Table 2 is a purely quantitative scoring table for 20 globally listed, investable oil and gas companies. The scoring table considers the following six quantitative aspects:
- Historical performance, which looks at the company’s historical financials over the past 10 years or since inception, where discounts are given for poor performance and inconsistency.
- Profitability, which looks at profitability ratios such as return on equity, return on assets and margins.
- Yields and Relative valuation, which compares the company’s fundamental yields against the risk-free rate and its relative valuation to peers.
- Financial safety, which examines the company’s balance sheet, comprising liquidity and solvency ratios, the quality of its shareholder equity, and any external credit rating on the company.
- Sentiment, which looks at analyst ratings and forward price ratios on the company.
- Price-to-value analysis, which compares price growth to weighted value growth across multiple periods. This weighted value includes revenue, net income and cash flows in ascending order.
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Investors should also qualitatively study any high-scoring companies they wish to invest in, since this scoring table is quantitative. From Table 2, New York-listed EOG Resources, ConocoPhillips, and Hong Kong-listed China National Offshore Oil Corporation (CNOOC) are the top-scoring companies.
Chart 1 shows the returns of WTI crude oil relative to those of these three companies over a one-year period. Charts 2, 3, and 4 show the 10-year financials for the highest-scoring companies. Investors seeking exposure to commodities, specifically O&G, should strongly consider the companies examined in the scoring table.
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Disclaimer: This article is strictly for information purposes only and does not constitute a recommendation, solicitation or expression of views to influence readers to buy or sell investment instruments, including the ones mentioned. Any personal investments should be made at the investor’s own discretion and/or after consulting licensed investment professionals, at their own risk. The author of this article does not hold or own any investment instrument(s) featured in this article or have a vested interest in it at the time of writing.
