Adaptation to Lower Oil Prices: International Corporations and Junior Shale Companies[Адаптация К Снижению Цен На Нефть: Международные Корпорации И Сланцевые Компании]

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.