Investment Appeal Evaluation of Oil Companies

This work investigates the evaluation of the investment appeal of oil companies and identification of factors affecting it. The aim of the study is to evaluate the investment appeal of oil companies taking into account the factors affecting it. To achieve this goal, it has been necessary to study the literature on the chosen topic, to analyze the main characteristics of the current state of the oil industry, to make a comparative analysis of investment appeal indicators and choose the most appropriate one, to assess the investment appeal of selected oil companies based on it, and after that to conduct empirical analysis to identify factors affecting it. The cash value added has been chosen as an indicator of investment appeal. The empirical analysis has been conducted on the basis of the CVA. Based on the evaluation results of the CVA, a significant reduction or insufficiency of the cash flow created by oil companies to cover the value of strategic investments has been revealed in 2015. In general, over the period, most companies create the added value of the cash flow, which indicates the income from the invested capital covering the risks. According to the results of the empirical analysis, it has been revealed that, among the factors forming the CVA, the weighted average cost of capital, changes in operating profit and invested capital exert the greatest influence. After that, the main drivers for each indicator have been determined. Through these drivers managers of oil companies have the opportunity to increase the value of CVA, and, as a consequence, the investment appeal of the company. Based on results of empirical analysis also it has been identified a direct correlation between investment appeal and the level of production and the coefficient of the depth of refining. Moreover, a direct correlation between the investment appeal of oil companies and world oil prices has confirmed.