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Financial Analytics: Science and Experience
 

Valuation of the oil and gas company in line with risk factors: Evidence from Gazpromneft

Vol. 9, Iss. 41, NOVEMBER 2016

PDF  Article PDF Version

Received: 22 August 2016

Received in revised form: 13 October 2016

Accepted: 24 October 2016

Available online: 17 November 2016

Subject Heading: RISK, ANALYSIS AND EVALUATION

JEL Classification: D81, G12, G17

Pages: 24-30

Vedmed' I.Yu. Ural Federal University named after The First President of Russia B.N. Yeltsin, Yekaterinburg, Russian Federation
ivedmed@yandex.ru

Sokolovskaya G.R. Ural Federal University named after The First President of Russia B.N. Yeltsin, Yekaterinburg, Russian Federation
soko-galina@yandex.ru

Importance The valuation of Gazpromneft Group will reflect the development of the respective economic sector. However, if risk factors are taken into consideration, it will show possible fluctuation of the business value, depending on various external threats. In this respect, we can evaluate the development prospects of the group and the industry as a whole.
Objectives The research determines the extent to which risk factors influence the business value of Gazpromneft Group by adding the risk-based aspect to the existing business valuation technique.
Methods We applied logic, cause-and-effect, comparative, scenario analysis, and simulation modeling. To appraise the business value without risk factors taken into account, we resorted to V.S. Romanov's methods, modified business valuation scheme through discounted cash flows.
Results We appraised the current business value without risk factors taken into consideration and reviewed principal threats that influence business financials. Having analyzed the latter, we found certain aspects that were the most susceptible to risk factors. The article sets out three scenarios arising from an impact of risk factors. Each type was verified with 1,000 tests.
Conclusions and Relevance The article indicates aspects that are the most vulnerable to risk. Having modeled risk factors, we measured the risk-based business value and described it in line with the three scenarios. To keep the business value, probable threats should be taken into consideration, with risk management measures in place.

Keywords: valuation, value, risk, simulation modeling, scenario analysis

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