+7 925 966 4690, 9am6pm (GMT+3), Monday – Friday
ИД «Финансы и кредит»

JOURNALS

  

FOR AUTHORS

  

SUBSCRIBE

    
Digest Finance
 

Multipliers based on EBITDA and DACF as an indicator of the investment attractiveness of domestic vertically integrated oil and gas companies

Vol. 28, Iss. 4, DECEMBER 2023

PDF  Article PDF Version

Received: 28 February 2022

Received in revised form: 24 March 2022

Accepted: 19 April 2022

Available online: 28 December 2023

Subject Heading: RISK, ANALYSIS AND EVALUATION

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

Pages: 362–385

https://doi.org/10.24891/df.28.4.362

Oleg V. SHIMKO Center for Innovative Economics and Industrial Policy, Institute of Economics of Russian Academy of Sciences (IE RAS), Balashikha, Moscow Oblast, Russian Federation
shima_ne@mail.ru

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

Subject. This article focuses on ratios of enterprise value to EBITDA and enterprise value to DACF of the twenty five leading publicly traded oil and gas companies within 2008 through 2018.
Objectives. The article aims to trace key trends in ratios of enterprise value to EBITDA and enterprise value to DACF of corporations in the oil and gas industry, as well as identify key trends in their change within the studied period and identify the factors that caused those changes.
Methods. For the study, I used the methods of comparative, financial and economic analyses, summarizing financial reporting data.
Results. The article finds that EV/EBITDA and EV/DACF multiples are acceptable for valuing oil and gas companies. The EV level depends on profitability, proved reserves and a country factor. It is required to adjust EBITDA for information on impairment, revaluation and write-off for assets that are reported separately from depreciation, depletion and amortization costs, as well as for income or expenses arising after the sale of fixed assets and as a result of effective court decisions or settlement agreements. It is advisable to adjust DACF for income, expenses and changes in assets and liabilities, which are caused by events that are unusual for oil and gas companies. Adjustment for interest payments can come to the fore in the DACF when the adjustment factor is significantly outside the standard range, and then it is better to limit to the EV/CF multiple.
Conclusions and Relevance. The application of EV/EBITDA and EV/DACF multiples requires a detailed analysis and if necessary, adjustments of their constituent components. However, they are quite relevant in the context of declining profitability and growing debt burden in the stock market sector of the global oil and gas industry. The findings can help appraise the value of oil and gas assets as part of a comparative approach and decide on actions for raising the market capitalization of publicly traded oil and gas corporations.

Keywords: valuation, multiplier, EV/EBITDA, EV/DACF, oil and gas industry

References:

  1. 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
  2. Minasyan V.B., Ivko D.G. [Model risk analysis of multiplier technology applied 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
  3. Basiladze G.R. [Comparative analysis of investment appeal of PJSC “Lukoil”, PJSC “Rosneft”, PJSC “Gazprom”]. Gumanitarnye, sotsial'no-ekonomicheskie i obshchestvennye nauki = Humanities, Social-Economic and Social Sciences, 2017, no. 1, pp. 145–147. URL: Link (In Russ.)
  4. Khalikova M.A., Belai I.E., Galimzyanov R.N. [The evaluation of a controlling stake of the oil company]. Internet-zhurnal Naukovedenie, 2016, vol. 8, no. 3. (In Russ.) URL: Link
  5. Timofeev D.V. [Country risk premium in emerging markets]. Korporativnye finansy, 2015, no. 2(34), pp. 54–72. (In Russ.) URL: Link
  6. 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 Sciences, 2018, vol. 8, no. 2, pp. 30–43. (In Russ.) URL: Link
  7. Kozlova A.S., Odinokova K.A., Taraskin D.S. [Most popular approaches to valuation of public companies]. Vestnik Saratovskogo gosudarstvennogo sotsial'no-ekonomicheskogo universiteta = Bulletin of Saratov State Socio-Economic University, 2019, no. 1, pp. 105–111. URL: Link (In Russ.)
  8. 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 of Oil and Gas Complex, 2016, no. 3, pp. 9–18. URL: Link (In Russ.)
  9. Kokin A.S., Oskolkov I.M., Syzganova A.A. [Comparative approach to estimation of cost of stocks of the oil and gas companies of Russia on the basis of the fundamental analysis]. Ekonomika: vchera, segodnya, zavtra = Economics: Yesterday, Today and Tomorrow, 2019, vol. 9, no. 1-1, pp. 241–258. URL: Link (In Russ.)
  10. Skavysh I.A. [The effectiveness of using industry-specific multipliers versus universal multipliers]. Finansovoe pravo i upravlenie, 2017, no. 1, pp. 1–10. (In Russ.) URL: Link
  11. Nazarova V.V., Shevyakina O.R. [Determination of an optimum premium paid in M&A transactions in oil and gas section]. Korporativnye finansy, 2015, no. 4, pp. 5–30. (In Russ.) URL: Link
  12. Volkov M.A. [Current issues of fundamental multiples application for high-leveraged companies investment analysis]. Innovatsii i investitsii = Innovations and Investments, 2020, no. 3, pp. 31–35. URL: Link (In Russ.)
  13. Vasil'eva E.V., Petrova S.B. [Strategic analysis of factors affecting the development of oil and gas corporations in Russia]. Vestnik Ekaterininskogo instituta = Bulletin of Catherine the Great National Institute, 2015, no. 2, pp. 8–14. (In Russ.)
  14. Yurlov F.F., Kornilov D.A., Kornilova E.V., Plekhanova A.F. [Comparative evaluation of efficiency of large companies oil and gas sector]. Vestnik NGIEI = Bulletin NGIEI, 2020, no. 7, pp. 83–92. URL: Link (In Russ.)
  15. Chernenko V.A., Burov A.N. [Russian and global capital structure approach: Enterprise value impact]. Izvestiya Sankt-Peterburgskogo gosudarstvennogo ekonomicheskogo universiteta = Bulletin of Saint-Petersburg State University of Economics, 2019, no. 1, pp. 38–42. URL: Link (In Russ.)
  16. 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. URL: Link (In Russ.)
  17. Kuznetsova N.V., Kazantsev L.V. [Formation of investment portfolio of a beginning investor]. Vestnik Zabaikal'skogo gosudarstvennogo universiteta = Transbaikal State University Journal, 2018, vol. 24, no. 5, pp. 125–134. URL: Link (In Russ.)
  18. Gurvits Yu.B. [The development of strategy for stock portfolio optimization in oil and gas sector]. Vestnik Moskovskogo universiteta. Ser. 6. Ekonomika = Bulletin of Moscow University. Series 6: Economics, 2017, no. 2, pp. 65–89. URL: Link (In Russ.)
  19. Shimko O.V. Analiz rezul'tatov finansovo-khozyaistvennoi deyatel'nosti vedushchikh publichnykh korporatsii neftegazovoi otrasli posle mirovogo finansovogo krizisa [An analysis of the results of financial and economic activities of leading public corporations in the oil and gas industry after the global financial crisis]. Moscow, Nauka Publ., 2019, 339 p.
  20. Shimko O.V. Sovremennye osobennosti otsenki stoimosti neftegazovykh korporatsii sravnitel'nym podkhodom: monografiya [Modern features of valuation of oil and gas corporations by a comparative approach: a monograph]. Moscow, Mezhdunarodnye otnosheniya Publ., 2018, 252 p.

View all articles of issue

 

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

Journal current issue

Vol. 28, Iss. 4
December 2023

Archive