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Determinants of the Timing and Incidence of Exploratory Drilling on Offshort Wildcat Tracts

Author

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  • Kenneth Hendricks
  • Robert H. Porter

Abstract

This paper documents exploratory drilling activity on offshore wildcat oil and gas leases in the Gulf of Mexico that were sold between 1954 and 1990, with emphasis on the period before 1980. For each year of the lease, we study the determinants of the decision whether or not to begin exploratory drilling, and the outcome of any drilling activity. Our results indicate that equilibrium predictions of plausible noncooperative models are reasonably accurate, and more descriptive than those of cooperative models of drilling timing. We discuss why noncooperative behavior may occur, and the potential gains from coordination.

Suggested Citation

  • Kenneth Hendricks & Robert H. Porter, 1993. "Determinants of the Timing and Incidence of Exploratory Drilling on Offshort Wildcat Tracts," NBER Working Papers 4605, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:4605 Note: IO
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    References listed on IDEAS

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    1. Wiggins, Steven N & Libecap, Gary D, 1985. "Oil Field Unitization: Contractual Failure in the Presence of Imperfect Information," American Economic Review, American Economic Association, vol. 75(3), pages 368-385, June.
    2. Peter C. Reiss, 1990. "Economic and Financial Determinants of Oil and Gas Exploration Activity," NBER Chapters,in: Asymmetric Information, Corporate Finance, and Investment, pages 181-206 National Bureau of Economic Research, Inc.
    3. Hendricks, Kenneth & Porter, Robert H, 1988. "An Empirical Study of an Auction with Asymmetric Information," American Economic Review, American Economic Association, vol. 78(5), pages 865-883, December.
    4. James L. Paddock & Daniel R. Siegel & James L. Smith, 1988. "Option Valuation of Claims on Real Assets: The Case of Offshore Petroleum Leases," The Quarterly Journal of Economics, Oxford University Press, vol. 103(3), pages 479-508.
    5. Case, Anne C, 1991. "Spatial Patterns in Household Demand," Econometrica, Econometric Society, vol. 59(4), pages 953-965, July.
    6. Hendricks, Kenneth & Porter, Robert H, 1992. "Joint Bidding in Federal OCS Auctions," American Economic Review, American Economic Association, vol. 82(2), pages 506-511, May.
    7. Libecap, Gary D & Wiggins, Steven N, 1985. "The Influence of Private Contractual Failure on Regulation: The Case of Oil Field Unitization," Journal of Political Economy, University of Chicago Press, vol. 93(4), pages 690-714, August.
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    Cited by:

    1. Lin, C.Y. Cynthia, 2009. "Do Firms Interact Strategically?," Working Papers 225896, University of California, Davis, Department of Agricultural and Resource Economics.
    2. Cynthia Lin, C.-Y., 2005. "The investment timing game in petroleum production: An econometric model," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 355(1), pages 62-68.
    3. Lin, C.-Y. Cynthia, 2009. "Estimating strategic interactions in petroleum exploration," Energy Economics, Elsevier, vol. 31(4), pages 586-594, July.

    More about this item

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L72 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Other Nonrenewable Resources

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