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The Timing and Incidence of Exploratory Drilling on Offshore Wildcat Tracts

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  • Hendricks, Kenneth
  • Porter, Robert H

Abstract

This paper documents exploratory drilling activity on offshore wildcat oil and gas leases in the Gulf of Mexico sold between 1954 and 1980. The authors calculate the empirical drilling hazard function for cohorts in specific areas. For each year of the lease, they study the determinants of the decision whether to begin exploratory drilling and their relationship to the outcome of any drilling activity. Their results indicate that equilibrium predictions of plausible noncooperative models are reasonably accurate and more descriptive than those of cooperative models of drilling timing. The authors discuss why noncooperative behavior may occur and the potential gains from coordination. Copyright 1996 by American Economic Association.

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 86 (1996)
Issue (Month): 3 (June)
Pages: 388-407

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Handle: RePEc:aea:aecrev:v:86:y:1996:i:3:p:388-407

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Cited by:
  1. Lin, C.-Y. Cynthia, 2009. "Estimating strategic interactions in petroleum exploration," Energy Economics, Elsevier, vol. 31(4), pages 586-594, July.
  2. Mohn, Klaus & Osmundsen, Petter, 2008. "Exploration economics in a regulated petroleum province: The case of the Norwegian Continental Shelf," Energy Economics, Elsevier, vol. 30(2), pages 303-320, March.
  3. Alex Gershkov, 2009. "Optimal auctions and information disclosure," Review of Economic Design, Springer, vol. 13(4), pages 335-344, December.
  4. Thomas Mayer, 2012. "Ziliak and McCloskey's Criticisms of Significance Tests: An Assessment," Econ Journal Watch, Econ Journal Watch, vol. 9(3), pages 256-297, September.
  5. Hannah Hörisch & Oliver Kirchkamp, 2008. "Less fighting than expected - experiments with wars of attrition and all-pay auctions," Jena Economic Research Papers 2008-023, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  6. Marianne Bertrand & Sendhil Mullainathan, 2005. "Profitable Investments or Dissipated Cash? Evidence on the Investment-Cash Flow Relationship From Oil and Gas Lease Bidding," NBER Working Papers 11126, National Bureau of Economic Research, Inc.
  7. Beshears, John, 2013. "The performance of corporate alliances: Evidence from oil and gas drilling in the Gulf of Mexico," Journal of Financial Economics, Elsevier, vol. 110(2), pages 324-346.
  8. James L. Smith & Rex Thompson, 2006. "Rational Plunging and the Option Value of Sequential Investment The Case of Petroleum Exploration," Working Papers 0602, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
  9. Boyce, John R. & Nøstbakken, Linda, 2011. "Exploration and development of U.S. oil and gas fields, 1955-2002," Journal of Economic Dynamics and Control, Elsevier, vol. 35(6), pages 891-908, June.
  10. Hannah Hörisch & Oliver Kirchkamp, 2010. "Less fighting than expected," Public Choice, Springer, vol. 144(1), pages 347-367, July.
  11. Ziliak, Stephen T. & McCloskey, Deirdre N., 2004. "Size matters: the standard error of regressions in the American Economic Review," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 33(5), pages 527-546, November.
  12. Boyce, John R. & Vojtassak, Lucia, 2008. "An 'oil'igopoly theory of exploration," Resource and Energy Economics, Elsevier, vol. 30(3), pages 428-454, August.
  13. Haile, Philip & Hendricks, Kenneth & Porter, Robert, 2010. "Recent U.S. offshore oil and gas lease bidding: A progress report," International Journal of Industrial Organization, Elsevier, vol. 28(4), pages 390-396, July.
  14. Doraszelski, Ulrich, 2004. "Innovations, improvements, and the optimal adoption of new technologies," Journal of Economic Dynamics and Control, Elsevier, vol. 28(7), pages 1461-1480, April.
  15. Torfinn Harding & James Cust, 2013. "Institutions and the Location of Oil Exploration," Economics Series Working Papers OxCarre Research Paper 12, University of Oxford, Department of Economics.
  16. Krishnan, Trichy V. & Feng, Shanfei & Beebe, Tony, 2011. "Modeling the demand and supply in a new B2B-upstream market using a knowledge updating process," International Journal of Forecasting, Elsevier, vol. 27(4), pages 1160-1177, October.
  17. Bar-Ilan, Avner & Strange, William C., 1998. "A model of sequential investment," Journal of Economic Dynamics and Control, Elsevier, vol. 22(3), pages 437-463, March.
  18. Peter Cramton, 2005. "How Best to Auction Oil Rights," Papers of Peter Cramton 06oil, University of Maryland, Department of Economics - Peter Cramton, revised 2005.

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