The impact of financial statements indicators on valuation of oil and gas companies

The paper is devoted to approaches and methods of oil and gas companies valuation based on financial statements and industry factors. The focus of the study are russian public vertically-integrated oil and gas companies. The purpose of the study is to identify the key financial statement indicators of the companies, which have the greatest impact on their market value, and the method of assessing the value created by a company considering these indicators. The main methods of a company valuation, including comparative analysis and income approach, are reviewed in the paper and their key advantages and disadvantages are identified. In particular, the special attention was given to indicators, which have the greatest influence on fundamental value of companies. In order to identify this correlation the statistical method and the methods of financial analysis and forecasting were used for the period 2015–2024 in relation to the selected companies. The results of calculation demonstrate high correlation between market capitalization of the selected companies and their assets and equity during this period. These items are also the key components of the invested capital used to calculate the value created by a company via the economic profit indicator (EVA). Despite some advantages of EVA in comparison to alternative methods of valuation, for the most of analyzed companies it deviated significantly from market value change during 2015–2024. Therefore, the scientific novelty of the study is the modified approach for EVA components calculation considering the results of correlation analysis and actual financials. In particular, the special attention was given to the adjustments of fixed assets and debt based on historical cash flows for these items. The results of the study demonstrate the increase in EVA for some of selected companies resulting in potential feasibility of the introduced adjustments considering the limited financial statements disclosure.