In 2024, oil and gas companies experienced a decline in profits compared to the previous year. For instance, Shell’s annual profits are expected to fall to just over $24 billion, down from higher figures in prior years. Similarly, ExxonMobil has warned investors of significantly lower profits.
An abundance of new oil and gas projects have led to weaker markets and the oil shortage crisis due to the Russia-Ukraine war has reversed course.
Oil and Gas Valuation Multiples
Oil and gas valuation multiples such as the P/S revenue multiple in 2024 is 1.5x out of 162 oil and gas companies. This is higher than coal valuation multiples but lower than renewable energy revenue multiples.
If the oil and gas industry faces financial challenges in 2025 due to increased supply, revenue multiples are forecasted to decline further over the next year.
Oil and Gas EBITDA Multiples
The median oil and gas EBITDA multiples in 2024 is 4.2x. Compared to other industries, the EBITDA multiple is suppressed. Investor’s perception of challenges in increasing profitability for oil and gas companies may be reflected in the lower EBITDA multiples.
Median PE multiple for global oil and gas companies that are listed on major US exchanges is 10.7x in 2024.
Oil and Gas Company Margins
The median gross margin for oil and gas companies in 2024 is 51%, the median EBITDA margin is 47%, and the median net profit margin is 16%.
Oil and Gas Industry Outlook 2025
Looking ahead to 2025, analysts and investors anticipate continued challenges for the oil and gas sector. The U.S. Energy Information Administration forecasts that benchmark Brent crude oil prices will decrease from an average of $81 per barrel in 2024 to $74 per barrel in 2025, and further to $66 per barrel in 2026. .
Trump’s efforts to boost U.S. oil production may face significant challenges, not from politics, but from Wall Street itself. Investors are pressuring oil companies to focus on steady profits and avoid reckless spending on new drilling projects.
This financial caution, combined with lower oil prices cutting into potential profits, means many companies are reluctant to increase production aggressively. As a result, U.S. oil output is expected to grow at a slower pace than in previous years, despite the administration’s push to revive the industry via “drill, baby, drill”.
Refresher: Value a company using revenue, value a company using EBITDA.
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