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ИД «Финансы и кредит»






Digest Finance

The use of revenue-based multipliers for the appraisal of oil and gas companies

Vol. 25, Iss. 4, DECEMBER 2020

PDF  Article PDF Version

Received: 3 November 2020

Received in revised form: 16 November 2020

Accepted: 30 November 2020

Available online: 25 December 2020


JEL Classification: G32, L25, L71, M41, O12

Pages: 387–415


Shimko O.V. Institute of Economics of Russian Academy of Sciences (IE RAS), Moscow, Russian Federation


Subject. The article focuses on ratios of the market capitalization and corporate value to revenue of the twenty five leading public companies in the oil and gas sector within 2008 through 2018.
Objectives. The study is to trace key trends in ratios of corporations in the oil and gas. I also determine what caused such a transformation for the analyzable period and whether the multipliers are applicable to appraise the corporate value in the oil and gas sector.
Methods. The study is based on methods of comparative and financial-economic analysis, summarizing financial reporting data.
Results. Revenue-based ratios are found to be applicable to appraise the value of oil and gas companies. Although having the similar composition of net revenue, companies with better profitability have higher multipliers. Integrated corporations were found to have lower multipliers than independent companies. The study shows that the import-based petrochemical production tends to have the lower value than that using domestic resources. The multiplier goes down if the company's revenue includes proceeds from the resale. As the debt burden grows, the multiplier decreases. Therefore, considering the significant difference in the debt burden, the multiplier should better include the corporate value instead of the market capitalization, since the corporate value comprises the net debt. I also discovered the country-related factor, which should be taken into consideration when using the multiplier.
Conclusions and Relevance. The use of revenue-based multipliers requires the thorough analysis of the financial and business operations of companies. However, it is quite acceptable when the overall profitability decreases and the debt burden increases in the public segments of the global oil and gas industry. The findings can be used to appraise the value of oil and gas assets as part of the comparative approach and decide on actions for raising the market capitalization of public oil and gas corporations.

Keywords: revenue, appraisal, comparative approach, multiplier, oil and gas


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December 2020