1887
Volume 34, Issue 1
  • ISSN: 0263-5046
  • E-ISSN: 1365-2397

Abstract

Six years after the Great Recession of 2008/2009, the oil and gas industry is afflicted by a new crisis: OPEC’s global oil price war. Many see the 2014/2015 oil price plunge as a test of financial endurance between OPEC and US shale producers. Shale producers have added 4 million barrels of crude per day to global oil supply since 2010, and reduced the US need for Saudi imports. Canadian tar sand producers added nearly another 4 million barrels per day in less than a decade. Rising output of US shale oil and Canadian tar sand producers threatened to erode the OPEC market share. All growth in global oil demand has over the past decade led to a rise in market share only for non-OPEC producers. That is what Saudi Arabia and its OPEC associates wanted to stop. In an effort to put the new entrants (unconventional oil producers) out of business, the 2014/2015 oil price plunge has been deliberately prolonged by OPEC, which continues to oversupply the market by more than 1.5 million barrels per day. Unlike today, OPEC helped in 2008/2009 to restore oil prices rapidly by steep production cuts in response to lagging oil demand owing to the global recession. In this article, we compare the severity of the impact brought on by the two most recent oil price crises on the various types of oil companies. Tracking timely market capitalization and P/E ratios (share price per earnings) of the oil majors covering the 2008 epoch of oil price decline confirmed that oil company KPIs recovered rapidly during the second quarter of 2009 (Weijermars, 2010; 2011). An update of the analysis of key performance indicators (KPI) over the past decade provides insight into how companies are affected by poor market conditions. We examine the periods before the two recessions, and include post-2014 data after the beginning of the current oil price war. This study tracks the impact of economic downturns on 26 upstream oil and gas companies. In order to facilitate the analysis of the data for the 26 companies tracked on this study, they were split into peer groups based on shareholder structure, size of the corporation, degree of vertical integration and the types of oil/gas production most commonly performed by the company. The five different peer groups studied are majors, independents, US shale producers, Canadian oil sand producers and public private partnerships (PPP). The five peer groups and their respective companies are presented in Table 1. The KPIs chosen for our study are share prices, market capitalization and return on capital employed (ROCE). These were tracked annually, quarterly and daily between 2005 and 2014, and for the first half of 2015 with information available until completion of our study (July 2015).

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/content/journals/0.3997/1365-2397.34.1.83803
2016-01-01
2024-03-29
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  • Article Type: Research Article
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