Energy Investment Banking 63 Interview Exam Study Questions with 100% Correct Answers | Verified

How are energy and natural resource companies different from normal companies? - ️️1. they can't control revenue 2. asset-centric 3. different accounting 4. depleting assets 5. cyclical they can't control their revenue - ️️more accurately, they can't control the prices they receive for their products (O&G, gold, etc.) and can therefore only control the production side of revenue. asset-centric - ️️all value for natural resource companies flows directly from their assets - how much in reserves they have in the ground, how much they can produce, and how much they can find to replace what they've produced. different accounting - ️️different accounting standards, moreso for oil and gas companies, and so you have to do extra work when modeling companies and when using them in a valuation. depleting assets - ️️when natural resource companies produce energy or minerals, they also deplete the PP&E on their balance sheet - so, they have to spend a lot on acquisitions and replacement assets (M&A) cyclical - ️️prices for commodities (e.g., O&G) are cyclical and therefore difficult to project - remedy: look at longer time horizons and use price scenarios in models. What are the different segments of O&G? - ️️upstream: E&P midstream: R&M oil field services integrated majors