The European Listed Top Energy Players: Their Financial Performance and Fossil Fuels Prices

Abstract. The energy industry is of vital importance to the European economy and everyday life. While most of the European continent is on the path to primarily producing and relying on renewable energy to combat climate change, the relative weight that fossil fuels currently have in the sector make their market prices a significant factor in the stability of the economic system. Over the last decade, geopolitical crises, the pandemic, and dark clouds of war have adversely affected the supply chain and demand of fossil fuels, resulting in high price volatility. Speculations have emerged that abnormal economic profits have been gained by major energy companies which would have reportedly benefited from the related market tensions and respective windfalls. Aiming to shed some light on this proposition, this paper examines the financial performance of Europe’s top energy companies and evaluates their financial results in comparison to fluctuations in oil and natural gas prices. We focused our investigation on the Euro Stoxx 600 and analysed the twenty-one listed companies classified in the sector “Energy”. Ten years (2013-2022) of financial statement and market data were retrieved and combined. Key performance indicators (KPIs) including return on equity, return on assets, profit margin, interest rate coverage, payout ratio, and a set of liquidity ratios were evaluated. Descriptive statistics illustrated how trends in KPIs compared statistically to oil and natural gas price fluctuations. A step-wise multiple linear regression approach was used to identify independent predictors of change in KPIs after controlling for market price trends and other fixed and time-varying covariates. Interaction terms were used to evaluate moderating effects. The findings from this study contributed to the empirical literature on financial performance of listed public companies in the energy industry and provided evidence relevant to investors, as well as to the debate on the use of windfall taxes.