· While oil and gas sector posted strong earnings on the back of higher commodity prices, performance for clean energy, especially solar, reflects regulatory concerns, especially in China
· The number of large bankruptcies for solar companies should increase, especially in China because of rampant overcapacity and pricing issues, the end of subsidies, and the ongoing trade feud with the US
Great divide – the break-down of the oil/solar connection
The latest earnings season has shown some great divide between and within the various sectors within energy. The impact of rising commodity prices is far from uniform.
A large majority of companies in the oil & gas sector reporting rising revenues and earnings underscores the turnaround in the sector and positive commodity impact. It implies margin stability.
Conversely, clean energy is not benefiting from the traditional positive oil price effect, ie improving volumes and earnings in silage with rising oil prices. While still more companies have reported rising earnings last quarter, the share of those companies is rapidly decreasing. In Q2, only 58% of companies in clean energy reported y/y rising Ebitda, down from 66% in Q4 17.
Figure 1 Energy quarterly earnings: number of companies reporting positive revenue and Ebitda growth