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

JOURNALS

  

FOR AUTHORS

  

SUBSCRIBE

    
Financial Analytics: Science and Experience
 

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

Vol. 16, Iss. 1, MARCH 2023

Received: 28 February 2022

Received in revised form: 10 March 2022

Accepted: 19 March 2022

Available online: 28 February 2023

Subject Heading: INNOVATION AND INVESTMENT

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

Pages: 37–64

https://doi.org/10.24891/fa.16.1.37

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. The article focuses on ratios of market capitalization to production and market capitalization to proved reserves of the twenty five leading publicly traded oil and gas companies within 2008 through 2018.
Objectives. The study aims to trace the key trends in ratios of market capitalization to production and market capitalization to proved reserves of corporations in the oil and gas industry, as well as identify the ones in their change within the studied period and identify the factors that have caused these changes.
Methods. For the study, I used comparative, and financial and economic analyses, and generalization of materials of the companies' consolidated financial statements.
Results. The article finds that the multipliers under study are suitable for estimating the value of oil and gas corporations. It was determined that the presence of segments of oil refining and petrochemistry in the structure of the company affects the level of coefficients favorably. It has been established that higher profitability compared to the competitors' one is a positive factor. On the contrary, the growth of the debt component has a negative impact. The impact of the country factor, which is required to be taken into account when assessing the value, is manifested in the performance of domestic companies. The availability of proved reserves is reflected in the coefficient values. This characteristic has the most significant impact on the value of the ratio of market capitalization to proved reserves. Therefore, its use is appropriate for similar availability of proved reserves of compared companies. Therefore, it is preferable to use a multiplier of the market capitalization-to-production ratio.
Conclusions. 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 stock market sector of the global oil and gas industry, while the ratio based on proved reserves is more reasonable as an auxiliary indicator.

Keywords: valuation, market capitalization, production, proved 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 = Izvestiya 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. [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
  6. 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.)
  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, 2020, no. 2, pp. 103–107. URL: Link (In Russ.)
  8. Ivko D.G. [Assessing the value of Russian companies: risks of using the market multiples method]. Finansy i upravlenie, 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. URL: Link (In Russ.)
  10. 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.)
  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. [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.)
  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 Sciences, 2018, vol. 8, no. 2, pp. 30–43. (In Russ.) URL: Link
  14. 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
  15. Biryukova V.V. [Balanced growth of the oil industry as a factor in the balanced development: The theory and practice]. Naukovedenie, 2016, vol. 8, no. 1. (In Russ.) URL: Link
  16. Ulanov V.L. [Docking zones of responsibility for achieving development targets of commodity companies]. Zapiski Gornogo instituta = Journal of Mining Institute, 2015, no. 211, pp. 117–121. 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 of Oil and Gas Complex, 2016, no. 3, pp. 9–18. URL: Link (In Russ.)
  18. Shcherbakova N.S. [Assessing the performance of energy companies in today's economic environment]. Voprosy ekonomiki i upravleniya = Economics and Management Issues, 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 [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 2311-8768 (Online)
ISSN 2073-4484 (Print)

Journal current issue

Vol. 16, Iss. 1
March 2023

Archive