How to value energy stocks

Market value and enterprise value (EV)

Market value (market capitalisation) is the share price multiplied by the number of shares outstanding. Shares the company holds itself are not counted.

Enterprise value (EV) is the value of the whole business, for both shareholders and lenders:

EV = market value + net interest-bearing debt

Net interest-bearing debt is borrowings minus cash. Many also add lease liabilities and minority interests, the part of subsidiaries owned by others. Two companies with the same market value can therefore have very different EVs: whoever buys a shipowner with large loans on its ships also takes over the loans.

Watch the currency. Many oil and shipping companies report in US dollars, while their shares trade in Norwegian kroner on Oslo Børs. Convert to the same currency before combining the figures.

Multiples: P/E, EV/EBITDA and P/B

A multiple sets the price against a key figure, so that companies of different sizes can be compared.

Oil, oil service and shipping companies are often compared on EV/EBITDA. Their debt varies a lot, and EV includes it. Depreciation, impairments and gains on ship sales also make earnings, and therefore P/E, uneven. The figures above and below the line must match: EV goes with figures before interest, market value with figures after interest.

EBITDA has two weaknesses. It is calculated before capital expenditure, so a company that must spend heavily on new ships or wells can look cheap. And it is calculated before tax: profits from petroleum activities on the Norwegian shelf are taxed at a combined 78 % (norskpetroleum.no, read 5 Oct 2026), while shipowners in the Norwegian tonnage tax scheme are exempt from tax on operating income from shipping and pay tonnage tax instead (Norwegian Tax Administration). EBITDA is also an alternative performance measure that companies define themselves (ESMA).

A worked example: EV/EBITDA and cash flow

Free cash flow and capital expenditure

Free cash flow is usually cash flow from operations minus capital expenditure (capex). Where to find the figures is explained in the guide to reading an annual report. For valuation, three things matter:

• Maintenance or growth. Part of the capex is needed just to keep the business at the same level. Oil and gas companies must drill new wells because production from their fields declines after the plateau, and shipowners must drydock their ships and renew the fleet. Money that must be spent this way is not free.
• Free cash flow yield is free cash flow divided by market value. One year says little in a cyclical industry; look at several years and at the investment plans.
• Leases. Under the accounting standard IFRS 16, most leases are recognised on the balance sheet, and the cost appears as depreciation and interest rather than as an operating cost. EBITDA is therefore higher for companies that charter in ships, rigs or vessels (IASB), even though the rent must be paid. Check whether debt and free cash flow are calculated with or without leases.

Net asset value (NAV)

Net asset value (NAV) is the value of the assets minus net debt. When the value lies in a few large assets, such as oil fields and ships, NAV is a common starting point.

• Oil and gas companies: the net present value of each field is calculated separately, from reserves, production profile, prices, costs and tax, and the values are added up. Net debt and obligations such as decommissioning are subtracted. Discoveries not yet sanctioned for development are often included, weighted by how likely they are to be developed. See how net present value is calculated in the guide to assessing a new discovery.
• Shipowners: NAV is the value of the fleet minus net debt. Ships are usually valued at what shipbrokers estimate they could be sold for today, without a charter.

The share price divided by NAV per share is called P/NAV. Below 1 means the market values the company below its assets, for example because it expects lower prices or rates than the estimates.

Dividends and buybacks

• Dividend yield is dividend per share divided by the share price, usually using the dividends of the last twelve months.
• Payout ratio is dividends divided by net profit. Some companies state their dividend policy as a share of cash flow instead.
• Buybacks mean the company buys its own shares in the market. There are then fewer shares, and each of the remaining ones owns a larger part of the company.
• Ex-date is the first day the share trades without the right to the dividend, and the price usually falls by about the dividend. The calendar on the analysis page shows the ex-dates the companies have published.

A high dividend yield can mean the market expects the dividend to fall. Compare dividends with free cash flow: if more is paid out than the company earns, the money comes from cash or new borrowing.

A Norwegian public limited company (ASA) may only pay dividends as far as it has adequate equity and liquidity after the distribution (Public Limited Liability Companies Act section 8-1). Buybacks require an authorisation from the general meeting for no more than two years at a time, and the total nominal value of the company's own shares may not exceed ten per cent of the share capital (sections 9-2 and 9-4). Companies registered in other countries follow their own rules.

Sensitivity to oil prices and freight rates

• Oil and gas companies get their revenue directly from oil and gas prices. Many show in reports or presentations how cash flow changes with prices. Debt amplifies the effect on the share.
• Suppliers and drilling contractors are affected later and more indirectly, through the oil companies' investments and the contracts signed. See dayrate, utilisation and backlog.
• Shipowners follow freight rates more than the oil price, and more closely the larger the share of the fleet trading in the spot market rather than on period contracts. See the guide to the freight market.

Beta shows how much a share has moved on average when a benchmark moved 1 %. Beta against the stock market is used in the capital asset pricing model (CAPM) to estimate the required return. Correlation shows how closely the two have followed each other, on a scale from −1 to 1. The “Stock vs oil price” block on the analysis page calculates both for the last year, against Brent, TTF, Henry Hub or the Oslo Børs benchmark index (OSEBX). The figures describe the past: the krone, company news and expiring contracts can change the relationship.

Risks the multiples do not show

• Debt. Check when the loans mature and which loan terms (covenants) apply, for example requirements for equity or for the ships' value relative to the loan. A breach can force a sale or a share issue in a bad period.
• Cycles. At the top of a cycle, earnings are high and P/E is low, so the share looks cheap just when earnings are at their best. Use averages over several years or more normal prices and rates.
• Tax, politics and currency. Tax rules, licence terms and fees can change, and companies operating in several countries face different political risks. With revenue in dollars and the share in kroner, the exchange rate also affects the share.
• Sanctions can close markets and split the fleet. See AIS, sanctions and the shadow fleet.
• Lifetime and transition. Reserves run down, ships and rigs age, and climate policy and CO₂ prices affect demand and costs in the long run. See the energy transition on the shelf.

The guides are not investment advice; they explain how the figures are put together.

Sources

• Variables used in Datasets – Damodaran Online, NYU Stern – definitions of EV, EV/EBITDA, dividend yield, payout ratio, beta and free cash flow
• ESMA Guidelines on Alternative Performance Measures (2015) – EBITDA and net debt as examples of alternative performance measures
• IFRS 16 Leases: Effects Analysis – IASB, January 2016 – leases on the balance sheet and higher EBITDA
• Public Limited Liability Companies Act – Lovdata (in Norwegian) – section 8-1 on dividends and sections 9-2 to 9-4 on own shares, read 5 Oct 2026
• Petroleum tax – norskpetroleum.no – combined tax rate of 78 %, read 5 Oct 2026
• Tonnage tax scheme – Norwegian Tax Administration (in Norwegian) – exemption for operating income from shipping and the tonnage tax

The guides are written by OESA students to explain concepts and how things fit together. They are not investment advice. Figures that are not definitions carry a source and a date; if you find an error, let us know at philipstave@oesa-global.com.