API: Pensions, Individual Investors Hold Majority Stake in O&G Companies

API: Pensions, Individual Investors Hold Majority Stake in O&G Companies

Corporate management continues to own small, single-digit shares of U.S. based oil and gas natural gas companies, with ownership interests mostly held by pension plans, financial institutions and individual investors, according to an American Petroleum Institute (API) study released Wednesday.

"Who Owns America's Oil and Natural Gas Companies", a follow-up to a 2007 API study, found that less than three percent of outstanding shares in 173 U.S.-based oil and gas companies are held by the officers and board members of those companies, while nearly 50 percent of those shares are held by public and private pension plans, including 401Ks and IRAs.

An additional 20 percent of those shares are owned by individual investors who manage their own holdings and are not corporate management. The remaining 27 percent of shares is held by financial institutions and asset management companies.

O&G Corporate Ownership "Broadly Middle-Class"

API noted that this data, along with previous analyses, show that ownership of oil and gas companies are mainly held by middle-class investors.

According to the study, 21 percent of oil and gas shares are held by mutual funds; these funds are held by 52.3 million Americans households, with a median annual income of $80,000 in 2011. Eighteen percent of oil and gas industry shares are held through IRAs; 48.6 million American households own one or more IRAs, and 80 percent of those IRA holders had annual incomes of $70,000 or less in 2010.

Public or private pension plans, which include 401Ks but not IRAs, own 31 percent of oil and gas shares. These funds manage assets on behalf of 60.7 million households in some 145 million accounts, with an average value of less than $55,000.

Calls by members of Congress and the Obama administration to eliminate tax breaks for oil and gas companies would impact investors, which includes retirees and middle-class Americans, not CEOs and board members, said Dr. Robert Shapiro, one of the authors of the study.

Last month, the president proposed repealing some oil and gas industry tax breaks as part of a plan to cut $3 trillion from the federal deficit over the next decade. Shapiro said the timing of the study's release is "fortuitous" in coinciding with major policies in the industry up for discussion.

Broad ownership of public corporations yield substantial benefits such as stronger economic growth and efficiency and social benefits by enabling large numbers of people to benefit from the strong returns generated in an efficient, productive and growing economy, noted Shapiro and study co-author Nam D. Pham.

"These dynamics are especially pertinent today given the growing public perception that most of the benefits produced by the American economy flow to a very small number of people."

Integrated O&G Management Holds Smallest Percentage of Company Shares

Corporate management of integrated oil and gas companies owned .5 percent of the shares of these companies, the smallest percentage of the three main industry segments of the oil and gas sector.

API Study: Ownership of Integrated O&G Company Shares

By contrast, 42 percent of integrated oil and gas companies' shares were held by other personal investors who manage their own holdings; 47 percent owned or held by asset management companies; three percent owned and managed directly by pension plans; and seven percent held or managed by other institutions.

API Study: Ownership of Non-Integrated O&G Company Shares

Less than six percent of shares of non-integrated oil and gas companies were owned by management, compared to 18.5 percent owned by other personal investors who manage their own holdings; nearly 76 percent held or owned by asset management companies; three percent owned and managed directly by pension plans; and six percent or managed by other institutions.

API Study: Ownership of O&G Service Company Shares

Four percent of shares held by oil and gas service companies are held by management. In comparison, 23 percent of shares in these companies is held by other personal investors who manage their own holdings; 63 percent is held by asset management companies; four percent is owned and managed directly by pension plans; and six percent held or managed by other institutions.

"All told, individuals who are not corporate management own 70 percent of the U.S. oil and natural gas industry," the study authors reported. "Of the remaining 30 percent, institutions own 27.2 percent of the industry, and corporate management holds the remaining 2.8 percent."

Karen Boman has more than 10 years of experience covering the upstream oil and gas sector. Email Karen at kboman@rigzone.com

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