Shareholder Valuations of Petroleum Companies and Oilfield Services During the 2008 and 2014 Oil Price Shocks

Ruud Weijermars; Anita Bressan Bocardo

doi:doi:10.11648/j.jfa.20160406.17

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Shareholder Valuations of Petroleum Companies and Oilfield Services During the 2008 and 2014 Oil Price Shocks

Ruud Weijermars, Anita Bressan Bocardo

Published in Journal of Finance and Accounting (Volume 4, Issue 6)

Received: 10 October 2016 Accepted: 25 October 2016 Published: 2 December 2016

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Abstract

This study analyzes the impact of the 2008 and 2014 oil price falls on the shareholder returns of diversified oil and gas majors, Canadian oil sands producers, US shale oil and gas producers and oilfield service companies. The 2008 an 2014 oil price shocks lead to capital book losses for investor TSR at year end. In both years, the TSR losses were disproportionately large as compared to the actual slow down (which was very modest) in retained earnings growth. Our recommendation is that investors should not only use P/E ratios to identify value growth stock investment opportunities. An alternative methodology quantifies the degree of speculative valuation involved in the TSR component of capital gains (losses). When negative speculative valuations are large, future TSR growth is most likely. Companies that want to mitigate unwarranted erosion of their market capitalization due to stock price declines should ramp up advertorial efforts and point out value growth opportunities to attract investors, especially in times of depressed stock prices.

Published in	Journal of Finance and Accounting (Volume 4, Issue 6)
DOI	10.11648/j.jfa.20160406.17
Page(s)	367-377
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Total Shareholder Return, Capital Gains, Dividends, Retained Earnings, Speculative Valuation

References

[1]	Bocardo, A. B., and Weijermars, R., 2015. Total Shareholder Returns from Petroleum Companies and Oilfield Services (2004-2014): Capital Gains and Speculation Dissected to Aid Corporate Strategy and Investor Decisions. Journal of Finance and Accounting, in press.
[2]	Rodrigues, R. and Weijermars, R., 2016. Assessing the impact of two recessions on the oil and gas industry: severity of declines and future outlook. First Break, vol. 34 (1), 79- 85.
[3]	Institute of Management accountants. IMA, 1997. Measuring and Managing Shareholder Value Creation. Statements on Management Accounting., 39 pages. http://www.imanet.org/ docs/default-ource/thought_leadership/ management_control_ systems/measuring_and_managing_shareholder_value_ creation.pdf?sfvrsn=2 (accessed 22 July 2015).
[4]	Weijermars, R., and Watson, S., 2011. Unconventional Natural Gas Business: TSR Benchmark and Recommendations for Prudent Management of Shareholder Value. SPE Economics & Management, 3 (4) p. 247-261, SPE-54056-PA. http://dx.doi.org/10.2118/154056-PA.
[5]	Chartered Institute of Management Accountants (CIMA), 2004. Maximizing Shareholder Value Achieving clarity in decision-making. Technical Report. The Chartered Institute of Management Accountants, 28 pages. http://www.cimaglobal. com/Documents/Thought_leadership_docs/MigratedDocsMarch2010/Resouces%20(pdfs)/Technical%20reports/Maximising_shareholder_value_achieving_clarity_in_decision-making.pdf (accessed 22 July 2015).
[6]	Pirog, R. 2012. Financial performance of the Major Oil Companies, 2007-2011. U.S. Congressional Research Service. February 17, 2012. https://www.fas.org/sgp/crs/misc/R42364. pdf (accessed 22 July 2015)
[7]	Wallace, J. S., 2003, Value Maximization and Stakeholder Theory: Compatible or not? Journal of Applied Corporate Finance, 15 (3), Spring. http://onlinelibrary.wiley.com/doi/10.1111/j.1745-6622.2003.tb00466.x/pdf
[8]	Burgman, R., and Van Clieaf, M., 2012. Total shareholder return and management performance: A performance metric appropriately used, or mostly abused? Rotman International Journal of Pension Management, 5 (2): 1-8 (Fall). DOI: 10.3138/rijpm.5.2.26
[9]	Beaver, W. and Morse, D., 1978. What determines Price-Earnings ratios? Financial Analyst Journal, 34 (4), p. 65-76. http://www.jstor.org/stable/4478160 (accessed 22 July 2015).
[10]	Weijermars, R., 2011. Credit ratings and cash-flow analysis of oil and gas companies: competitive disadvantage in financing costs for smaller companies in tight capital markets. SPE Economics & Management, 3(02), 54-67. SPE-144489. doi:10.2118/144489-PA.

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APA Style

Ruud Weijermars, Anita Bressan Bocardo. (2016). Shareholder Valuations of Petroleum Companies and Oilfield Services During the 2008 and 2014 Oil Price Shocks. Journal of Finance and Accounting, 4(6), 367-377. https://doi.org/10.11648/j.jfa.20160406.17

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ACS Style

Ruud Weijermars; Anita Bressan Bocardo. Shareholder Valuations of Petroleum Companies and Oilfield Services During the 2008 and 2014 Oil Price Shocks. J. Finance Account. 2016, 4(6), 367-377. doi: 10.11648/j.jfa.20160406.17

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AMA Style

Ruud Weijermars, Anita Bressan Bocardo. Shareholder Valuations of Petroleum Companies and Oilfield Services During the 2008 and 2014 Oil Price Shocks. J Finance Account. 2016;4(6):367-377. doi: 10.11648/j.jfa.20160406.17

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@article{10.11648/j.jfa.20160406.17,
  author = {Ruud Weijermars and Anita Bressan Bocardo},
  title = {Shareholder Valuations of Petroleum Companies and Oilfield Services During the 2008 and 2014 Oil Price Shocks},
  journal = {Journal of Finance and Accounting},
  volume = {4},
  number = {6},
  pages = {367-377},
  doi = {10.11648/j.jfa.20160406.17},
  url = {https://doi.org/10.11648/j.jfa.20160406.17},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jfa.20160406.17},
  abstract = {This study analyzes the impact of the 2008 and 2014 oil price falls on the shareholder returns of diversified oil and gas majors, Canadian oil sands producers, US shale oil and gas producers and oilfield service companies. The 2008 an 2014 oil price shocks lead to capital book losses for investor TSR at year end. In both years, the TSR losses were disproportionately large as compared to the actual slow down (which was very modest) in retained earnings growth. Our recommendation is that investors should not only use P/E ratios to identify value growth stock investment opportunities. An alternative methodology quantifies the degree of speculative valuation involved in the TSR component of capital gains (losses). When negative speculative valuations are large, future TSR growth is most likely. Companies that want to mitigate unwarranted erosion of their market capitalization due to stock price declines should ramp up advertorial efforts and point out value growth opportunities to attract investors, especially in times of depressed stock prices.},
 year = {2016}
}

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TY  - JOUR
T1  - Shareholder Valuations of Petroleum Companies and Oilfield Services During the 2008 and 2014 Oil Price Shocks
AU  - Ruud Weijermars
AU  - Anita Bressan Bocardo
Y1  - 2016/12/02
PY  - 2016
N1  - https://doi.org/10.11648/j.jfa.20160406.17
DO  - 10.11648/j.jfa.20160406.17
T2  - Journal of Finance and Accounting
JF  - Journal of Finance and Accounting
JO  - Journal of Finance and Accounting
SP  - 367
EP  - 377
PB  - Science Publishing Group
SN  - 2330-7323
UR  - https://doi.org/10.11648/j.jfa.20160406.17
AB  - This study analyzes the impact of the 2008 and 2014 oil price falls on the shareholder returns of diversified oil and gas majors, Canadian oil sands producers, US shale oil and gas producers and oilfield service companies. The 2008 an 2014 oil price shocks lead to capital book losses for investor TSR at year end. In both years, the TSR losses were disproportionately large as compared to the actual slow down (which was very modest) in retained earnings growth. Our recommendation is that investors should not only use P/E ratios to identify value growth stock investment opportunities. An alternative methodology quantifies the degree of speculative valuation involved in the TSR component of capital gains (losses). When negative speculative valuations are large, future TSR growth is most likely. Companies that want to mitigate unwarranted erosion of their market capitalization due to stock price declines should ramp up advertorial efforts and point out value growth opportunities to attract investors, especially in times of depressed stock prices.
VL  - 4
IS  - 6
ER  -

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Author Information

Ruud Weijermars

Harold Vance Department of Petroleum Engineering, Texas A & M University, College Station, USA
Anita Bressan Bocardo

Harold Vance Department of Petroleum Engineering, Texas A & M University, College Station, USA; State University of Santa Catarina (UDESC), Balneário Camboriú, Santa Catarina, Brazil

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Plain Text BibTeX RIS

APA Style

Ruud Weijermars, Anita Bressan Bocardo. (2016). Shareholder Valuations of Petroleum Companies and Oilfield Services During the 2008 and 2014 Oil Price Shocks. Journal of Finance and Accounting, 4(6), 367-377. https://doi.org/10.11648/j.jfa.20160406.17

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ACS Style

Ruud Weijermars; Anita Bressan Bocardo. Shareholder Valuations of Petroleum Companies and Oilfield Services During the 2008 and 2014 Oil Price Shocks. J. Finance Account. 2016, 4(6), 367-377. doi: 10.11648/j.jfa.20160406.17

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AMA Style

Ruud Weijermars, Anita Bressan Bocardo. Shareholder Valuations of Petroleum Companies and Oilfield Services During the 2008 and 2014 Oil Price Shocks. J Finance Account. 2016;4(6):367-377. doi: 10.11648/j.jfa.20160406.17

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@article{10.11648/j.jfa.20160406.17,
  author = {Ruud Weijermars and Anita Bressan Bocardo},
  title = {Shareholder Valuations of Petroleum Companies and Oilfield Services During the 2008 and 2014 Oil Price Shocks},
  journal = {Journal of Finance and Accounting},
  volume = {4},
  number = {6},
  pages = {367-377},
  doi = {10.11648/j.jfa.20160406.17},
  url = {https://doi.org/10.11648/j.jfa.20160406.17},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jfa.20160406.17},
  abstract = {This study analyzes the impact of the 2008 and 2014 oil price falls on the shareholder returns of diversified oil and gas majors, Canadian oil sands producers, US shale oil and gas producers and oilfield service companies. The 2008 an 2014 oil price shocks lead to capital book losses for investor TSR at year end. In both years, the TSR losses were disproportionately large as compared to the actual slow down (which was very modest) in retained earnings growth. Our recommendation is that investors should not only use P/E ratios to identify value growth stock investment opportunities. An alternative methodology quantifies the degree of speculative valuation involved in the TSR component of capital gains (losses). When negative speculative valuations are large, future TSR growth is most likely. Companies that want to mitigate unwarranted erosion of their market capitalization due to stock price declines should ramp up advertorial efforts and point out value growth opportunities to attract investors, especially in times of depressed stock prices.},
 year = {2016}
}

Copy | Download

TY  - JOUR
T1  - Shareholder Valuations of Petroleum Companies and Oilfield Services During the 2008 and 2014 Oil Price Shocks
AU  - Ruud Weijermars
AU  - Anita Bressan Bocardo
Y1  - 2016/12/02
PY  - 2016
N1  - https://doi.org/10.11648/j.jfa.20160406.17
DO  - 10.11648/j.jfa.20160406.17
T2  - Journal of Finance and Accounting
JF  - Journal of Finance and Accounting
JO  - Journal of Finance and Accounting
SP  - 367
EP  - 377
PB  - Science Publishing Group
SN  - 2330-7323
UR  - https://doi.org/10.11648/j.jfa.20160406.17
AB  - This study analyzes the impact of the 2008 and 2014 oil price falls on the shareholder returns of diversified oil and gas majors, Canadian oil sands producers, US shale oil and gas producers and oilfield service companies. The 2008 an 2014 oil price shocks lead to capital book losses for investor TSR at year end. In both years, the TSR losses were disproportionately large as compared to the actual slow down (which was very modest) in retained earnings growth. Our recommendation is that investors should not only use P/E ratios to identify value growth stock investment opportunities. An alternative methodology quantifies the degree of speculative valuation involved in the TSR component of capital gains (losses). When negative speculative valuations are large, future TSR growth is most likely. Companies that want to mitigate unwarranted erosion of their market capitalization due to stock price declines should ramp up advertorial efforts and point out value growth opportunities to attract investors, especially in times of depressed stock prices.
VL  - 4
IS  - 6
ER  -

Copy | Download