grown through purchases, and Kos said similar deals are likely. “We’re growing the business at a decent rate,” he said. “We have no
change of heart in terms of our expectations or aspiration in terms of growth. We understand that in order to continue at that growth rate, we will end up making some acquisitions.”
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COMPANY PROFILES 23. SANDRIDGE ENERGY INC. • Address: 123 Robert S. Kerr Ave., Oklahoma City, OK 73102 • Phone: 429-5500 • Website: www.sandridgeenergy.com • Ticker: SD • Exchange: NYSE • At the top: James D. Bennett • Market cap: $3.5 billion • Industry: Crude petroleum and natural gas extraction. • Summary: SandRidge Energy Inc. produces oil and natural gas, primarily in northern Oklahoma and in the Gulf of Mexico.
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OKLAHOMA INC.
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Unit Corp. thrives as it eyes new headquarters in Tulsa NO. 6 | COMPANY TOUTS ITS NEW RIG AS ‘FUTURE’ OF INDUSTRY
24. SONIC CORP. • Address: 300 Johnny Bench Drive, Oklahoma City, OK 73104 • Phone: 225-5000 • Website: www.sonic drivein.com • Ticker: SONC • Exchange: NAS • At the top: J. Clifford Hudson • Market cap: $1.2 billion • Industry: Quick service restaurants • Summary: Sonic Corp. operates and franchises a chain of quick-service drive-in restaurants in the United States.
25. ONEOK PARTNERS LP • Address: 100 W Fifth St., Tulsa, OK 74103 • Phone: (918) 588-7000 • Website: www.oneokpartners.com • Ticker: OKS • Exchange: NYSE • At the top: Terry K. Spencer • Market cap: $14.6 billion • Industry: Natural gas transmission • Summary: ONEOK Partners LP is engaged in natural gas pipelines; gas gathering and processing; and natural gas liquids (NGLs).
26. SOUTHWEST BANCORP INC. • Address: 608 S Main St., Stillwater, OK 74074 • Phone: 742-1800 • Website: www.oksb.com • Ticker: OKSB • Exchange: NAS • At the top: Mark W. Funke • Market cap: $338 million • Industry: Financial banks • Summary: Southwest Bancorp Inc., a financial holding company, provides commercial and consumer banking services in Oklahoma, Kansas and Texas.
27. WILLIAMS COS INC. • Address: One Williams Center, Tulsa, OK 74172 • Phone: (918) 573-2000 • Website: www.williams.com • Ticker: WMB • Exchange: NYSE • At the top: Alan S. Armstrong • Market cap: $43.5 billion • Industry: Natural gas transmission • Summary: Williams Cos. Inc. is primarily engaged in gas marketing and the gathering, storing, and processing of natural gas and natural gas liquids (NGLs).
28. ORCHIDS PAPER PRODUCTS CO. • Address: 4826 Hunt St., Pryor, OK 74361 • Phone: (918) 825-0616 • Website: www.orchidspaper.com • Ticker: TIS • Exchange: NYSE • At the top: Jeffrey S. Schoen • Market cap: $281 million • Industry: Paper mill • Summary: Orchids Paper Products Co. makes bulk tissue paper and converts it into bathroom tissue, paper napkins and paper towels for the consumer market.
29. BANCFIRST CORP. • Address: 101 N Broadway, Suite 200, Oklahoma City, OK 73102 • Phone: 270-1086 • Website: www.bancfirst.com • Ticker: BANF • Exchange: NAS • At the top: David E. Rainbolt • Market cap: $953 million • Industry: National commercial banks • Summary: BancFirst Corp. is the holding company for BancFirst, a super-community bank that emphasizes decentralized management and centralized support.
30. ALLIANCE HOLDINGS GP LP • Address: 1717 S Boulder Ave. Suite 400, Tulsa, OK 74119 • Phone: (918) 295-1415 • Website: www.ahgp.com • Ticker: AHGP • Exchange: NAS • At the top: Joseph W. Craft III • Market cap: $3.9 billion • Industry: Bituminous coal and lignite surface mining • Summary: Alliance Holdings GP LP owns the assets of Alliance Resource Partners LP.
31. OGE ENERGY CORP. • Address: 321 N Harvey, Oklahoma City, OK 73101 • Phone: 553-3000 • Website: www.oge.com • Ticker: OGE • Exchange: NYSE • At the top: Peter B. Delaney • Market cap: $7.8 billion • Industry: Electric services • Summary: OGE Energy is the holding company for the largest electric utility in Oklahoma. Its Enogex unit was spun off into a combined company with CenterPoint Energy’s pipeline business.
Unit Corp. is building a new headquarters in Tulsa, as seen in this drawing.
TULSA — Unit Corp. is on a roll as it prepares to move into a new home. Unit finished sixth in this year’s Oklahoma Inc. rankings, moving up from 29th on the strength on total returns that rose 61.7 percent over the past year. CEO Larry Pinkston said Unit is thriving because all three of its business segments are growing. Its midstream segment has enjoyed significant volume growth. Production is increasing for its exploration and production segment. Rigs are going back to work in its drilling segment. Pinkston said that mix of businesses, which is increasingly rare, means that Unit’s stock often trades at a discount to pure play companies. The range varies, depending on the performance of its business segments. “We can grow shareholder value just as good as any pure play company,” he said. “We capture margins at three different levels.” Chief Financial Officer Michael Earl said Unit has grown by keeping an eye out for opportunities. He said the company is lightly leveraged, so it can take advantage of any opportunity that arises. Unit began as a drilling company, making it easier to add the midstream and exploration and production segments over time. Pinkston said the key was ensuring the proper management was in place for those businesses.
New rig unveiled Pinkston said Unit’s drilling segment has benefited from increased utilization and day rates, but the key to its future is the company’s new BOSS rigs. The new rig, which was unveiled in February, is a high-tech drilling platform designed to take advantage of technological advancements and meet the needs of a drilling industry that has evolved to a focus on mile-long horizontal wells through shale and other dense rock. The rig name stands for box-on-box self-stacking, reflecting the way the rig can quickly be torn down, moved and rebuilt at a new well site. The process can be completed in less than three days. Pinkston said Unit’s first BOSS rig got its start in Oklahoma’s Woodford shale. The company is building 10 new rigs this year at its yard in Oklahoma City, with plans to add as many as 14 more each year for the next several years. “We haven’t had a new product there to market in several years,” Pinkston said. “It’s going to be the
Jay F. Marks jmarks@ opubco.com
BUSINESS WRITER
future of the drilling industry.” Pinkston said Unit’s exploration and production segment provides consistent growth for the company, since Unit can control its own destiny. “We create our own opportunities,” he said. Unit’s operations are focused on the MidContinent, mostly in Oklahoma and the Texas Panhandle, with an eye toward growing through the
drillbit, rather than relying on acquisitions. The company operates in four core areas. “We try to stay where we know the areas the best,” Pinkston said. He said Unit’s goal is to replace 150 percent of each year’s production with new reserves. “There’s not another E&P company out there that can say that,” he said. Unit’s midstream operations mirror its E&P efforts in Oklahoma and the Texas Panhandle, although it does have some gathering assets in the Marcellus Shale. Pinkston said the company has invested in active, highly drilled areas over the past several years.
DRAWING PROVIDED
“The volumes are building in all of those,” he said.
Employee growth Building is in Unit’s future, as well, as the company in September announced plans for a new headquarters in Tulsa. Unit plans to construct a new six-story building on 30 acres at 81st and U.S. Highway 75. Pinkston said officials hope construction is completed in about 18 months to house Unit’s growing employee base. The company currently employs about 2,700 people, with about 370 in its Tulsa headquarters. It has been growing about 12 to 15 percent a year over the past few years.
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OKLAHOMA INC.
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Magellan makes good investment in crude NO. 7 | COMPANY HAS BEEN CONSERVATIVE IN ACQUISITIONS TULSA — Magellan Midstream Partners LP is profiting at both ends of the oil spectrum. Its refined products transportation business is typically stable, while Magellan has successfully gotten into the crude oil transport business, too. “We have really a tale of two stories here with our company,” CEO Mike Mears said. Magellan ranked No. 7 on this year’s Oklahoma Inc. list of the state’s top public companies on the strength of a nearly 60 percent increase in total returns, a combination of stock gains and dividends. Mears said Magellan has made good investments as it moved into the crude business, generating “tremendous” returns from each one. Magellan has been conservative in its approach to acquisitions, refusing to
Jay F. Marks jmarks@ opubco.com
BUSINESS WRITER
overpay for crude oil assets. “Our view is no acquisition is better than a bad acquisition,” Mears said. He said sophisticated investors understand the company’s approach. Some large investors have thanked Magellan for not splashing cash on a bigmoney acquisition. “There’s too many examples out there where people have overpaid and their unit price or their stock price performance has lagged because of that,” he said. Mears said Magellan’s refined product business has been relatively stable in the past few years.
COMPANY PROFILES 32. BLUEKNIGHT ENERGY PARTNERS LP • Address: 201 NW 10, Suite 200, Oklahoma City, OK, 73103 • Phone: 278-6400 • Website: www.bkep.com • Ticker: BKEP • Exchange: NASDAQ • At the top: Mark Hurley • Market cap: $212 million • Industry: Crude petroleum pipelines • Summary: Blueknight Energy Partners provides gathering, transporting, terminalling and storage of crude oil in Oklahoma, Kansas and Texas.
33. ADDVANTAGE TECHNOLOGIES GROUP INC. • Address: 1221 E Houston St., Broken Arrow, OK 74012 • Phone: (918) 251-9121 • Website: www.addvantage tech.com • Ticker: AEY • Exchange: NAS • At the top: Kenneth A. Chymiak • Market cap: $27.7 million • Industry: Radio and TV communications equipment • Summary: ADDvantage Technologies Group Inc. sells new and remanufactured cable TV equipment and provides repair services to cable operators.
34. WPX ENERGY INC. • Address: One Williams Center, Tulsa, OK 74172 • Phone: (918) 573-2000 • Website: www.wpx energy.com • Ticker: WPX • Exchange: NYSE • At the top: Richard E. Muncrief • Market cap: $4.9 billion • Industry: Oil and gas exploration services • Summary: WPX Energy Inc. is an oil and gas exploration, production and marketing company, which owns producing oil, natural gas and natural gas liquids (NGL) properties in the Rocky Mountains, North Dakota and Pennsylvania.
35. APCO OIL AND GAS INTERNATIONAL • Address: One Williams Center, No. 35, Tulsa, OK 74172 • Phone: (918) 573-2164 • Website: www.apcooilandgas.com • Ticker: APAGF • Exchange: NAS • At the top: Bryan K. Guderian • Market cap: $425 million • Industry: Crude petroleum and natural gas • Summary: Apco Oil and Gas International Inc. exploits oil and gas resources internationally.
36. BOK FINANCIAL CORP. • Address: Bank of Oklahoma Tower, Tulsa, OK 74192 • Phone: (918) 588-6000 • Website: investor.bokf.com • Ticker: BOKF • Exchange: NAS • At the top: Steven G. Bradshaw • Market cap: $4.6 billion • Industry: National commercial banks • Summary: BOK Financial Corp offers a range of financial services to consumers and regional businesses.
37. WILLIAMS PARTNERS LP • Address: One Williams Center, Tulsa, OK 74172 • Phone: (918) 573-2000 • Website: www.williamslp.com • Ticker: WPZ • Exchange: NYSE • At the top: Alan S. Armstrong • Market cap: $23.8 billion • Industry: Natural gas transmission • Summary: Williams Partners LP is engaged in the gathering and processing of natural gas, and the storage of NGLs, and the operation of three major interstate natural gas pipelines.
Magellan Midstream Partners’ Bridgetex pipeline construction is shown in Texas. PHOTO PROVIDED
He said demand for gasoline has dipped as cars become more fuel efficient, but that has been offset by an increase in diesel demand. “As the economy continues to remain healthy, the demand for logistics, for trucking and railroads, continues to go up,” Mears said. “The diesel demand associated with that is slowly increasing. “You average those two together, and overall refined product demand is relatively flat.”
Despite that, Mears said Magellan has been able to increase the flow of refined products through its pipeline system because of the location of its assets. He said demand for diesel at the firm’s terminal in Odessa, Texas, has been skyrocketing because of the drilling activity in the area. Magellan also has benefited from the desire of Mid-Continent refiners to reach new markets. Mears said those refiners typically have to compete with their peers along
the Gulf Coast on fuel costs, but the rise of oil production in the MidContinent has given them a cheaper source of crude. He said Magellan’s customers shipped gasoline and other refined products south into North Texas for the first time about two years ago. Magellan is planning to build a pipeline to Little Rock, Ark., which currently can only get refined products from Houston. “There’s opportunities here and there for us to invest,” Mears said. The bulk of Magellan’s spending these days is devoted to oil projects. Mears said Magellan moved into crude oil in 2010, when it established a joint venture to build storage capacity at Cushing. Then it bought additional assets from BP. “We became overnight the third-largest storage operator in Cushing,” he said. Magellan’s next big move was the purchase of
the Longhorn pipeline, which used to be a refined products line under former parent company Williams Cos. Inc. Mears said Magellan converted the line to transport crude oil from West Texas’ booming Permian Basin to refineries in the Houston area. “That was somewhat of a transformational project for us,” he said. Magellan spent $400 million on the project, which repaid that investment in only three years. Mears said that is almost unheard of in the midstream industry. “It really ratcheted us up in the crude oil space,” he said. Mears said Magellan is actively working on other projects, activating an idle pipeline to serve producers in the South Central Oklahoma Oil Province and seeking customers for a line out of Colorado. “We can take crude oil from any source and get it to any refinery,” he said.
Rose Rock has growing out of parent’s shadow NO. 8 | PARTNERSHIP HAS EYE ON MORE ASSETS IN COLORADO BY JAY F. MARKS Business Writer jmarks@opubco.com
TULSA — Rose Rock Midstream Partners LP is thriving as it continues to inherit additional assets from parent company SemGroup Corp. The latest dropdown from SemGroup was an additional stake in the White Cliffs Pipeline, a 527-mile line that moves crude oil out of Colorado’s DenverJulesburg Basin to the storage hub at Cushing. Rose Rock now owns 51 percent of the pipeline, including all of SemGroup’s stake, CEO Carlin Conner said. He said SemGroup could offer additional assets to Rose Rock in the future as its businesses mature. The next one likely will be the Glass Mountain Pipeline, which is being built to move crude oil into Cushing from western Oklahoma. SemGroup also is working on the Wattenberg Oil Trunkline, which connects to the White Cliffs pipeline in Colorado. Rose Rock President Pete
A Rose Rock Midstream employee stands on a crude oil storage tank in Platteville, Colo. PHOTO PROVIDED
Schwiering said SemGroup was the first company to build midstream assets in Colorado, beginning in 2009 when there was little production there. Schwiering said the region has huge potential, with projections for its future production rising as drilling gets more sophisticated. SemGroup and Rose Rock could even add a third pipeline out of Colorado to meet the demand for transport capacity, he said. Conner, who has been SemGroup CEO for about six months, said Rose Rock has done well in establish-
ing relationships and executing on its growth plan during that time. “Rose Rock has a very good footprint in the MidContinent but we want to touch some other basins,” he said. Conner said Rose Rock is poised to grow, even without further dropdowns from SemGroup. Schwiering said Rose Rock is looking to spread its coverage into other areas. “We’re ready to expand into other basins,” he said. Schwiering said Rose Rock has acquired trucking assets that can help it expand its marketing efforts.
“That allows us to get into new areas and see new areas,” he said. Those trucks allow Rose Rock to serve customers in other parts of Colorado, Ohio or Texas. They are a more mobile option to building new pipelines. “They become an extension of your pipeline system too,” Schwiering said. “They go out and bring barrels to our pipe.” Conner said it is tough for midstream companies to break into new plays. Rose Rock’s trucks can help, but its relationship with would-be customers often makes the difference. “It really is about the people in the field,” he said. Conner said Rose Rock matches up well with other members of its peer group. It has increased distributions by 48 percent since its initial public offering in December 2011. Schwiering said that is just the beginning for Rose Rock. “I think we’re just scratching the surface in the next five years,” he said.
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OKLAHOMA INC.
SUNDAY, NOVEMBER 2, 2014
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Gulfport Energy maneuvers for success in Utica Shale NO. 9 | PRODUCER AMASSES ACREAGE, EXCEEDS EXPECTATIONS BY JAY F. MARKS Business Writer jmarks@opubco.com
Gulfport Energy Corp. is getting the hang of things in the Utica Shale. Gulfport rose to No. 9 in this year’s Oklahoma Inc. rankings, fueled by a 52.6 percent increase in revenues. That was fourth best among state companies over the past year. The Oklahoma Citybased oil and natural gas producer also logged a 58.5 percent rise in earnings per share.
Positioned for success Gulfport has amassed a leading position in the
Utica Shale in Ohio and West Virginia over the past couple of years. It had about 184,500 acres under lease at the time of its second-quarter earnings call in August. “Our team firmly believes adding on top of our top-tier position is an accretive investment for the company as we add new acreage to block up units and increase our position in one of North America’s premier shale plays,” CEO Michael Moore said during a recent conference call. Gulfport exceeded its own expectations in the most recent quarter, as production bested its estimated guidance at more
than 42,000 barrels of oil equivalent a day, the company said in an Oct. 15 news release. The company’s production averaged more than 53,000 barrels of oil equivalent a day for the first two weeks of October.
Developing the asset Moore said Gulfport continues to improve its operations in the Utica. “While we have learned a substantial amount about the play, we continue to collect and analyze data to ensure that we develop the asset in a way that yields optimal near-term and longterm results,” he said in the Aug. 7 call. “Being one of
ONEOK Partners’ Canadian Valley natural gas processing facility in western Oklahoma. PHOTO PROVIDED
Reinvented ONEOK prospers as stand-alone holding company NO. 10 | ORGANIZATION HAS A NEW FOCUS TULSA — Investors seem to like the new ONEOK Inc., which reinvented itself this year as pure-play general partner holding company. ONEOK shifted its natural gas utility business into a separate company in late July, leaving the company free to focus on its stewardship of ONEOK Partners LP. Its only asset is its ownership of the master limited partnership. Brad Borror, ONEOK’s manager of communications, said the move — which resulted in the creation of utility company ONE Gas Inc. — cleared up some “investor confusion.” ONEOK had been known for natural gas distribution, even though it turned its attention to gathering and processing natural gas liquids. The company’s earnings have shifted from utilities to the midstream sector, he said, so officials wanted to make it clear where ONEOK wanted to go. ONEOK’s stock rose 25 percent after it announced its new focus, creating $3 billion in shareholder value. ONEOK logged total returns of nearly 94 percent for the past year, allowing it to jump to No. 10 on the Oklahoma Inc. list. Borror said ONEOK is poised to capitalize on the ongoing shale boom. Oil and natural gas producers have developed drilling technology to unlock resources trapped in dense rock, resulting in tremendous production growth. Shale has proved to be
Jay F. Marks jmarks@ opubco.com
BUSINESS WRITER
rich in liquids, which require further processing to separate natural gas liquids from the gas stream. Raw natural gas liquids need more processing to break them down into components like propane, butane and ethane, Borror said. Petrochemical companies use those components as feedstock for manufacturing a variety of products. Borror said ONEOK Partners has been providing the oil and gas industry with needed gathering and processing infrastructure. ONEOK Partners is active in North Dakota’s Bakken Shale, where it has announced eight new natural gas processing plants to bolster its capacity. He said the partnership could process 100 million cubic feet of natural gas a day in 2010. It will be able to handle 1.2 billion cubic feet a day when its growth projects are complete. The price tag for those projects could reach as much as $8.2 billion by 2016. “We are in a major growth phase,” Borror said. ONEOK Partners is the largest operator of gather-
ing lines in North Dakota, with more than 6,500 miles of pipeline, he said. Borror said the firm is building out gathering lines in western Oklahoma to supplement its existing operations there. ONEOK Partners also operates natural gas pipelines that provide feebased income as they provide power plants with fuel. “We’re really got a lot of basin diversification in our projects,” Borror said, noting ONEOK Partners also has an operation in Wyoming’s Powder River Basin, where it bought one processing plant and is building another. T.D. Eureste, ONEOK’s directory of treasury and finance, said the firm has a competitive advantage over its peers since all of its assets are integrated. He said ONEOK Partners has infrastructure that can move natural gas liquids to market hubs where petrochemical plants are being built. Eureste said additional growth projects are in the works, to be announced over the next 12 to 18 months. ONEOK Partners strives for organic growth, he said, which will be passed along to shareholders via dividends. Borror said ONEOK Partners is blessed to be operating in strategically important areas, with plenty of room to grow.
the first operators in a new shale play in a short amount of time, we have conducted a considerable amount of science to help us develop the play to yield optimal results. “We made the necessary commitments to anchor and secured significant midstream infrastructure from the wellhead through the plant.” Gulfport also has assets in Canada’s oil sands, through its stake in Grizzly Oil Sand ULC, and southern Louisiana. Moore said the company plans to leverage its increased efficiency into attractive growth through next year.
Claes Petersson, vice president of product innovation for Sonic Corp., shows the ice cream station at Sonic’s test kitchen at its Bricktown headquarters. PHOTO BY PAUL HELLSTERN, THE OKLAHOMAN
Sonic ranking surges with investor returns BY BRIANNA BAILEY Business Writer bbailey@opubco.com
Sonic Corp. was ranked the No. 1 Oklahoma-based company in the service and technology sector for the year. Sonic saw a 51.8 percent increase in total returns to investors for the year. The drive-in franchiser saw its revenues grow 2.4 percent for the year. Earnings were up 8.8 percent in 2014 from the previous year. Sonic Corp. projects it will open 50 to 60 new franchise drive-ins over the next year, the company said in its 2015 fiscal year outlook. New technology investments for the consumer, including digital menu boards and a new point-of-sale system, were implemented in company drive-ins during the past year and will begin rolling out to franchised drive-ins this fall, the company said. Strong sales growth at drive-ins, focus on creative marketing campaigns to push its products, and expansion into new markets has helped Sonic have a strong year, Sonic CEO Cliff Hudson said in a re-
cent conference call. Sonic also plans to repurchase $105 million worth of its own stock next fiscal year. “That combined with the creative campaign we have in place really has put us in a very good position to continue to promote our innovative and distinctive food products that really provide a nice foundation for the existing health of the business and the business ongoing,” Hudson said. Tulsa-based book publisher Educational Development Corp. came in second place in the sector, with total returns to investors up 39 percent from the previous year. Educational Development Corp. saw its revenues grow 9.6 percent for the year, while earnings-pershare growth was flat over the previous year. Broken Arrow-based cable television services and equipment company ADDvantage Technologies Group Inc. came in third place with a 20 percent increase in total returns and an 8.8 percent increase in revenues for the year. ADDvantange saw its earnings per share decline 111.8 percent over the year.
10S
SUNDAY, NOVEMBER 2, 2014
Return on average equity Rank
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37
‘14 Return on Average Equity (in percent)
Company Name
Sonic Corp. Alliance Holdings GP LP Alliance Resource Partners LP Magellan Midstream Partners LP AAON Inc. ONEOK Inc. Panhandle Oil & Gas Inc. ONEOK Partners LP LSB Industries Inc. Rose Rock Midstream LP Continental Resources Inc. Helmerich & Payne Inc. OGE Energy Corp. Matrix Service Co. New Source Energy Partners LP Compressco Partners LP Orchids Paper Products Co. Williams Partners LP Gulfport Energy Corp. BancFirst Corp. BOK Financial Corp. Unit Corp. Southwest Bancorp Inc. Devon Energy Corp. Access Midstream Partners LP Williams Cos Inc. Laredo Petroleum Inc. Educational Development Corp. Chesapeake Energy Corp. NGL Energy Partners LP Apco Oil and Gas International Inc. SemGroup Corp. ADDvantage Technologies Group Inc. SandRidge Energy Inc. WPX Energy Inc. Blueknight Energy Partners LP PostRock Energy Corp.
Best profit growth Rank
Company Name
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37
Devon Energy Corp. New Source Energy Partners LP LSB Industries Inc. Chesapeake Energy Corp. Panhandle Oil & Gas Inc. Unit Corp. Matrix Service Co. Gulfport Energy Corp. SandRidge Energy Inc. Access Midstream Partners LP Southwest BanCorp Inc. Magellan Midstream Partners LP Laredo Petroleum Inc. PostRock Energy Corp. OGE Energy Corp. Rose Rock Midstream LP Alliance Resource Partners LP Alliance Holdings GP LP AAON Inc. Compressco Partners LP ONEOK Partners LP BancFirst Corp. ONEOK Inc. Sonic Corp. Educational Development Corp. Orchids Paper Products Co. Helmerich & Payne Inc. Blueknight Energy Partners LP Williams Partners LP BOK Financial Corp. Continental Resources Inc. Williams Cos Inc. NGL Energy Partners LP Apco Oil and Gas International Inc. SemGroup Corp. ADDvantage Technologies Group Inc. WPX Energy Inc.
70.0 51.4 50.4 42.5 23.9 22.5 21.4 18.0 17.7 16.3 15.9 15.3 14.3 14.3 12.3 11.7 11.4 10.8 10.4 10.3 9.7 9.0 7.9 7.8 6.4 5.9 5.8 4.1 4.0 1.9 1.6 -0.3 -0.7 -14.8 -26.2 NM NM
‘14 Adjusted Net Income (in millions)
41.28 257.68 435.43 704.44 39.47 308.19 21.42 924.48 70.05 39.15 630.09 695.79 422.90 35.62 19.92 20.04 10.26 1,074.00 195.21 57.69 298.05 196.83 20.47 1,621.00 260.44 370.00 61.66 0.53 519.00 25.31 5.22 -2.73 -0.28 -262.09 -1,204.00 1.79 -30.25
Average Common Equity (in millions)
58.98 501.40 863.26 1,659.16 165.10 1,370.88 100.00 5,127.74 396.18 240.17 3,973.79 4,557.05 2,955.55 249.73 161.33 171.48 90.22 9,983.50 1,878.89 557.73 3,085.07 2,187.11 260.38 20,770.00 4,039.87 6,278.50 1,070.00 12.89 13,056.50 1,307.59 322.78 1,084.36 38.78 1,772.38 4,599.50 -153.67 -30.67
Largest revenues ‘14 Common Equity (in millions)
57.53 540.28 952.16 1,763.00 177.69 656.42 110.02 5,822.40 432.60 253.29 4,304.25 4,819.08 3,099.80 269.45 238.73 166.50 99.65 10,614.00 2,188.49 580.50 3,212.51 2,294.68 271.35 21,474.00 4,031.00 7,863.00 1,264.30 12.54 13,140.00 1,775.96 325.37 1,164.90 38.76 1,656.57 4,020.00 -158.17 -40.15
Percent Change in Net Income ‘13 to ‘14
194.4 182.6 174.5 165.3 154.3 120.5 93.3 86.3 78.4 65.2 49.9 49.6 48.0 45.7 24.8 21.6 20.8 20.8 20.2 18.1 15.3 10.7 6.2 5.9 2.1 -4.3 -4.7 -8.8 -10.2 -10.8 -13.5 -39.0 -53.9 -86.9 -104.2 -116.3 -349.3
Energy major 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
Panhandle Oil & Gas Inc. Matrix Service Co. Devon Energy Corp. New Source Energy Partners LP Chesapeake Energy Corp. Unit Corp. Magellan Midstream Partners LP Gulfport Energy Corp. Rose Rock Midstream LP ONEOK Inc. Access Midstream Partners LP Helmerich & Payne Inc. Continental Resources Inc. NGL Energy Partners LP Laredo Petroleum Inc. PostRock Energy Corp. SemGroup Corp. Compressco Partners LP SandRidge Energy Inc. Alliance Resource Partners LP ONEOK Partners LP Williams Cos Inc. OGE Energy Corp. Alliance Holdings GP LP Blueknight Energy Partners LP WPX Energy Inc. Apco Oil and Gas International Inc. Williams Partners LP
‘13 Net Income (in millions)
‘14 Net Income (in millions)
1,635.00 19.92 70.35 701.00 21.42 196.83 35.62 195.21 -206.56 335.80 20.47 704.44 61.66 -20.33 422.9 39.15 440.03 257.68 39.47 20.04 924.48 57.69 308.19 41.28 0.53 10.27 699.82 23.35 1,074.00 301.19 630.09 370.00 25.31 5.22 -2.73 -0.28 -1,204.00
-1,732.00 7.05 25.62 -1,074.00 8.42 89.25 18.42 104.77 -958.09 203.23 13.66 470.93 41.66 -37.42 338.8 32.19 364.15 213.36 32.84 16.97 801.64 52.13 290.20 39.00 0.52 10.73 733.95 25.61 1,196.00 337.84 728.50 607.00 54.95 39.75 65.33 1.74 -268.00
7.8 12.3 17.7 4.0 21.4 9.0 14.3 10.4 -14.8 6.4 7.9 42.5 5.8 NM NA 16.3 50.4 51.4 23.9 11.7 18.0 10.3 22.5 70.0 4.1 11.4 15.3 NM 10.8 9.7 15.9 5.9 1.9 1.6 -0.3 -0.7 -26.2
60.43 462.53 774.37 1,555.31 152.52 2,085.34 89.97 4,433.07 359.75 227.05 3,643.34 4,295.02 2,811.30 230.00 83.94 176.46 80.79 9,353.00 1,569.28 534.96 2,957.63 2,079.54 249.42 20,066.00 4,048.74 4,694.00 875.70 13.24 12,973.00 839.22 320.18 1,003.82 38.81 1,888.20 5,179.00 -149.18 -21.19
Industry Sector
Service Energy Energy Energy Manufacturing Energy Energy Energy Manufacturing Energy Energy Energy Energy Energy Energy Energy Manufacturing Energy Energy Financial/Banks Financial/Banks Energy Financial/Banks Energy Energy Energy Energy Service Energy Energy Energy Energy Technology Energy Energy Energy Energy
Rank
Company Name
1 2 3 4 5 6 7 8 9 11 12 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37
Chesapeake Energy Corp. ONEOK Inc. Devon Energy Corp. ONEOK Partners LP NGL Energy Partners LP Williams Cos Inc. Williams Partners LP Helmerich & Payne Inc. Continental Resources Inc. WPX Energy Inc. OGE Energy Corp. Alliance Resource Partners LP Alliance Holdings GP LP Magellan Midstream Partners LP SemGroup Corp. SandRidge Energy Inc. Unit Corp. BOK Financial Corp. Access Midstream Partners LP Matrix Service Co. Rose Rock Midstream LP LSB Industries Inc. Laredo Petroleum Inc. Sonic Corp. Gulfport Energy Corp. AAON Inc. BancFirst Corp. Blueknight Energy Partners LP Apco Oil and Gas International Inc. Compressco Partners LP Orchids Paper Products Co. Southwest Bancorp Inc. New Source Energy Partners LP PostRock Energy Corp. Panhandle Oil & Gas Inc. ADDvantage Technologies Group Inc. Educational Development Corp.
‘14 Total Revenues (in millions)
19,606.00 13,942.21 13,573.00 12,811.68 11,961.93 6,710.00 6,511.00 3,599.20 3,502.75 3,116.00 2,404.30 2,244.53 2,244.14 2,136.32 1,796.18 1,776.48 1,486.31 1,320.32 1,159.03 1,154.29 1,015.22 706.57 680.61 547.38 370.08 331.74 276.47 196.69 141.34 124.32 117.48 90.68 84.91 80.05 74.92 32.11 27.28 SOURCE: S&P CAPITAL IQ
Score
One Year Total Return (Stock and dividends) in percent
4.67 5.00 6.33 7.67 8.67 9.33 9.67 10.67 10.67 12.00 13.00 13.67 13.67 13.67 14.67 16.00 16.00 16.33 16.67 17.00 17.67 17.67 21.00 21.00 22.33 23.00 23.67 24.33
98.3 110.5 55.1 29.7 54.5 61.6 59.7 33.4 56.8 93.5 38.5 90.9 83.6 52.5 50.7 -2.0 48.5 55.6 50.2 40.0 25.0 86.0 17.4 7.2 11.2 26.2 25.2 12.7
Percent Change in Earnings Per Share ‘13 to ‘14
Rank
Percent Change in Revenues ‘13 to ‘14
Rank
2 1 11 20 12 7 8 19 9 3 18 4 6 13 14 28 16 10 15 17 23 5 24 27 26 21 22 25
34.9 37.1 42.8 126.9 34.2 13.3 25.3 52.6 64.8 16.4 47.0 7.4 18.0 118.4 7.0 22.8 49.0 3.6 -38.6 3.8 19.2 -6.8 -33.4 3.8 7.6 5.6 -4.0 -8.3
9 153.5 8 91.5 7 193.5 1 192.0 10 138.5 16 119.5 11 49.0 4 58.5 3 -10.2 15 5.0 6 18.2 18 -5.8 14 -13.6 2 -93.8 19 32.4 12 65.6 5 -104.5 23 17.6 28 74.5 21 24.0 13 7.7 25 -41.9 27 24.6 22 20.7 17 -66.7 20 -344.4 24 -86.8 26 -31.1
Financial major Rank Company Name
Score
One Year Total Return (Stock and dividends) in percent
1 2 3
1.33 1.67 3.00
35.9 29.8 6.6
Rank
Percent Change in Revenues ‘13 to ‘14
1 2 3
3.4 -6.2 -7.6
Price to earnings ratio Rank
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37
Rank.
3 6 1 2 4 5 10 9 20 18 15 19 21 26 11 8 27 16 7 13 17 23 12 14 24 28 25 22
SOURCE: S&P CAPITAL IQ
BancFirst Corp. Southwest Bancorp Inc. BOK Financial Corp.
‘13 Common Equity (in millions)
SOURCE: S&P CAPITAL IQ
‘14 Return on Average Equity (in percent)
SOURCE: S&PCAPITAL IQ
Rank Company Name
THE OKLAHOMAN | NEWSOK.COM
OKLAHOMA INC.
Rank
Percent Change in Earnings Per Share ‘13 to ‘14
Rank
1 2 3
9.9 72.1 -11.4
2 1 3
SOURCE: S&P CAPITAL IQ
Company Name
Price to Earnings Stock Price ‘14 Ratio June 30, June 30, Earnings 2014 2014 Per Share
NGL Energy Partners LP 722.3 Blueknight Energy Partners LP 184.6 Williams Cos Inc. 107.8 Apco Oil and Gas International Inc. 80.2 Laredo Petroleum Inc. 68.8 Access Midstream Partners LP 61.1 Williams Partners LP 48.9 AAON Inc. 47.2 Continental Resources Inc. 46.2 ONEOK Inc. 46.0 Chesapeake Energy Corp. 38.9 Rose Rock Midstream LP 36.4 Educational Development Corp. 30.4 Sonic Corp. 29.8 Magellan Midstream Partners LP 27.1 Gulfport Energy Corp. 27.0 Orchids Paper Products Co. 24.8 Matrix Service Co. 24.1 ONEOK Partners LP 21.9 Panhandle Oil & Gas Inc. 21.9 Compressco Partners LP 21.7 Devon Energy Corp. 19.8 OGE Energy Corp. 18.3 Helmerich & Payne Inc. 17.9 Unit Corp. 17.0 BancFirst Corp. 16.5 Southwest Bancorp Inc. 16.2 BOK Financial Corp. 15.2 Alliance Holdings GP LP 15.0 LSB Industries Inc. 13.4 Alliance Resource Partners LP 11.3 New Source Energy Partners LP 10.9 PostRock Energy Corp. -1.4 WPX Energy Inc. -4.0 SandRidge Energy Inc. -13.2 ADDvantage Technologies Group Inc. -137.8 SemGroup Corp. -1,126.4
Best earnings per share growth Rank
Company Name
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37
Devon Energy Corp. New Source Energy Partners LP LSB Industries Inc. Panhandle Oil & Gas Inc. Chesapeake Energy Corp. Unit Corp. Matrix Service Co. AAON Inc. SandRidge Energy Inc. Southwest Bancorp Inc. PostRock Energy Corp. Gulfport Energy Corp. Magellan Midstream Partners LP Laredo Petroleum Inc. OGE Energy Corp. Alliance Resource Partners LP Alliance Holdings GP LP Access Midstream Partners LP Compressco Partners LP BancFirst Corp. Sonic Corp. ONEOK Partners LP ONEOK Inc. Educational Development Corp. Helmerich & Payne Inc. Orchids Paper Products Co. Rose Rock Midstream LP BOK Financial Corp. Continental Resources Inc. Williams Partners LP Williams Cos Inc. Blueknight Energy Partners LP Apco Oil and Gas International Inc. NGL Energy Partners LP SemGroup Corp. ADDvantage Technologies Group Inc. WPX Energy Inc.
43.34 9.23 58.21 14.43 30.98 63.55 54.29 22.35 158.04 68.08 31.08 54.64 3.95 22.08 84.04 62.80 32.04 32.79 58.60 56.03 27.50 79.40 39.08 116.11 68.83 61.90 17.06 66.60 64.79 41.67 46.65 23.93 1.50 23.91 7.15 2.76 78.85
0.06 0.05 0.54 0.18 0.45 1.04 1.11 0.47 3.42 1.48 0.80 1.50 0.13 0.74 3.10 2.33 1.29 1.36 2.67 2.56 1.27 4.02 2.13 6.48 4.06 3.76 1.05 4.37 4.31 3.12 4.14 2.19 -1.06 -6.00 -0.54 -0.02 -0.07
Percent Change in Earnings Per Share ‘13 to ‘14
-93.8 -66.7 -41.9 -86.8 32.4 18.2 -31.1 80.5 -13.6 5.0 138.5 -10.2 0.0 8.8 49.0 58.5 -7.2 91.5 7.7 153.5 17.6 193.5 24.6 -5.8 119.5 9.9 72.1 -11.4 20.7 176.1 24.0 192.0 65.6 -344.4 74.5 -111.8 -104.5
Industry Sector
Energy Energy Energy Energy Energy Energy Energy Manufacturing Energy Energy Energy Energy Service Service Energy Energy Manufacturing Energy Energy Energy Energy Energy Energy Energy Energy Financial/Banks Financial/Banks Financial/Banks Energy Manufacturing Energy Energy Energy Energy Energy Technology Energy
SOURCE: S&P CAPITAL IQ
Percent Change in Earnings Per Share ‘13 to ‘14
193.5 192.0 176.1 153.5 138.5 119.5 91.5 80.5 74.5 72.1 65.6 58.5 49.0 32.4 24.6 24.0 20.7 18.2 17.6 9.9 8.8 7.7 5.0 0.0 -5.8 -7.2 -10.2 -11.4 -13.6 -31.1 -41.9 -66.7 -86.8 -93.8 -104.5 -111.8 -344.4
‘14 Earnings Per Share
‘13 Earnings Per Share
4.02 2.19 3.12 2.56 0.80 4.06 1.36 0.47 -0.54 1.05 -1.06 2.33 3.10 0.45 2.13 4.14 4.31 1.04 1.27 3.76 0.74 2.67 1.48 0.13 6.48 1.29 1.50 4.37 3.42 1.11 0.54 0.05 0.18 0.06 -0.07 -0.02 -6.00
-4.30 0.75 1.13 1.01 -2.08 1.85 0.71 0.26 -2.12 0.61 -3.08 1.47 2.08 0.34 1.71 3.34 3.57 0.88 1.08 3.42 0.68 2.48 1.41 0.13 6.88 1.39 1.67 4.93 3.96 1.61 0.93 0.15 1.36 0.96 1.55 0.17 -1.35
SOURCE: S&P CAPITAL IQ
THE OKLAHOMAN | NEWSOK.COM
SUNDAY, NOVEMBER 2, 2014
OKLAHOMA INC.
11S
Financial firms slide compared to past highs BY PAULA BURKES Business Writer pburkes@opubco.com
Though the state’s three publicly-traded financial companies each fell 10 or more notches to the bottom half of this year’s energy-dominated Oklahoma Inc. chart, the financial sector garnered some notable standings. Among the state’s 37 publiclytraded companies, Southwest Bancorp Inc. — the parent company of Bank SNB — grabbed the No. 10 spot in the earnings per share category. In the 12 months ending June 30, Southwest’s earnings soared 72.1 percent. Meanwhile, Oklahoma Citybased BancFirst Corp. — the
parent to BancFirst, the state’s largest state-chartered bank — ranked No. 20 in earnings and jumped 35.9 percent in stock and dividends to take No. 23 in the total return category. BOK Financial — parent of Tulsa-based and nationally chartered Bank of Oklahoma — posted a 6.6 percent gain in oneyear total return and negative 7.6 percent and 11.4 percent changes in revenues and earnings per share, resulting in a next-tothe-last No. 36 rating. But Joe Crivelli, director of investor relations for BOK, says there’s a reason for that. “We were coming off our best year ever, so you have to keep it in perspective,” Crivelli said.
Best 1-year Total Return Rank
Company Name
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37
Matrix Service Co. Panhandle Oil & Gas Inc. ONEOK Inc. Helmerich & Payne Inc. Williams Cos Inc. Continental Resources Inc Unit Corp. Magellan Midstream Partners LP Rose Rock Midstream LP Compressco Partners LP Devon Energy Corp. Chesapeake Energy Corp. AAON Inc. NGL Energy Partners LP Sonic Corp. Laredo Petroleum Inc. SandRidge Energy Inc. SemGroup Corp. Alliance Resource Partners LP Educational Development Corp. Access Midstream Partners LP LSB Industries Inc. BancFirst Corp. Gulfport Energy Corp. Southwest Bancorp Inc. New Source Energy Partners LP Orchids Paper Products Co. WPX Energy Inc. Apco Oil and Gas International Inc. ONEOK Partners LP ADDvantage Technologies Group Inc. OGE Energy Corp. Williams Partners LP Blueknight Energy Partners LP Alliance Holdings GP LP BOK Financial Corp. PostRock Energy Corp.
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
Stock Price June 30, 2014
110.5 98.3 93.5 90.9 86.0 83.6 61.6 59.7 56.8 55.6 55.1 54.5 53.1 52.5 51.8 50.7 50.2 48.5 40.0 39.0 38.5 37.0 35.9 33.4 29.8 29.7 27.9 26.2 25.2 25.0 20.8 17.4 12.7 11.2 7.2 6.6 -2.0
32.79 56.03 68.08 116.11 58.21 158.04 68.83 84.04 54.64 27.50 79.40 31.08 22.35 43.34 22.08 30.98 7.15 78.85 46.65 3.95 63.55 41.67 61.90 62.80 17.06 23.93 32.04 23.91 14.43 58.60 2.76 39.08 54.29 9.23 64.79 66.60 1.50
Stock Price June 30, 2013
15.58 28.50 41.31 62.45 32.47 86.06 42.58 54.50 36.62 19.04 51.88 20.38 14.70 30.19 14.55 20.56 4.76 53.86 35.32 3.13 47.70 30.41 46.55 47.09 13.20 20.40 26.25 18.94 11.53 49.52 2.28 34.10 51.60 8.77 63.75 64.05 1.53
Dividend Yield June ‘14 (Percent)
Company Name
New Source Energy Partners LP Educational Development Corp. Williams Partners LP Compressco Partners LP Blueknight Energy Partners LP NGL Energy Partners LP Alliance Resource Partners LP Alliance Holdings GP LP ONEOK Partners LP Orchids Paper Products Co. Rose Rock Midstream LP Access Midstream Partners LP ONEOK Inc. Magellan Midstream Partners LP Williams Cos Inc. BOK Financial Corp. OGE Energy Corp. Helmerich & Payne Inc. BancFirst Corp. SemGroup Corp. Devon Energy Corp. Chesapeake Energy Corp. Southwest Bancorp Inc. AAON Inc. Panhandle Oil & Gas Inc.
Stock Price June 2014
9.8 8.1 6.8 6.6 5.7 5.4 5.2 5.2 5.2 4.4 3.9 3.6 3.4 3.0 2.9 2.4 2.3 2.2 2.0 1.2 1.2 1.1 0.9 0.8 0.6
Dividend Rate
23.93 3.95 54.29 27.50 9.23 43.34 46.65 64.79 58.60 32.04 54.64 63.55 68.08 84.04 58.21 66.60 39.08 116.11 61.90 78.85 79.40 31.08 17.06 22.35 56.03
2.34 0.32 3.67 1.81 0.53 2.36 2.45 3.39 3.04 1.40 2.14 2.30 2.30 2.56 1.70 1.60 0.90 2.50 1.24 0.96 0.96 0.35 0.16 0.17 0.32
SOURCE: S&P CAPITAL IQ
Manufacturing OTC Rank Company Name
Score
One Year Total Return (Stock and dividends) in percent
1 2
1.00 2.00
11.1 -10.8
Greystone Logistics Inc. Webco Industries Inc.
Rank
Percent Change in Revenues ‘13 to ‘14
Rank
1 2
-5.0 -10.2
1 2
Percent Change in Earnings Per Share ‘13 to ‘14
25.0 -82.1
Rank
1 2
SOURCE: S&P CAPITAL IQ
Financial OTC Rank Company Name
Score
One Year Total Return (Stock and dividends) in percent
1
1.00
-60.0
PSM Holdings Inc.
the Oklahoma Inc. chart and some years on the bottom,” he said. Meanwhile, smaller community banks have been overly burdened by added federal regulations, said Roger Beverage, chief executive of Oklahoma Bankers Association. In a spring survey of the Oklahoma Bankers Association’s 230 member banks, 24 percent said they’ve chosen to get out of residential mortgage lending because of excessive regulations, including extra costs for consumers and banks, Beverage said. “It costs more to provide the service than to generate income,” he said. “Washington has slowly taken away the very thing that makes community banks unique,” Beverage said.
vices and great products to our customers.” Among the latter is a strong commercial collection and billing delivery product for healthcare providers, Funke said. BancFirst chief executive David Rainbolt said, “Well-run banks will typically provide consistent earnings growth with a modest risk profile. While dependable stock appreciation is the long-term result of such performance, you can’t control the markets in the short run.” “As far as BancFirst is concerned, I’m very satisfied with our one-year total return in stock appreciation and dividends of 35.9 percent. Some years, that performance will be in the top 10 on
Best revenue growth Rank
Company Name
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37
New Source Energy Partners LP NGL Energy Partners LP Rose Rock Midstream LP Gulfport Energy Corp. SemGroup Corp. Access Midstream Partners LP Devon Energy Corp. Matrix Service Co. Panhandle Oil & Gas Inc. Chesapeake Energy Corp. Magellan Midstream Partners LP PostRock Energy Corp. ONEOK Partners LP Continental Resources Inc. ONEOK Inc. Unit Corp. Orchids Paper Products Co. Educational Development Corp. ADDvantage Technologies Group Inc. Blueknight Energy Partners LP Helmerich & Payne Inc. Laredo Petroleum Inc. AAON Inc. WPX Energy Inc. Alliance Resource Partners LP Alliance Holdings GP LP Compressco Partners LP BancFirst Corp. Sonic Corp. LSB Industries Inc. Apco Oil and Gas International Inc. Southwest BanCorp Inc. Williams Cos Inc. BOK Financial Corp Williams Partners LP OGE Energy Corp. SandRidge Energy Inc.
Percent Change in Revenues ‘13 to ‘14
126.9 118.4 64.8 52.6 49.0 47.0 42.8 37.1 34.9 34.2 25.3 22.8 19.2 18.0 16.4 13.3 11.2 9.6 8.8 7.6 7.4 7.0 6.0 5.6 3.8 3.8 3.6 3.4 2.4 -0.8 -4.0 -6.2 -6.8 -7.6 -8.3 -33.4 -38.6
Rank
Percent Change in Revenues ‘13 to ‘14
1
-26.8
Rank
1
Percent Change in Earnings Per Share ‘13 to ‘14
-400.0
Rank
1
SOURCE: S&P CAPITAL IQ
‘14 Total Revenues (in millions)
‘13 Total Revenues (in millions)
84.91 11,961.93 1,015.22 370.08 1,796.18 1,159.03 13,573.00 1,154.29 74.92 19,606.00 2,136.32 80.05 12,811.68 3,502.75 13,942.21 1,486.31 117.48 27.28 32.11 196.69 3,599.20 680.61 331.74 3,116.00 2,244.53 2,244.14 124.32 276.47 547.38 706.57 141.34 90.68 6,710.00 1,320.32 6,511.00 2,404.30 1,776.48
37.41 5,477.28 615.93 242.57 1,205.62 788.64 9,504.00 841.87 55.53 14,607.00 1,705.39 65.19 10,748.88 2,968.40 11,975.63 1,312.32 105.65 24.88 29.51 182.75 3,352.52 636.16 312.89 2,950.00 2,162.47 2,162.11 119.99 267.51 534.72 712.41 147.28 96.67 7,198.00 1,428.91 7,104.00 3,611.10 2,895.57 SOURCE: S&PCAPITAL IQ
SOURCE: S&P CAPITAL IQ
Best dividends Rank
One Year Total Return in Percent
He said BOK for many years benefited from the home loan refinancing boom that came to a screeching halt in May 2013, he said, when long-term interest rates spiked. Still, for the 10 years ending June 30, BOK has had a 106 percent return, compared with a peer average of 28 percent, Crivelli said. Moreover, BOK’s loan business is growing again, he said. Similarly, the chief executives of Southwest Bancorp. and BancFirst say they’re focused on growth. “Our focus is on consistent, conservative and sustainable earnings growth for our shareholder base,” said Mark Funke of Southwest Bancorp. “The way we do that is to provide great ser-
Best 2-year Total Return Rank
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35
Company Name
Gulfport Energy Corp. Matrix Service Co. Helmerich & Payne Inc. AAON Inc. Compressco Partners LP Magellan Midstream Partners LP Access Midstream Partners LP SemGroup Corp. Rose Rock Midstream LP Continental Resources Inc. NGL Energy Partners LP Sonic Corp. Williams Cos Inc. Orchids Paper Products Co. ONEOK Inc. Panhandle Oil & Gas Inc. Alliance Resource Partners LP Unit Corp. Southwest Bancorp Inc. Alliance Holdings GP LP Chesapeake Energy Corp. OGE Energy Corp. Blueknight Energy Partners LP BancFirst Corp. Laredo Petroleum Inc. WPX Energy Inc. Devon Energy Corp. LSB Industries Inc. ADDvantage Technologies Group Inc. BOK Financial Corp. ONEOK Partners LP Educational Development Corp. Williams Partners LP SandRidge Energy Inc. PostRock Energy Corp.
Two Year Total Return in Percent
Stock Price June 30, 2014
Stock Price June 30, 2012
204.4 189.4 176.3 172.9 161.3 156.9 155.0 151.4 146.9 137.2 122.9 120.4 118.0 99.4 94.5 89.3 88.8 86.6 82.1 74.3 72.3 58.8 55.7 55.0 48.9 47.8 40.9 34.8 28.1 22.5 20.9 19.8 18.7 6.9 -3.8
62.80 32.79 116.11 22.35 27.50 84.04 63.55 78.85 54.64 158.04 43.34 22.08 58.21 32.04 68.08 56.03 46.65 68.83 17.06 64.79 31.08 39.08 9.23 61.90 30.98 23.91 79.40 41.67 2.76 66.60 58.60 3.95 54.29 7.15 1.50
20.63 11.33 43.48 8.38 12.40 35.32 27.21 31.93 24.43 66.62 22.15 10.02 28.82 17.68 42.31 30.14 28.06 36.89 9.41 41.48 18.60 25.90 6.66 41.91 20.80 16.18 57.99 30.91 2.15 58.20 53.75 4.04 52.24 6.69 1.56
12S
SUNDAY, NOVEMBER 2, 2014
OKLAHOMA INC.
THE OKLAHOMAN | NEWSOK.COM
Energy manages win over manufacturing It was close, but the energy boom bounced manufacturing companies out of this year’s Oklahoma Inc. top 10 best performing publicly traded stocks. Tulsa-based AAON Inc., maker of commercial-industrial air-conditioning and heating equipment, kept things interesting by landing at the No. 11spot, but got there by falling from No. 3. Oklahoma City-based LSB Industries — perhaps best known for its ClimateMaster brand of geothermal heating and cooling systems — rose to No. 17 from No. 36 last year. In addition to residential and commercial climate control equipment, LSB also makes agricultural chemicals, industrial acids and explosives used in mining and quarrying. The only other manufacturer among Oklahoma’s public companies was No. 28 Orchids Paper Products, a Pryor maker of bathroom tissue and paper towels, which plunged from No. 9. The rankings were based on a year’s worth of data ending June 30.
Economic engines Oklahoma Inc. assesses the health of public companies headquartered in the state regardless of where they have plants and employees. Both LSB and AAON have out-of-state manufacturing plants. However, manufacturing is an important and growing part of the state economy, according to the Oklahoma Commerce Department. The state agency cited National Association of Manufacturing statistics showing that manufacturers account for nearly 11 percent of the total output for the state — about $17.5 billion in 2012. Manufacturers directly employ 10 percent of the state’s workforce, the Commerce Department said. But they’re not your father’s factories. “Modern manufacturing is extremely technical, highly paid, skilled work that includes automated machinery, robots, and 3-D printing technologies. The industry employs critical and creative thinkers to solve important problems including engineers, accountants, managers, and other professionals,” the Commerce Department said in material about National Manufacturing Day, Oct. 3.
LSB Industries The only Oklahoma City entry, LSB Industries, through numerous subsidiaries, manufactures agricultural chemicals, industrial acids and explosives and other mining and quarrying products, as well as climate control products and systems under several names. The best-known LSB subsidiary name is probably ClimateMaster, which donates a geothermal system for every house built by Central Oklahoma Habitat for Humanity. LSB, which trades under the ticker symbol LXU on the New York Stock Exchange, saw its earnings per share rise 176.1 percent over the year. Revenues slipped 0.8 percent to $706.6 millon, and total return per share increased 37 percent over the same period. LSB dealt with challenges inside and out over the past year, but saw increased profits in the second quarter of 2014. It agreed to reform its board of directors and make other governance changes in an agreement with activist shareholders. LSB also dealt with repercussions from a 2012 explosion at its chemical plant in El Dorado, Ark., including a $113 million in-
Richard Mize
richardmize @opubco .com
REAL ESTATE EDITOR
surance settlement with a French supplier, which went toward repairs and expansion. The company also made improvements at its plant in Pryor, where production came to a standstill early last year for unscheduled maintenance. “We delivered an increase in profitability as a result of improved performance by our chemical business, despite a drop in average sales prices,” Chairman and CEO Jack Golsen said, commenting on second-quarter 2014 highlights. “Our investments and work to achieve greater reliability at our Pryor facility are beginning to pay off as the facility produced ammonia at an acceptable rate of approximately 650 tons per day,” Golsen said. “At our El Dorado facility, we remain on schedule and on budget with our two expansion projects, which we expect to generate material incremental operating profit starting in 2016.” Severe winter weather slowing construction in late 2013 and early 2014 got part of the blame for a decline in climate control orders and “results ... below what we know we are capable of achieving,” he said. “However, secondquarter climate control bookings and backlog rose significantly, reaching their highest levels since the third quarter of 2008, which points to higher segment sales and profitability for the balance of the year compared to the first half of this year,” Golsen said. Over all, he said, the second half of this year will be better than the first. “With our chemical facilities operating at consistent production rates and our climate control backlog at a multiyear high and despite planned turnarounds in the third quarter, we expect improved results for the second half of 2014, compared to the second half of 2013 when excluding the effect of insurance recoveries,” Golsen said.
Orchids Paper Pryor’s Orchids Paper, which trades under the ticker symbol TIS on the New York Stock Exchange, saw its earnings per share drop 7.2 percent over the year. Revenues rose 11.2 percent to $117.5 million, and total return per share increased 27.9 percent over the same period. Analyst John Nobile of New York small-cap brokerage Taglich Brothers Inc. gave Orchids a “speculative buy” rating in a recent research note, and noted that a strategic alliance that Orchids struck with a Mexican manufacturer in June buffs Orchids’ outlook. Orchids acquired the U.S. business, including certain manufacturing assets, of Fabrica Papel de San Francisco, headquartered in Mexicali, Baja California, Mexico. Nobile said Fabrica is one of the largest tissue manufacturers in Mexico with 150,000 metric tons of capacity. “Operating margins on products produced under this agreement are expected to be consistent with margins earned on products produced in Orchid’s facility in Oklahoma,” Nobile said. Orchids President and CEO Jeff Schoen said the Fabrica agreement represents a big transition for Orchids just as it is shaking off “a challenging sales environment” in the first
The state agency cited National Association of Manufacturing statistics showing that manufacturers account for nearly 11 percent of the total output for the state — about $17.5 billion in 2012.
half of this year due to heavy promotion of competitive branded products that compete with its own private-label business. “Our focus on product development, new distribution, operational efficiencies, and the Fabrica partnership has positioned us well for future growth and profitability,” Schoen said in comments on the second quarter. “The Fabrica strategic partnership and the ongoing capital projects will increase our ability to produce higher quality grades of value and premium-tier products to drive future sales, supporting our vision of being recognized as a national supplier of high-quality consumer tissue products in the value, premium and
ultrapremium-tier product categories.” Fabrica’s U.S. sales totaled about $25.8 million in 2013, Nobile said. Orchids paid $36.7 million, including shares of Orchids’ common stock valued at $20 million, and $16.7 million cash funded with a new term loan with U.S. Bank N.A., Nobile said.
AAON Inc. Tulsa-based heating and cooling equipment maker AAON Inc., which trades under the ticker symbol AAON on the Nasdaq Stock Market, saw its earnings per share rise 80.5 percent over the year. Revenues rose 6 percent to $331.7 million, and total return per share increased 53.1 percent over the same period.
Earnings and shares do not reflect a three-for-two stock split effective July 16, which was after the Oklahoma Inc. research period. The number of shares outstanding increased from about 36.6 million to 54.9 million. “Our continued strong capital position, as well as our confidence in the opportunities for future growth, underly the company’s decision to declare a 50 percent stock dividend, which we believe will increase our liquidity in the market,” President and CEO Norman H. Asbjornson said in announcing the stock split. With new construction iffy for the 12 months ending June 30, AAON emphasized the replacement market for its airconditioning and heating equipment, the company said in its second-quarter 10-Q filing with the Securities and Exchange Commission. AAON makes rooftop units, chillers, outdoor mechanical rooms, energy recovery units and other products used in climate control.
“The uncertainty of the economy has negatively impacted the commercial and industrial new construction market (which) is subject to cyclical fluctuations in that it is generally tied to housing starts, but has a lag factor of six to 18 months,” AAON said. “Housing starts, in turn, are affected by such factors as interest rates, the state of the economy, population growth and the relative age of the population. “When new construction is down, we emphasize the replacement market. The new construction market in 2013 through the second quarter of 2014 continued to be unpredictable and uneven. Thus, throughout the year, we emphasized promotion of the benefits of AAON equipment to property owners in the replacement market.” Based on a strong balance sheet at midyear, “our backlog and other relevant factors, we expect 2014 to surpass last year’s record sales and earnings,” Asbjornson said in comments on the first half of the year.