Valuation of International Oil Companies

Osmundsen, Petter; Asche, Frank; Misund, Bård; Mohn, Klaus

doi:10.5547/issn0195-6574-ej-vol27-no3-4

Cited by 63 publications

(25 citation statements)

References 16 publications

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“…Hence, the negative coefficients on oil and gas reserves may be an effect of size. Osmundsen et al (2006) found that size is positively correlated to market value in integrated oil companies. * = significant at the 10% significance level, ** = significant at the 5% significance level, *** = significant at the 1% significance level, tvalues in parenthesis.…”

Section: Part I Effects Of Accounting Methods Choicementioning

confidence: 99%

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Vertical Integration and Valuation of International Oil Companies

2014

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. This paper studies financial statement information from the 50 largest international oil and gas companies during 1992 to 2011 and evaluates their relation to market values. In particular, we examine how this relationship is affected by accounting method choice (successful efforts versus full cost accounting) and vertical integration. We find that net income is more value relevant for full cost companies compared to companies that use the successful efforts accounting method. Furthermore, the value relevance of oil and gas reserves is different among successful efforts and full cost companies. Larger reserves among successful efforts companies are awarded a premium by stock markets. The value relevance of book value is significantly lower for integrated companies than for pure upstream companies. We also find that the value relevance of oil and gas reserves is different for upstream and integrated companies. Terms of use: Documents inJEL-Code: F230, G000, L710, M410.

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Section: Part I Effects Of Accounting Methods Choicementioning

confidence: 99%

“…Few academic studies have been carried out on valuation of integrated international oil companies, and they do not address accounting information (e.g. Osmundsen et al, 2006;2007). Our sample of international integrated and upstream companies allows us to compare the value relevance of these two types of companies.…”

Section: Introductionmentioning

confidence: 99%

Vertical Integration and Valuation of International Oil Companies

2014

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“…Their result confirmed that a structural break took place in the valuation of oil and gas companies in the late 1990s. Additionally, Osmundsen et al (2006) found that the major determinants of firm valuation are oil price, oil and gas production, and to a certain extent, reserve replacement. To examine the relationship between stock prices returns and financial risk factors of oil companies, Giovannini et al (2006) used multivariate cointegration techniques and multivariate GARCH Model.…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

Value drivers in Oil Companies: An Application of Variance Based Structure Equation Model

Kumar

Sukumaran

2017

CMR

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This study aims to provide new insights into how the financial and operational information relate to the market valuation of both independent and integrated oil companies. Hence, the study examines the value drivers for value creation in oil firms. Specifically, it explores the effect of investment, financing, and dividend decisions on value creation in oil-based energy firms. It is important to identify factors for value creation in stock market to design effective policies for wealth creation. The study was based on 82 oil and energy firms selected based on average asset sizes and revenues during the

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“…ROCE is often considered as the most important performance indicator by oil and gas companies. The study by Osmundsen et al (2006) based on a panel data of 14 international oil and gas companies, finds that the variation in company valuations are explained by the oil price, oil and gas production and to a certain extent reserve replacement. Oil and gas analysts often plot key performance indicators among the companies against their respective market-based valuation multiples.…”

Section: Review Of Literaturementioning

confidence: 99%

An empirical study on the valuation of oil companies

Kumar

Sukumaran

2016

OPEC Energy Review

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This study examines the determinants of value creation for the world's largest oil and gas companies. The study was based on 82 oil companies. The financial performance analysis for the period 2009–2013 reveals that the average total revenues increased from $39.82 billion in year 2009 to $68.87 billion in year 2013. The largest oil firms in terms of average revenues were Exxon Mobil, Royal Dutch Shell and Sinopec during the period 2009–2013. Three major market value variables were regressed on various independent variables representing performance, the financing, investment and dividend policy variables of oil firms. The empirical analysis finds that dividend policy and cost efficiency are important determinants of valuation of oil companies. The higher the liquidity position of the energy firms, the higher is the value creation in the market. The study establishes negative relationship between capital intensity and value creation. It can be viewed that market is sceptical about high capital expenditures by oil and gas firms. Higher cash flows result in increase in value for oil firms in stock market. Higher working capital efficiency leads to higher value creation. Undervalued stocks in the oil sector tends to have higher potential for value appreciation. Focus on effective asset utilisation is a value increasing activity for oil and gas sector firms.

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Valuation of International Oil Companies

Cited by 63 publications

References 16 publications

Vertical Integration and Valuation of International Oil Companies

Vertical Integration and Valuation of International Oil Companies

Value drivers in Oil Companies: An Application of Variance Based Structure Equation Model

An empirical study on the valuation of oil companies

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