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Adaptation to Lower Oil Prices: International Corporations and Junior Shale Companies

Author

Listed:
  • KAZNACHEEV, Peter F.

    (Russian Presidential Academy of National Economy and Public Administration)

  • Kjurchiski, Nikola V.

    (Russian Presidential Academy of National Economy and Public Administration)

  • Samoilova, Regina V.

    (Russian Presidential Academy of National Economy and Public Administration)

Abstract

The dramatic fall in oil prices during 2014–2015 allows assessing the adaptability of different corporate models in the oil industry. This article presents a comparative analysis of financial and operational performance of vertically integrated international oil companies and US junior oil companies. The authors analyzed the impact of the companies’ size on their EBITDA, market capitalization and total oil production. The analysis demonstrated that, despite all their advantages, vertically integrated international oil companies made somewhat larger reductions in EBITDA than junior oil companies. International majors were also affected by larger drops in capitalization. At the same time, junior companies managed to make significantly larger increases in oil production. Panel data analysis using the difference-in-differences statistical method showed a positive correlation between EBITDA under low prices and the fact that the company belongs to the category of oil juniors. The authors come to the conclusion that small and medium companies with a significant share of shale production have demonstrated a high capacity for adaptation. These companies partially compensated the drop in revenues from lower oil prices by implementing rapid cost cutting, increased oil recovery, and the ability to increase production rapidly. The experience of junior oil companies has an impact on international oil majors in the area of technological innovation, and in broader corporate reorganization and adaptation. Over the last several years, shale companies have in many ways become trendsetters for the entire oil industry. They have innovated not only exploration and production technologies, but also management techniques which allowed reducing costs and increasing efficiency at a time of lower oil prices.

Suggested Citation

  • KAZNACHEEV, Peter F. & Kjurchiski, Nikola V. & Samoilova, Regina V., 2017. "Adaptation to Lower Oil Prices: International Corporations and Junior Shale Companies," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 6, pages 148-159, December.
  • Handle: RePEc:rnp:ecopol:ep1766
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    References listed on IDEAS

    as
    1. Lutz Kilian, 2016. "The Impact of the Shale Oil Revolution on U.S. Oil and Gasoline Prices," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 10(2), pages 185-205.
    2. Grinets, Irina & Kaznacheev, Peter, 2014. "The Role of Innovative Development in Unconventional Hydrocarbon Exploitation in the Context of the Shale Gas Revolution in the USA," Research Papers kazn02, Russian Presidential Academy of National Economy and Public Administration.
    3. Lin, Boqiang & Omoju, Oluwasola E. & Okonkwo, Jennifer U., 2015. "Will disruptions in OPEC oil supply have permanent impact on the global oil market?," Renewable and Sustainable Energy Reviews, Elsevier, vol. 52(C), pages 1312-1321.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    oil and gas industry; oil market; shale oil and gas; corporate adaptation.;

    JEL classification:

    • C45 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Neural Networks and Related Topics
    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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