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Valuation of International Oil Companies

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Author Info

  • Petter Osmundsen
  • Frank Asche
  • Bard Misund
  • Klaus Mohn

Abstract

According to economic theory, exploration and development of new oil and gas fields should respond positively to increasing petroleum prices. But since the late 1990s, stock market analysts have focused strongly on short-term accounting return measures, like RoACE , for benchmarking and valuation of international oil and gas companies. Consequently, exaggerated capital discipline among oil and gas companies may have reduced their willingness to invest for future reserves and production growth. Based on panel data for 14 international oil and gas companies for the period 1990-2003, we seek to establish econometric relations between market valuation on one hand, and simple financial and operational indicators on the other. Our findings do not support the general perception of RoACE as an important valuation metric in the oil and gas industry. We find that the variation in company valuations is mainly explained by the oil price, oil and gas production, and to some extent reserve replacement.

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Bibliographic Info

Article provided by International Association for Energy Economics in its journal The Energy Journal.

Volume (Year): Volume 27 (2006)
Issue (Month): Number 3 ()
Pages: 49-64

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Handle: RePEc:aen:journl:2006v27-03-a04

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Cited by:
  1. Misund, Bård & Asche, Frank & Osmundsen, Petter, 2008. "Industry upheaval and valuation: Empirical evidence from the international oil and gas industry," The International Journal of Accounting, Elsevier, vol. 43(4), pages 398-424, December.
  2. Misund, Bard & Mohn, Klaus, 2014. "Exploration Risk in Oil & Gas Shareholder Returns," UiS Working Papers in Economics and Finance 2014/4, University of Stavanger.
  3. Aune, Finn Roar & Mohn, Klaus & Osmundsen, Petter & Rosendahl, Knut Einar, 2010. "Financial market pressure, tacit collusion and oil price formation," Energy Economics, Elsevier, vol. 32(2), pages 389-398, March.
  4. Mohn, Klaus & Osmundsen, Petter, 2008. "Exploration economics in a regulated petroleum province: The case of the Norwegian Continental Shelf," Energy Economics, Elsevier, vol. 30(2), pages 303-320, March.
  5. Mohn, Klaus & Misund, Bård, 2009. "Investment and uncertainty in the international oil and gas industry," Energy Economics, Elsevier, vol. 31(2), pages 240-248, March.

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