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Strategies & Market Trends : Value Investing
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To: E_K_S who wrote (48046)5/19/2012 1:14:24 PM
From: Paul Senior   of 78717
 
Hmm. I have to say I am not sure about these tangible book value number valuations for oil companies as generated by by the people who publish the information I use.

I will guess (I will defer to people here who actually know the accounting methodology.) that fluctuations in reserves - in the amount of reserves and the pricing of those reserves - is accounted for in net asset figures. Which I guess are available (if the company publicly issues this info) once a year after the independent firm that the oil company hires to make these evaluations, issues its report to the company. NAV fluctuates based on this info. Otoh, book value I guess is based on lower of cost or market of assets acquired, and with that being the case, I further guess that book value is not usually or routinely adjusted for the dollar value of reserves on the balance sheet. And therefore not by the stock screen people who just use the company's balance sheet to make a routine calculation of tangible book value from the company's balance sheet.

For example, here we have YCharts giving us HES's tangible book value of $16.8B (higher than HES's market price of $15B) from subtracting a couple of items from HES's balance sheet:

ycharts.com
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I well-remember the Shell abrupt reserve adjustment and the resulting sharp stock price drop. (I don't know if book value was affected or not. Seemingly, it was such a large drop in reserve amounts that it was significant and material, so maybe it did drop book value too.) In any case it was a very shocking announcement. And cautionary for investors.
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