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ИД «Финансы и кредит»






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


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

Pages: 268–290


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


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


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