scholarly journals Portfolio Choice for a Resource-Based Sovereign Wealth Fund: An Analysis of Cash Flows

2020 ◽  
Vol 8 (1) ◽  
pp. 14
Author(s):  
Knut Anton Mork ◽  
Hanna Marisela Eap ◽  
Magnus Eskedal Haraldsen
Keyword(s):  
Cash Flow ◽  
Portfolio Choice ◽  
Oil And Gas ◽  
Oil And Gas Industry ◽  
Cash Flows ◽  
Sovereign Wealth Fund ◽  
Gas Industry ◽  
Share Prices ◽  
Discount Factors ◽  
Equity Price

We consider the portfolio choice of a government with a Sovereign Wealth Fund (SWF) when government revenues depend on exhaustible resources, such as oil and gas. The question is whether the SWF portfolio should underweight shares in the resource industry. Some studies have found that these share prices correlate more closely with the overall stock market than the resource price, which would seem to weaken the case for underweighting. However, equity price movements depend not only on changes in expectations of future cash flows, but also on time variation in discount factors. We analyze cash flows directly, rather than trying to disentangle these effects. We have collected cash-flow data for the companies in all of the major industries of the FTSE Global All Cap index, the basis for the strategic index of the Norwegian Government Pension Fund Global. Subsequently, we look at the correlations between each industry’s cash flow and the Norwegian government’s cash flow from oil and gas. We find a close, statistically significant, and persistent correlation for the oil and gas industry. The correlations for other industries are small and mostly insignificant. We believe that our findings can be used to support proposals for SWFs in countries with significant petroleum revenues to underweight shares in this industry.

What happens when quantum computing re-defines the assessment of investment risk?

2017 ◽  
Vol 57 (2) ◽  
pp. 486
Author(s):  
Mark Laybourn ◽  
John Pascoe
Keyword(s):  
Quantum Computing ◽  
Oil And Gas ◽  
Quantum Computer ◽  
Oil And Gas Industry ◽  
Cash Flows ◽  
Daily Lives ◽  
Gas Industry ◽  
Market Prices ◽  
Investment Evaluation ◽  
Classical Computer

The dawn of quantum computing is upon us and as the world’s smartest minds determine how the technology will change our daily lives, we consider how it could benefit investors in oil and gas projects to make better decisions. The oil and gas industry relies on investment for its survival and investors expect a return commensurate with the risks of a project. The classical approach to investment evaluation relies on mathematics in which estimated project cash flows are assessed against a cost of capital and an upfront investment. The issue with this approach is the key assumptions which underpin the project cash flow calculations such as reserves, production and market prices are themselves estimates which each introduce a degree of risk. If we analysed the financial models of recent oil and gas developments we would find the key assumptions which underpin the projects would be vastly different to reality. The crystal ball of investment evaluation would benefit from a more powerful way to optimise estimates and assess risk. A quantum computer offers the ability to perform optimisation calculations not possible with classical computers. The theoretical ability to run infinite parallel processes (as opposed to sequential processes in classical computers) can fundamentally change the optimisation of estimates. Google and NASA were recently able to solve a highly specialised computing problem with a quantum computer 100 million times faster than a classical computer. The power to significantly improve estimation optimisations and thereby reduce risk will help investors achieve a higher degree of confidence and should see levels of investment increase.

scholarly journals The Problem of Determining Discount Rate for Integrated Investment Projects in the Oil and Gas Industry

Mathematics ◽  
2021 ◽  
Vol 9 (24) ◽  
pp. 3327
Author(s):  
Alexey Komzolov ◽  
Tatiana Kirichenko ◽  
Olga Kirichenko ◽  
Yulia Nazarova ◽  
Natalya Shcherbakova
Keyword(s):  
Discount Rate ◽  
Net Present Value ◽  
Oil And Gas ◽  
Oil And Gas Industry ◽  
Cash Flows ◽  
Practical Implementation ◽  
Gas Industry ◽  
Investment Projects ◽  
Integrated Project ◽  
Methodological Approaches

The main aim of this paper was to examine specific approaches to determining the discount rate for comprehensive computation of investment projects efficiency in the oil and gas industry. The objective of the study was to develop a scientific approach for determining the discount rate for integrated oil and gas projects. The authors analyze dynamic methods for determining the efficiency of investment projects in the oil and gas industry and conclude that they are advisable for oil and gas projects due to the high capital intensity of the projects and their long payback period. Regarding the need to implement dynamic indicators of efficiency, the authors set the task of deter-mining the proper discount rate as a factor having a significant impact on effectiveness evaluation. The discount rate is proposed to be evaluated by solving the equation and finding the break-even point where the NPV (net present value) of the integrated project will be equal to 0 (taking into account the revenue of the subprojects included in the complex). The practical implementation of methodological approaches to assessing the discount rate for integrated projects is relevant due to the execution of large, systemically important and integrated projects. As a result of the study, the authors put forward a methodological algorithm for determining the discount rate of an integrated project which assumes an assessment of cash flows for the subprojects included in the complex; determination of the target rate of return for subprojects; and calculation of prices for products at which a complex project become break-even. The practical implementation of methodological approaches to assessing the discount rate for integrated projects is relevant due to the execution of large systemically important integrated projects.

scholarly journals Company Valuation of PT Perusahaan Gas Negara TBK

2020 ◽  
Author(s):  
Fira Octaria Basri ◽  
Sylviana Maya Damayanti
Keyword(s):  
Cash Flow ◽  
Oil And Gas ◽  
Intrinsic Value ◽  
Oil And Gas Industry ◽  
Free Cash Flow ◽  
The State ◽  
Discounted Cash Flow ◽  
Gas Industry ◽  
Financial Report ◽  
State Revenue

More than decades, Indonesia’s economic growth depend on the oil and gas sector. In the past few years, oil and gas sector’s contribution to the state revenue decreased significantly along with the decline in reserves and production. The state revenue from the oil and gas industry decreased by almost 80 percent from Rp216 trillion in 2014 or 14 percent of state revenue to Rp44 trillion in 2016 or 2.8 percent of the state revenue. Perusahaan Gas Negara or also called as PGN is the largest national company in the natural gas transportation and distribution sector. In or der to make the business growing wider, PGN are going to acquiring Pertamina Gas or Pertagas. The acquisition is part of the establishment of the holding company in energy sector by the Ministry of State Own Enterprises, which was established on April 11, 2018. This research is made to know how the intrinsic value per share of Perusahaan Gas Negara (PGN) through calculating it with the discounted cash flow method using free cash flow to the firm. The data are obtained from PGN’s financial report from 2013 to 2018. The result is the intrinsic value per share of Perusahaan Gas Negara is IDR Rp6,757.72. Keywords: discounted cash flow, free cash flow to the firm, valuation.

Accounting and financial reporting considerations for oil and gas companies operating under Australia's proposed Carbon Pollution Reduction Scheme

2009 ◽  
Vol 49 (2) ◽  
pp. 585
Author(s):  
Nick Henry ◽  
Adam Cunningham
Keyword(s):  
Financial Markets ◽  
Financial Reporting ◽  
Oil And Gas ◽  
Greenhouse Gas Emission ◽  
Oil And Gas Industry ◽  
Cash Flows ◽  
Pollution Reduction ◽  
Reduction Scheme ◽  
Gas Industry ◽  
Oil And Gas Companies

The introduction of the Carbon Pollution Reduction Scheme (CPRS) is one of Australia’s most significant economic reforms since the deregulation of the Australian financial markets in the 1980s and will have a significant impact on companies across a number of sectors—in particular those in the oil and gas industry. Given the significant greenhouse gas emission footprint of the oil and gas industry in Australia, for many oil and gas companies the cost of buying carbon pollution permits and/or reducing emissions through targetted abatement programs is likely to be significant. From a strategic perspective, understanding how the proposed CPRS could affect future cash flows will be critically important. Financial markets have already begun to factor the potential cash flow impacts into valuations of companies likely to be directly impacted by the legislation. Public disclosure of the potential impacts of the CPRS is considered both an opportunity and threat for those companies exposed to it. The proposed CPRS will also pose significant governance, compliance and reporting challenges for those companies directly impacted by it. Measurement and reporting of emissions information will need to be subjected to the same level of control and rigour as other financial information. This paper will examine both the immediate and longer term accounting and financial reporting considerations for oil and gas companies as a result of the CPRS, focussing on what companies need to be doing now to be prepared for the introduction of this legislation.

scholarly journals Does Managerial Power Increase Selective Hedging? Evidence from the Oil and Gas Industry

2019 ◽  
Vol 12 (2) ◽  
pp. 71
Author(s):  
Jankensgård
Keyword(s):  
Corporate Governance ◽  
Cash Flow ◽  
Oil And Gas ◽  
Oil And Gas Industry ◽  
Oil Price ◽  
Opportunistic Behavior ◽  
Gas Industry ◽  
Inside Ownership ◽  
Power Increase ◽  
Managerial Power

This study examines the managerial power-hypothesis of selective hedging, which holds that selective hedging is observed more frequently in companies where managers have greater latitude to execute hedging proposals without serious scrutiny or questioning. The hypothesis is tested using hand-collected data on corporate governance and derivative positions from the oil and gas industry. The results support the view that managerial power increases selective hedging. The main governance dimension associated with selective hedging is the extent of inside ownership. Firms with high inside ownership have excessive variability in their derivative portfolios, were more prone to opportunistic behavior following the great rise in the oil price in the mid-2000s, and have lower realized cash flow from hedging.

Deployment of Digital NDT Solutions in the Oil and Gas Industry

2020 ◽  
Vol 78 (7) ◽  
pp. 861-868
Author(s):  
Casper Wassink ◽  
Marc Grenier ◽  
Oliver Roy ◽  
Neil Pearson
Keyword(s):  
Oil And Gas ◽  
Oil And Gas Industry ◽  
Gas Industry

What Does Rent Give to Federal Budget (on the Russia's Budget Dependence upon "Oil Dollars")

2004 ◽  
pp. 51-69 ◽  
Author(s):  
E. Sharipova ◽  
I. Tcherkashin
Keyword(s):  
Oil And Gas ◽  
Strong Dependence ◽  
Oil Prices ◽  
Federal Budget ◽  
Oil And Gas Industry ◽  
Gas Industry ◽  
Resource Rent ◽  
Tax Legislation ◽  
Russian Economy ◽  
The Government

Federal tax revenues from the main sectors of the Russian economy after the 1998 crisis are examined in the article. Authors present the structure of revenues from these sectors by main taxes for 1999-2003 and prospects for 2004. Emphasis is given to an increasing dependence of budget on revenues from oil and gas industries. The share of proceeds from these sectors has reached 1/3 of total federal revenues. To explain this fact world oil prices dynamics and changes in tax legislation in Russia are considered. Empirical results show strong dependence of budget revenues on oil prices. The analysis of changes in tax legislation in oil and gas industry shows that the government has managed to redistribute resource rent in favor of the state.

The Political Economy of Power: Approaches to the Analysis of Relationships between the State and Business in Russia

2011 ◽  
pp. 19-33
Author(s):  
A. Oleinik
Keyword(s):  
Oil And Gas ◽  
Road Construction ◽  
Oil And Gas Industry ◽  
Retail Trade ◽  
Business Community ◽  
The Political ◽  
Economic Power ◽  
Gas Industry ◽  
The Road ◽  
Ruling Elites

The article deals with the issues of political and economic power as well as their constellation on the market. The theory of public choice and the theory of public contract are confronted with an approach centered on the power triad. If structured in the power triad, interactions among states representatives, businesses with structural advantages and businesses without structural advantages allow capturing administrative rents. The political power of the ruling elites coexists with economic power of certain members of the business community. The situation in the oil and gas industry, the retail trade and the road construction and operation industry in Russia illustrates key moments in the proposed analysis.

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