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Economic and Financial Determinants of Oil and Gas Exploration Activity

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  • Peter C. Reiss

Abstract

This paper studies the investment activities of 44 independent oil and gas firms from 1978 to 1986. It develops a dynamic model of oil and gas exploration and development. The model predicts less of a decline in exploration activity than actually occurred in 1985-86. I consider the extent to which financial factors may have affected firms' investment plans during the 1985-86 deflation. There is some evidence that credit contracts in this industry did place important limitations on firm's abilities to respond to the energy price deflation. These constraints were imposed because lenders could not separately distinguish between unfavorable industry developments and poor individual firm performance.

Suggested Citation

  • Peter C. Reiss, 1989. "Economic and Financial Determinants of Oil and Gas Exploration Activity," NBER Working Papers 3077, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:3077
    Note: ME EEE
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    Cited by:

    1. Donald P. Morgan, 2002. "Rating Banks: Risk and Uncertainty in an Opaque Industry," American Economic Review, American Economic Association, vol. 92(4), pages 874-888, September.
    2. Donald P. Morgan, 2000. "Rating risks: risk and uncertainty in an opaque industry," Staff Reports 105, Federal Reserve Bank of New York.
    3. Sabet, Amir H. & Heaney, Richard, 2017. "Real options and the value of oil and gas firms: An empirical analysis," Journal of Commodity Markets, Elsevier, vol. 6(C), pages 50-65.
    4. Omer, Thomas C. & Terando, William D., 1999. "The Effect of Risk and Tax Differences on Corporate and Limited Partnership Capital Structure," National Tax Journal, National Tax Association, vol. 52(n. 4), pages 699-716, December.

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