Energy’s Comeback Kids

Successful Turnarounds Are Rare in the Rough-and-Tumble Energy Industry: the Ones That Work Tend to Emphasize Digital, Pivot to Renewables, and Bet Big on Innovation

The Winning Transformations of ERG, Vistra Energy, and Ecopetrol, Among Others, Hold Lessons for Energy Industry Leaders, Says New Report from BCG

NEW YORK—Uncertainty has been a constant in the energy industry—evidenced by the huge swings in the price of natural resources and frequently changing government regulations, among other things. This compels successful leaders of energy companies to always be willing to dramatically change their businesses, according to a new report by The Boston Consulting Group (BCG). The report, titled Energy’s Comeback Kids, is being released today.

Despite the importance of transformation in the space, success is rare, say the authors. Of the 900 energy companies screened by BCG, only 70 had a significant bounce back in key metrics after a downturn or stagnation.

“The energy space is not for the faint of heart, but the stellar results of a few key winners’ turnarounds should have the attention of all energy company leaders that are working to sustain profitability or grow revenue,” says Ramón Baeza, a BCG senior partner and a coauthor of the report.

The companies that succeeded at their turnarounds have a few things in common. They:

  • Innovate through investments in digital tools, products, and services
  • Constantly question their portfolio mix and reject any potential “sacred cows”
  • Understand the need to go beyond one-time transformation initiatives and adopt a mindset of always-on transformation
  • Respond to increasing demand for renewable energy sources
  • Build the right workplace culture and capabilities and fundamentally change the ways in which people work
  • Reduce costs and continuously look for ways to improve margins

Six of the companies that BCG studied in depth managed to dramatically outperform not only the S&P Global 1200 Energy and Utilities Indexes, but even the S&P Global 1200 itself—and by a long shot. The following are among the notable turnarounds:

  • ERG. After an 80-year legacy of growth, the Italian energy company faced a severe downturn in the first decade of the 2000s following extreme instability in the oil market. In response, ERG launched an ambitious turnaround program, in which the company pivoted from an oil refinery business to an integrated energy company that used both renewable and conventional forms of energy. This helped lead to an increase in ERG’s share price of 46% since late 2007.
  • Vistra Energy. The Texas-based energy provider was created through the leveraged buyout of its parent company, which left Vistra with nearly $40 billion in debt. So Vistra immediately restructured, cutting general and administration expenses by more than 40% and investing heavily in innovation. The investment included technology that improved operations, such as e-bill services and voice recognition tools, and the launch of new customer-facing mobile apps. This turnaround effort allowed Vistra to reap total shareholder returns of nearly 90% in December 2016.
  • Ecopetrol. Following a 50% drop in global oil prices in 2014, Colombia-based Ecopetrol launched a turnaround, investing heavily in digital. Specifically, the company set up a data repository and aimed to link Ecopetrol’s oil wells; it also adopted digital tools to ensure quality control in the company’s pipelines and detect abnormalities in infrastructure. These digital initiatives, along with extensive downsizing and cost cutting, allowed Ecopetrol’s market capitalization to grow by 216% since late 2015.

The other three companies in Energy’s Comeback Kids that pulled off stellar turnarounds are Kansai Electric Power, Equatorial Energia, and Energisa.

“Adopting a mindset of always-on transformation, rejecting sacred cows, and focusing on culture are crucial ingredients of any successful transformation or turnaround,” says Jaime Ruiz-Cabrero, a BCG partner and a coauthor of the report. “Beyond that, within the energy space specifically, responding to increasing consumer demand for renewable energy sources, investing in innovation, and investing in digital can also reap remarkable rewards.”

A copy of the report can be downloaded Energy’s Comeback Kids.

To arrange an interview with one of the authors, please contact Eric Gregoire at +1 617 850 3783 or

About Boston Consulting Group

Boston Consulting Group partners with leaders in business and society to tackle their most important challenges and capture their greatest opportunities. BCG was the pioneer in business strategy when it was founded in 1963. Today, we help clients with total transformation—inspiring complex change, enabling organizations to grow, building competitive advantage, and driving bottom-line impact.

To succeed, organizations must blend digital and human capabilities. Our diverse, global teams bring deep industry and functional expertise and a range of perspectives to spark change. BCG delivers solutions through leading-edge management consulting along with technology and design, corporate and digital ventures—and business purpose. We work in a uniquely collaborative model across the firm and throughout all levels of the client organization, generating results that allow our clients to thrive.

Press Releases