A Fundamental Analysis Approach to Oil and Gas Firm Valuation

Abstract

Most fundamental analysis studies have focused on fundamentals selected by a data-driven approach on large samples of firms from numerous industries. This paper reports the results of a fundamental analysis of a single industry, the US oil and gas exploration and production industry, using variables identified by industry financial analysts. The results demonstrate a significant relationship between a number of the fundamentals with both the market value of equity and cumulative stock return. The results also suggest that the fundamentals provide incremental information beyond earnings, change in earnings, and book value of equity when explaining equity values and stock returns. Copyright Blackwell Publishers Ltd 2000.

The relevance of accounting and supplementary information in the valuation of global oil companies

“…Diferentemente de Boone (1998), Bryant (2003 e de Quirin et al (2000), que se basearam em bancos de dados feitos por empresas particulares e em dados padronizados como, por exemplo, o Banco de Dados Arthur Andersen Oil & Gas Reserve Disclosure, este estudo aborda dados primários, capturados nos relatórios das empresas.…”

“…Esses resultados relacionados ao FCD assemelham-se aos achados de Harris e Ohlson (1987), Teall (1992), Boone (1998), Quirin et al (2000), Cormier e Magnan (2002) e Misund et al (2005). No entanto, são conflituosos com Johnsen et al (1996).…”

Value Relevance of Accounting and Other Variables in the Junior-Mining Sector

“…Valuation analysis tends to be conducted independent of any quoted share price (Quirin et al 2000). Fundamental analysis was introduced by Ball and Brown (1968) as a means to test the value-relevance of accounting information to market value and is now an established line of research.…”

“…While, by definition, industryspecific studies reduce sample size and generalisability, they have several advantages over wide-ranging multi-sector analysis (Riley et al 2003). For example, industry-specific studies provide an opportunity to present nuanced, industry-specific insights as more than white noise; an advantage that most multi-sector studies cannot emulate (Quirin et al 2000). Amir and Lev (1996) in studying non-financial fundamentals found they provide better explanatory power for the market capitalisation of a wireless-communications firm than what was given by financial factors and that financial fundamentals complemented the capacity of non-financial fundamentals to predict/explain market value.…”

“…Similar to Lev and Thiagarajan (1993), Quirin et al (2000) sourced their fundamental variables from a survey of oil and gas analysts and found that the analyst's fundamental variables yielded marginal explanatory power over traditional accounting measures, in terms of an enterprise's stock value and its predicted returns.…”