Basic principles are widely understood in the financial industry, but the terminology and analytical techniques can vary greatly. This book is written for the nonfinancial shareholders, managers, and oil company employees interested in the forces that influence stock values. The bottom line in any company is expressed in the language of finance. This book explains financial concepts in a nontechnical, practical way so that nonfinancial professionals and others may understand and appreciate this aspect of the business. When the first edition of this book was written, companies disclosed substantially less information than what is available today. This additional information allows a better understanding of the financial status and health of a company. But there is still room for improvement.
Table of Contents
1. Introduction Oil Prices Diminishing Supplies and Increasing Demand Mega Mergers The Stock Market Fundamentals
of Valuation Market Value Fair Market Value Technical Analysis Dow Theory Fundamental Analysis The first step-Economic
conditions The second step-Industry analysis The third step-Company analysis Asset- vs. Income-Based Techniques
Asset-based valuation concepts Control premium Income-based valuation concepts Efficient Market Hypothesis Random
Walk Theory Catch-22 Niels Bohr-Early EMH proponent Stock Quotations Accounting Value vs. Economic Value Future
and Present Value Theory Future value Present value Annuities Perpetuity Present value tables Internal Rate of
Return Cost of Capital Cost of debt Cost of preferred stock Cost of equity Capital asset pricing model Summary
Accounting Systems for Oil and Gas Generally Accepted Accounting Principles Accounting concepts Governance, transparency,
and disclosure Reserve Recognition Accounting FC and SE Accounting SE accounting FC accounting Ceiling Test Limitation
Book value, SEC value, and FMV of reserves Depreciation, depletion, and amortization Cost Depletion and Percentage
Depletion Summary and Key Concepts Financial Statement Analysis Annual Report The Income Statement The Balance
Sheet The Statement of Cash Flows Form 10-K Form 10-K Oil & Gas Reserves Financial Analysis CVX financial statements
Quick look Ratio Analysis Analytical perspectives Ratios Liquidity ratios Profitability ratios Activity ratios
Dividends Valuation ratios Energy ratios Ratio Roulette CVX CVX Highlights 2001 Summary and Key Concepts How much
is too much debt?
5. Valuation of Common Stock Guidelines for Estimating Value IRS guidelines SEC guidelines Book Value Book value
multiple Debt-adjusted book value multiple Adjusted book value O&G Properties Long-term Investment in Stock
Off-Balance-Sheet Activities Involving the Cost & Equity Methods of Accounting Consolidation and minority interests
Off-balance-sheet assets and liabilities Long-term leases Synthetic leases Litigation Environmental Liabilities
Exxon Valdez spill in the Prince William Sound, 1989 DR&R-Abandonment Off-Balance-Sheet Commitments Drilling
Commitments Summary Discounted cash flow analysis Adjustments Net income DD&A Deferred taxes Extraordinary
items Other adjustments Exploration expenses Research and development Interest expense Free cash flow Operating
income multiple Comparable sales Replacement value Combined appraisal techniques
6. Competitive Comparisons Individual Investment Institutional Investment Employment Benchmarking M&A Potential
Identification of Peer Group Line of business Size Market or location Other considerations Identification of Comparison
Criteria Study the sector Sources of information Identify the industry or sector concerns Integrated O&G industries
E&S E&P Drilling Refining and marketing Utilities
7. Segment Valuation Proved Reserves Acreage Transportation Pipelines Tankers Refineries Industry Structure
Financial Analysis and Evaluation of