Abstract:
Since oil price is volatile and oil companies are affected, oil industry is bed of disputes. In this condition, finding appropriate method of compensation valuation is very important. We considered discounted cash flow method in compensation valuation in oil industry disputes. This survey showed that high volatile cash flow and oil company future contingency are the most obstacles for using of this method. Cash flow prediction based on oil price normalization, using scenario and sensitivity analysis are resolutions for removing obstacles of using discounted cash flow. For Managing investment in oil industry in Iran, it has been suggeted to agree on future cash flow and discounted rate before starting the project.
Machine summary:
Investigating the Method of Discounting Future Cash Flows in Calculating Compensation in Oil Industry Arbitrations Hamidreza Oloumi Yazdi Associate Professor, Department of Private Law, Faculty of Law, Allameh Tabataba'i University Mehdi Rashno PhD Student in Oil and Gas Contract Management, Faculty of Law, Allameh Tabataba'i University (Date of Receipt: 2019/03/11 - Date of Approval: 2019/09/09) Abstract The oil industry has been a platform for investment disputes due to the high volatility of oil prices and the vulnerability of oil companies to them.
This research investigates the use of the discounted cash flow method in calculating compensation in investment disputes in the oil industry.
Is the discounted cash flow method, which is one of the common methods of calculating compensation in arbitration awards, applicable to assessing damages in oil and gas projects?
Canadian appraisal profession “One of the income approach methods for valuation is one in which the present value of future cash flows is calculated with a specified discount rate” (International Glossary of .
Business Valuation Terms, 2001: 279) In the discounted cash flow method, the value of the company is determined based on its future situation.
Examples of Using the Discounted Cash Flow Method in Arbitration Awards In the case between CMS and the government of Argentina, which was formed based on the investment agreement between the governments of the United States and Argentina, the tribunal considered the discounted cash flow method for evaluation; because the project under consideration had reached activity and profitability, and sufficient data existed for valuation through this method.
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