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The choice of strategic core – impact of financial volume

Author

Listed:
  • Magne Emhjellen
  • Kjell Hausken
  • Petter Osmundsen

Abstract

Recent trends among major oil companies and independents have been consolidation through mergers and acquisitions and focus on key strategic core areas. The expressed goals have been to achieve synergy, reduce costs, and concentrate on areas with maximum expected value creation. This paper provides a model that endogenously determines the optimal numbers of projects to implement in an optimal number of areas. The decision of whether to invest in a project cannot be seen in isolation but must be linked with portfolio optimisation and the strategic core of the firm. Accounting for excess opportunity costs and monitoring costs, we demonstrate how financial volume, i.e., materiality, is decisive for companies' investment allocation decision and how implementing marginally profitable projects in low-tax areas may be part of an optimal solution.

Suggested Citation

  • Magne Emhjellen & Kjell Hausken & Petter Osmundsen, 2006. "The choice of strategic core – impact of financial volume," International Journal of Global Energy Issues, Inderscience Enterprises Ltd, vol. 26(1/2), pages 136-157.
    • Handle: RePEc:ids:ijgeni:v:26:y:2006:i:1/2:p:136-157
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    Citations

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    Cited by:

    1. Magne Emhjellen & Petter Osmundsen, 2013. "CCS - Failing to Pass Decision Gates," CESifo Working Paper Series 4525, CESifo.
    2. Petter Osmundsen & Kjell Løvås & Magne Emhjellen, 2017. "Petroleum Tax Competition Subject ot Capital Rationing," CESifo Working Paper Series 6390, CESifo.
    3. Magne Emhjellen & Petter Osmundsen, 2016. "Oil Project Selection by Metrics," CESifo Working Paper Series 5898, CESifo.
    4. repec:ces:ceswps:_4944 is not listed on IDEAS
    5. Osmundsen, Petter & Emhjellen, Magne, 2010. "Decision criteria for climate projects," UiS Working Papers in Economics and Finance 2010/2, University of Stavanger.

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