Background

The client is a fund manager with a portfolio weighted towards oil and gas exploration companies. The investment strategy is driven by fundamental analysis of cash flow forecasts at field level. The fund should have a balanced exposure to oil vs. gas prices, to emerging markets vs. OECD markets, to exploration upside vs. proved core assets, to cost-geared vs. high-margin developments, and to the key growth markets being North America shale liquids, Canada oil sands, Atlantic deep-water, Asia LNG, and Arctic exploration.

Approach

Rystad Energy provides discounted cash flow analysis on a large number of oil and gas fields owned by several hundred quoted companies and at various price scenarios. Data are based on UCube and supported by assumptions, justifications, and data consistency indicators. Customized deep dive analysis and presentations are performed on selected topics and companies. The data set is being updated regularly.

Result

The result of the data is summarized in a data table, where the sum of parts NPV for the company is compared with the “upstream enterprise value”, which excludes all other businesses apart from upstream oil and gas, and is based on the market value of equity and net debt. The summary data, as shown to the right, has been utilized to support the fund’s investment decisions on large cap E&P companies. The second slide shows a deep dive into the valuation of small cap E&P companies active in the Granite Wash unconventional play in the USA.

Benchmarking Rystad Energy NPV Anlaysis vs Market Valuation of Upstream Businesses