Report: to boost their value, big oil companies should split upIf oil companies want to deliver heftier returns for their shareholders, they should split up their organizations, according to a leading industry analyst.

Christopher Swann affirms that while still profitable, large oil companies have experienced big hits to their price-to-earnings multiples over the past 10 years. They have fallen from the high tens in the early 2000s to the seven to 12 range recently – even though oil has more than tripled in price since then.

Large oil companies, like Exxon Mobil and BP, often combine their higher growth exploration businesses with their slower moving refining and marketing divisions. However, investors love simplicity and pure exploration companies in the U.S. trade at nearly 20 times per 2011 earnings – while the major oil companies are far lower at 11 times per 2011 earnings.

Oppenheimer researchers assert that U.S. major oil companies could boost their value by more than 20 percent if they spin off their refining and marketing operations.

Ultimately, splitting up major oil companies would enable investors to more easily value them and help managers to focus on one area of expertise, rather than disjointed businesses held together by bureaucratic red tape.
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