+7 495 989 9610, 9am6pm (GMT+3), Monday – Friday
ИД «Финансы и кредит»

JOURNALS

  

FOR AUTHORS

  

SUBSCRIBE

    
Digest Finance
 

Multipliers Based on Oil And Gas Production and Reserves as National Vertically Integrated Oil Companies’ Indicator of Lucrativeness for Investors. Part II

Vol. 26, Iss. 3, SEPTEMBER 2021

PDF  Article PDF Version

Received: 10 March 2021

Received in revised form: 29 March 2021

Accepted: 5 April 2021

Available online: 30 September 2021

Subject Heading: RISK, ANALYSIS AND EVALUATION

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

Pages: 268–290

https://doi.org/10.24891/df.26.3.268

Oleg V. SHIMKO Institute of Economics, Russian Academy of Sciences (IE RAS), Moscow, Russian Federations
shima_ne@mail.ru

https://orcid.org/0000-0002-0779-7097

Subject. The article investigates ratios of market capitalization to production and proven reserves held by 25 major public oil and gas corporations within 2008 through 2018.
Objectives. I trace key trends in ratios of market capitalization to production and proven reserves in major public oil and gas corporations. The article also determines what caused such transformation for the analyzable period and indicates whether such multipliers are applicable to business valuations in the oil and gas sector.
Methods. I use methods of comparative, financial and economic analysis, and summarize materials of financial statements.
Results. The analyzable multipliers were found to be applicable to business valuation of oil and gas corporations. If a company has oil refining and petrochemisry segments in its architecture, it will have a favorable effect on ratios. The company will also benefit if its profitability is higher than that of competitors. National companies and their indicators are seen to be influenced by the country factor, which should be taken into account for purposes of business valuation. Ratios depend on the availability of proven reserves. This aspect influences the multiplier of ratio of market capitalization to proven reserves. Therefore, it is advisable in case of similar proven reserves in comparable companies. Hence, it is more preferable to use the multiplier of the ratio of market capitalization to production.
Conclusions and Relevance. It is acceptable to use the multiplier with reference to the information on production even if the profitability goes down and the debt burden increases in the listed sector of the global oil and gas industry, while the ratio based on proven reserves is more reasonable as an auxiliary indicator. The findings can be used to appraise the possible value of oil and gas assets as part of the comparable approach. They can also underlie measures for raising the market capitalization of public oil and gas companies.

Keywords: valuation, market capitalization, production, proven reserves, oil and gas industry

References:

  1. Ivko D.G. [Peculiarities of assessing Russian companies’ value by using the method of market multipliers]. Finansy i upravlenie = Finance and Management, 2017, no. 1, pp. 34–46. (In Russ.) URL: Link
  2. Garifullin F.F. [Methods of valuation for mergers and acquisitions of oil and gas companies]. Vestnik universiteta, 2017, no. 1, pp. 43–47. URL: Link (In Russ.)
  3. Evsyukov V.V., Khlynin E.V. [The valuation of the company in the paradigm of digital economy]. Izvestiya Tul'skogo gosudarstvennogo universiteta. Nauki o zemle = News of the Tula State University. Sciences of Earth, 2019, no. 2, pp. 373–388. URL: Link (In Russ.)
  4. Minasyan V.B. [Assessment of risks arising from the use of multiplier technology to assess the shares]. Finansy: teoriya i praktika = Finance: Theory and Practice, 2018, vol. 22, no. 3, pp. 124–135. (In Russ.) URL: Link
  5. Minasyan V.B., Ivko D.G. [Analysis of multiplier technology applief at stock valuation of Russian companies]. Finansy: teoriya i praktika = Finance: Theory and Practice, 2019, vol. 23, no. 6, pp. 91–116. (In Russ.) URL: Link
  6. Kokin A.S., Oskolkov I.M., Syzganova A.A. [Comparative approach to estimation of cost of stocks of the oil and gas]. Ekonomika: vchera, segodnya, zavtra = Economics: Yesterday, Today and Tomorrow, 2019, vol. 9, iss. 1А, pp. 241–258. (In Russ.) URL: Link
  7. Usmanova A.S., Nesterenko E.A., Taraskin D.S. [Valuation of public companies in Russia by business sector]. Vestnik Saratovskogo gosudarstvennogo sotsial'no-ekonomicheskogo universiteta = Bulletin of the Saratov State Socio-Economic University, 2020, no. 2, pp. 103–107. URL: Link (In Russ.)
  8. Ivko D.G. [Estimating Russian company value: Risks related to using the method of market multipliers]. Finansy i upravlenie = Finance and Management, 2018, no. 1, pp. 8–22. (In Russ.) URL: Link
  9. Ponomareva S.V., Zheleznova I.V. [Features of share buybacks in Russia]. Vestnik Permskogo natsional'nogo issledovatel'skogo politekhnicheskogo universiteta. Sotsial'no-ekonomicheskie nauki = PNRPU Sociology and Economics Bulletin, 2017, no. 2, pp. 165–178. (In Russ.) URL: Link
  10. Volkov M.A. [Current issues of fundamental multipliers application for high-leveraged companies investment analysis]. Innovatsii i investitsii = Innovation and Investment, 2020, no. 3, pp. 31–35. URL: Link (In Russ.)
  11. Gurvits Yu.B. [The development of strategy for stock portfolio optimization in oil and gas sector]. Vestnik Moskovskogo universiteta. Seriya 6: Ekonomika = Moscow University Economics Bulletin, 2017, no. 2, pp. 65–89. URL: Link (In Russ.)
  12. Kozlova A.S., Odinokova K.A., Taraskin D.S. [Key approaches to valuation of public companies]. Vestnik Saratovskogo gosudarstvennogo sotsial'no-ekonomicheskogo universiteta = Bulletin of the Saratov State Socio-Economic University, 2019, no. 1, pp. 105–111. URL: Link (In Russ.)
  13. Lipatnikov V.S., Kirsanova K.A. [Assessment of the impact of the adverse economic geopolitical environment on the worth of Russian oil and gas companies]. Upravlencheskie nauki = Management Science, 2018, vol. 8, iss. 2, pp. 30–43. (In Russ.) URL: Link
  14. Skavysh I.A. [Efficiency of applying industry-specific multipliers versus universal multipliers]. Finansovoe pravo i upravlenie = Financial Law and Management, 2017, no. 1, pp. 1–10. (In Russ.) URL: Link
  15. Biryukova V.V. [Balanced growth of the oil industry as a factor in the balanced development of the theory and practice]. NAUKOVEDENIE, 2016, vol. 8, no. 1. (In Russ.) URL: Link
  16. Ulanov V.L. [Assigning the scope of responsibility for tartget indicators of resource companies’ development]. Zapiski Gornogo instituta = Journal of Mining Institute, 2015, vol. 211, pp. 117–124. URL: Link (In Russ.)
  17. Eder L.V., Filimonova I.V., Kozhevin V.D. [Efficiency analysis of the Russian oil and gas companies]. Problemy ekonomiki i upravleniya neftegazovym kompleksom = Problems of Economics and Management in the Oil and Gas Complex, 2016, no. 3, pp. 9–18. (In Russ.)
  18. Shcherbakova N.S. [Evaluating the performance of enterprises in the fuel and energy sector in the current economic circumstances]. Voprosy ekonomiki i upravleniya = Issues of Economics and Management, 2016, no. 5, pp. 119–127. URL: Link (In Russ.)
  19. Shimko O.V. Analiz rezul'tatov finansovo-khozyaistvennoi deyatel'nosti vedushchikh publichnykh korporatsii neftegazovoi otrasli posle mirovogo finansovogo krizisa [Analyzing the financial and business performance of major public corporations in the oil and gas sector after the global financial crisis]. Moscow, Nauka Publ., 2019, 339 p.
  20. Shimko O.V. Sovremennye osobennosti otsenki stoimosti neftegazovykh korporatsii sravnitel'nym podkhodom [Modern distinctions of the valuation of oil and gas corporations through the comparative approach]. Moscow, Mezhdunarodnye otnosheniya Publ., 2018, 252 p.

View all articles of issue

 

ISSN 2311-9438 (Online)
ISSN 2073-8005 (Print)

Journal current issue

Vol. 26, Iss. 3
September 2021

Archive