Energy
By SuperdayReps · Wharton MBA · ex-Greenhill · investment banking interview coaching
18 min read · updated October 10, 2026
An energy interview is mostly the standard first round. The three statements, a DCF, terminal value, WACC, enterprise value against equity value and the valuation methods all still come up, and they are covered in the range of technicals and the lessons under it.
What is different about energy is who sets the price. An oil producer sells at whatever the market pays that day. A regulated utility charges what a state commission allows. A solar farm sells under a contract signed years ago, and an interstate pipeline charges regulated tariffs that a federal regulator approves. Each answer leads to a different valuation, and that is where the sector questions come from. The second difference is that much of the sector runs on assets that run out, which removes the terminal value from its most important model.
Two ideas carry the sector. First, ask what sets the company's price: the market, a contract or a regulator. Market prices mean scenarios and hedges; contracts mean their length and quality; a regulator means the rate base and the allowed return. Second, an oil or gas field depletes, so you run its cash flows until the reserves are gone, with no terminal value.
The map
| Vertical | How it makes money | How it is valued |
|---|---|---|
| Upstream (exploration and production, or E&P) | Finds oil and gas, drills wells and sells what they produce at market prices | NAV model; EV / EBITDAX, EV per daily production, EV per proved reserves |
| Oilfield services | Rigs, crews, equipment and data hired by producers | Standard DCF and EV / EBITDA, read through the cycle |
| Midstream | Fees for gathering, processing, moving and storing oil and gas | EV / EBITDA, distribution yield, dividend discount model |
| Downstream (refining and marketing) | The spread between crude oil and the fuels made from it | Standard DCF, EV / EBITDA and P / E |
| Integrated | All of the above in one company | Sum of the parts |
| Regulated utilities | An allowed return on the assets that serve customers | P / E, dividend yield, DDM, EV / rate base, P / BV |
| Independent power producers | Selling electricity at market prices, less fuel | DCF and EV / EBITDA, EV per megawatt |
| Renewables | Contracted power sales from wind and solar, plus tax credits | Project-level DCF, EV per megawatt, cash available for distribution |
Most of the table values normally. Upstream differs most, because its assets deplete at a price it cannot set. Midstream comes next, because so many pipeline companies are partnerships valued on yield. Regulated utilities have their return set for them, and renewables are valued project by project.
Keep reading
The rest of this lesson is free with an account
There's about 14 more minutes of Energy below this, plus every other lesson in Coverage Banking. Free account, no card.
Any partner school .edu
Frequently asked
- What questions do energy investment banking interviews ask?
- The standard first round plus a sector layer. The sector layer is the verticals in oil and gas and how each is valued, how a NAV model values an exploration and production company, what EBITDAX is and why it exists, the reserve and production multiples, how commodity price decks and hedges enter the numbers, how pipeline companies and MLPs are valued, what drives a refiner's margin, how a regulated utility earns an allowed return on its rate base, and how a renewable project is valued from its contracts and tax credits.
- How do you value an E&P company?
- Mainly with a net asset value model, which is a DCF built well by well or field by field that runs until the reserves are used up, with no terminal value, conventionally discounted at 10 percent. You add undeveloped acreage, cash and the value of any hedges, subtract debt and the value of corporate overhead, and compare the result with the share price. Alongside it bankers use EV / EBITDAX, enterprise value per barrel of daily production and enterprise value per barrel of proved reserves.
- What is EBITDAX?
- EBITDA with exploration expense added back. Oil and gas companies account for unsuccessful exploration in one of two ways: successful efforts companies expense it, while full cost companies capitalise it. Adding exploration expense back puts both on the same footing, so EV / EBITDAX can compare them.
- How are regulated utilities valued?
- On P / E and dividend yield against peers, with a dividend discount model or a DCF behind it, and often on enterprise value to rate base and price to book value. A regulator sets the return the utility may earn on its rate base, so earnings grow roughly with the rate base. The key questions are how fast the rate base grows, what return on equity the regulator allows and how much of it the utility actually earns.
LearnAI