Abstract
The value of publicly traded firms are characterized by their market capitalization and enterprise value. Market capitalization is the total value of tradable shares of a company at a specific point in time, determined by the product of its stock price and the number of outstanding shares. Enterprise value is the market capitalization plus debt, minority interest and preferred shares, minus total cash and cash equivalents. Models of market capitalization and enterprise value for a cross section of offshore drilling contractors circa 2011 is described. The valuation methodology is outlined and the results of regression models are presented along with a discussion of the limitations of analysis. Fleet value is the single best predictor of market capitalization and enterprise value.
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Notes
- 1.
Goodwill impairment occurs when the fair market value of goodwill exceeds the carrying value. Under accounting rules, companies must review their goodwill annually by projecting profits and analyzing the market values of similar assets. If the profit outlook worsens or market value declines, a company is supposed to write down the value of the goodwill, booking an expense equal to the reduction. Since write downs don’t involve cash flow or operations, they are often ignored by analysts and investors [15].
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Kaiser, M.J., Snyder, B.F. (2013). Offshore Driller Valuation Models. In: The Offshore Drilling Industry and Rig Construction in the Gulf of Mexico. Lecture Notes in Energy, vol 8. Springer, London. https://doi.org/10.1007/978-1-4471-5152-4_8
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DOI: https://doi.org/10.1007/978-1-4471-5152-4_8
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