Oil and Gas Equipment & Services. Module 3: Market Multiple Valuation. Jeff Ritter. Agenda. Brief Company Background Brief Review Module 2 Market Multiple Valuation Market Multiple Issues. World’s Largest Oil F ield C ompany. What does Halliburton do?.
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Equipment & Services
Module 3: Market
Brief Company Background
Brief Review Module 2
Market Multiple Valuation
Market Multiple Issues
World’s Largest Oil Field Company
“Is the element part of enterprise operations or financing activities of Halliburton?”
“Method of comparable”-U.S. Accounting Standards
Deduct Value Owed
to Debt Holders
*May be based on current or forecasted performance measures
Example of information provided by group members for computations:
Market Value of Equity (Market Capitalization):
Price Per Share
Market Value of Equity
Market Value of Equity
Determine multiple for BHI, SLB, TKPPY. EV/EPAT
Average comparable multiples
Estimate Enterprise Value of HAL with averaged multiples
EPAT of Halliburton X EPAT Market multiple = Enterprise Value
Enterprise Value – NFL = Equity Value
Equity Value/Common Shares Outstanding = Equity Value per share
*Same steps for all multiples
1 company value is earnings
1NEA X NEA market multiple
2Equity value/Common shares outstanding
Commonly referred to as price to book ratio. company value is earnings
Will not include in final analysis company value is earnings
Enterprise Value is chosen because sales is a driver of both debt and equity holders.
Will not include in final analysis debt and equity holders.
Market multiples extremely inconsistent so this multiple is most likely not ideal to evaluate the industry.
Research and development is important because the companies providing the services need to have superior methods/equipment to attract companies to hire them. Oil and Gas service companies are expected “to benefit from the increasing complexity and technological intensity of oil and gas exploration.”- Forbes.
With BV and NI included $49.34
Value Per Share
Only benefit = it is easy
Any Questions? most likely not ideal to evaluate the industry.