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Shell’s Consolidation Strengthens World’s Most Valuable Oil & Gas

17 March 2017
This article is more than 4 years old.

Shell maintains status as the world’s most valuable Oil & Gas brand with a value of US$36.8bn

· Strategic divestment and marketing communications help to strengthen brand

· However, growth rates of 40%+ mean Sinopec and PetroChina likely to overtake Shell this year

Every year, leading valuation and strategy consultancy Brand Finance values the brands of thousands of the world’s biggest companies. Brands are first evaluated to determine their power / strength (based on factors such as marketing investment, familiarity, loyalty, staff satisfaction and corporate reputation) and given a corresponding letter grade up to AAA+. Brand strength is used to determine what proportion of a business’s revenue is contributed by the brand, which is projected into perpetuity to determine the brand’s value. The world’s most valuable oil & gas brands are ranked and included in the Brand Finance Oil & Gas 50 2017.

In brand value terms, the last year has been perhaps surprisingly successful for oil & gas brands. Just seven of the top 50 have lost brand value, with dozens of major brands seeing double digit growth. Oil prices saw a fairly steady increase across 2016 as supply became slightly more constrained, helping to improve revenues. After a drop at the beginning of the year, Brent Crude nearly doubled in value from early January to the end of December.

Shell remains the world’s most valuable oil and gas brand with a brand value of US$37 billion, up from US$31.6 billion last year. Shell’s asset disposal program combined and geographic pullback have helped it to consolidate the strength of its brand. Shell’s brand strength has been upgraded from AA+ to AAA-. Its longstanding partnership with Ferrari continues to deliver returns, with a demonstrable price premium attributable to the association with the world’s most powerful auto brand. As part of its ‘Make the Future’ initiative, Shell enlisted the help of six popstars from around the world for its ‘Best Day of My Life’ video, which became one of the most viral ads of 2016. David Haigh continues, “The enhanced strength of Shell’s brand will enable it to maintain or improve margins, even as revenues fall.”

2nd and 3rd place are Sinopec and PetroChina are growing rapidly. As in so many other of Brand Finance’s brand value league tables, Chinese brands are just on the cusp of taking the number one spot. Sinopec and PetroChina’s brands are worth US$29.6 billion and US$29 billion respectively and even with far lower rates of growth than this year (47% and 43%), both could easily overtake Shell in 2018.

Brand Finance CEO David Haigh continues, “Sinopec is planning a US$10 billion IPO of its retail business which includes over 30,000 sites. A clear understanding of brand value drivers will be a useful tool in extracting maximum value from the listing and, post-sale brand management will become even more critical as shareholders demand accountability.”

ENDS

Note to Editors

Brand values are reported in USD. For precise conversions into local currency values, please confirm rates with the Brand Finance team.

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Media Contacts

Konrad Jagodzinski
Konrad Jagodzinski
Communications Director
Brand Finance
Florina Cormack-Loyd
Florina Cormack-Loyd
Senior Communications Manager
Brand Finance

About Brand Finance

Brand Finance is the world’s leading brand valuation consultancy. Bridging the gap between marketing and finance, Brand Finance evaluates the strength of brands and quantifies their financial value to help organisations of all kinds make strategic decisions.

Headquartered in London, Brand Finance has offices in over 20 countries, offering services on all continents. Every year, Brand Finance conducts more than 5,000 brand valuations, supported by original market research, and publishes nearly 100 reports which rank brands across all sectors and countries.

Brand Finance is a regulated accountancy firm, leading the standardisation of the brand valuation industry. Brand Finance was the first to be certified by independent auditors as compliant with both ISO 10668 and ISO 20671, and has received the official endorsement of the Marketing Accountability Standards Board (MASB) in the United States.

Methodology

Definition of Brand

Brand is defined as a marketing-related intangible asset including, but not limited to, names, terms, signs, symbols, logos, and designs, intended to identify goods, services, or entities, creating distinctive images and associations in the minds of stakeholders, thereby generating economic benefits.

Brand Strength

Brand strength is the efficacy of a brand’s performance on intangible measures relative to its competitors. Brand Finance evaluates brand strength in a process compliant with ISO 20671, looking at Marketing Investment, Stakeholder Equity, and the impact of those on Business Performance. The data used is derived from Brand Finance’s proprietary market research programme and from publicly available sources.

Each brand is assigned a Brand Strength Index (BSI) score out of 100, which feeds into the brand value calculation. Based on the score, each brand is assigned a corresponding Brand Rating up to AAA+ in a format similar to a credit rating.

Brand Valuation Approach

Brand Finance calculates the values of brands in its rankings using the Royalty Relief approach – a brand valuation method compliant with the industry standards set in ISO 10668. It involves estimating the likely future revenues that are attributable to a brand by calculating a royalty rate that would be charged for its use, to arrive at a ‘brand value’ understood as a net economic benefit that a brand owner would achieve by licensing the brand in the open market.

The steps in this process are as follows:

1 Calculate brand strength using a balanced scorecard of metrics assessing Marketing Investment, Stakeholder Equity, and Business Performance. Brand strength is expressed as a Brand Strength Index (BSI) score on a scale of 0 to 100.

2 Determine royalty range for each industry, reflecting the importance of brand to purchasing decisions. In luxury, the maximum percentage is high, while in extractive industry, where goods are often commoditised, it is lower. This is done by reviewing comparable licensing agreements sourced from Brand Finance’s extensive database.

3 Calculate royalty rate. The BSI score is applied to the royalty range to arrive at a royalty rate. For example, if the royalty range in a sector is 0-5% and a brand has a BSI score of 80 out of 100, then an appropriate royalty rate for the use of this brand in the given sector will be 4%.

4 Determine brand-specific revenues by estimating a proportion of parent company revenues attributable to a brand.

5 Determine forecast revenues using a function of historic revenues, equity analyst forecasts, and economic growth rates.

6 Apply the royalty rate to the forecast revenues to derive brand revenues.

7 Discount post-tax brand revenues to a net present value which equals the brand value.

Disclaimer

Brand Finance has produced this study with an independent and unbiased analysis. The values derived and opinions presented in this study are based on publicly available information and certain assumptions that Brand Finance used where such data was deficient or unclear. Brand Finance accepts no responsibility and will not be liable in the event that the publicly available information relied upon is subsequently found to be inaccurate. The opinions and financial analysis expressed in the study are not to be construed as providing investment or business advice. Brand Finance does not intend the study to be relied upon for any reason and excludes all liability to any body, government, or organisation.

The data presented in this study form part of Brand Finance's proprietary database, are provided for the benefit of the media, and are not to be used in part or in full for any commercial or technical purpose without written permission from Brand Finance.

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