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Digest Finance
 

Multipliers Based on Assets and Equity as an Indicator of the Investment Attractiveness of Domestic Vertically Integrated Oil and Gas Companies

Vol. 27, Iss. 4, DECEMBER 2022

PDF  Article PDF Version

Received: 24 February 2022

Received in revised form: 17 March 2022

Accepted: 26 May 2022

Available online: 28 December 2022

Subject Heading: RISK, ANALYSIS AND EVALUATION

JEL Classification: C50, 40

Pages: 362385

https://doi.org/10.24891/df.27.4.362

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. The article focuses on ratios of the market capitalization or enterprise value to balance sheet assets or equity of the twenty five leading publicly traded oil and gas companies within 2008 through 2018.
Objectives. The aim of the study is to trace key trends in ratios of the market capitalization or enterprise value to balance sheet assets or equity of corporations in the oil and gas industry, as well as identify the key trends in their changes within the studied period, and establish 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 establishes that the multipliers studied are acceptable for assessing the value of oil and gas companies, but it is preferable to use asset-based ratios. The multiples of the ratio of market capitalization to assets or market capitalization to equity in the oil and gas industry are characterized by a decrease, and the lack of stability of values does not allow using these ratios for other dates in valuation. It is necessary to analyze in detail the results of financial and economic activities and the structure of assets in order to select an analogue company, especially in times of crisis. There is a country factor in the stock market valuation of oil and gas assets. The influence on the market capitalization of the size of the debt component in the structure of total capital has been established. An increase in the level of debt burden over time was revealed. It is advisable to use an indicator of enterprise value that includes net debt instead of market capitalization when there is a difference in debt burden between the assessed corporation and the analogue company.
Conclusions and Relevance. The overall decline in profitability and the increase in debt load in the stock market sector of the global oil and gas industry should be taken into account when using multipliers based on assets and shareholder capital in the assessment of the value of oil and gas corporations through a comparative approach. The findings can be used to appraise the value of oil and gas assets as part of the comparative approach and decide on actions for raising the market capitalization of publicly traded oil and gas corporations.

Keywords: assets, equity, valuation, comparative approach, oil and gas industry

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