The Pricing of International Oil and Gas Companies 1990-2003 - a Structural Shift in the Equity Valuation Process
20 Pages Posted: 15 Jan 2006
Date Written: October 1, 2005
This paper examines the equity valuation process for the world's largest privately owned oil and gas companies. Our analyses provide evidence for a structural shift in the valuation of the largest oil and gas companies. Furthermore, we examine the key value-drivers that have been instrumental in the structural shift. Using financial and operational information from 15 international oil and gas companies over the period 1990-2003 and proxies for merger activity and market sentiment, we test for structural shift in the valuation of integrated international oil and gas companies. We show that financial information such as net income, cash flows and accruals, and operational measures such as the size of oil and gas reserves, are instrumental in explaining the structural shift in valuation of oil and gas companies.
Keywords: company valuation, structural shift, oil company
JEL Classification: G12, G32, G34, M41, L71
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