Petroleum Business Strategies for Maintaining Positive Cash Flow and Corporate Liquidity Under Volatile Oil and Gas Prices as the Sustainable Energy Transition Unfolds

Maria do Socorro Cirilo Agostinho; Ruud Weijermars

doi:doi:10.11648/j.jfa.20170501.14

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Petroleum Business Strategies for Maintaining Positive Cash Flow and Corporate Liquidity Under Volatile Oil and Gas Prices as the Sustainable Energy Transition Unfolds

Maria do Socorro Cirilo Agostinho, Ruud Weijermars

Published in Journal of Finance and Accounting (Volume 5, Issue 1)

Received: 5 November 2016 Accepted: 1 December 2016 Published: 10 February 2017

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Abstract

To determine how the financing strategies and tactics of petroleum companies are affected by volatile market conditions, a cash-flow analysis was conducted of 30 oil companies with market capitalization ranging from USD 95 million (juniors) to USD 360 billion (majors). Our focus is on two critical recovery periods: 2004-2008 and 2009-2014. These intervals of market recovery are separated by the Great Recession of 2008-2009. The companies are divided into six traditional peer groups, classified by market capitalization and credit rating: oil majors, public private partnerships (PPP oils), independents, unconventionals, small caps, and juniors. Our analysis indicates that a high impact commodity price shock such as occurred during the global recession of 2008/2009 is more damaging to smaller companies than to bigger companies. However, post-recession data indicates that several of these smaller companies were able to recover and modify their practices to better protect themselves against future recessions. Smaller companies reduced dependence on external financing (from 35% to 15%), and of 16 companies in the “smaller” classification, 5 completely eliminated the need for long-term borrowing due to significant improvement in retained earnings. Success factors identified in this study include balancing capital expenditure with cash flow from operations, diversifying investments, divestiture of some assets, and focused efforts to reduce cash operating costs.

Published in	Journal of Finance and Accounting (Volume 5, Issue 1)
DOI	10.11648/j.jfa.20170501.14
Page(s)	34-55
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2017. Published by Science Publishing Group

Keywords

Cash Flow Analysis, Oil And Gas Companies, Capital Expenditure, Operating Income, Financing Activities, Uncertain Market

References

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APA Style

Maria do Socorro Cirilo Agostinho, Ruud Weijermars. (2017). Petroleum Business Strategies for Maintaining Positive Cash Flow and Corporate Liquidity Under Volatile Oil and Gas Prices as the Sustainable Energy Transition Unfolds. Journal of Finance and Accounting, 5(1), 34-55. https://doi.org/10.11648/j.jfa.20170501.14

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ACS Style

Maria do Socorro Cirilo Agostinho; Ruud Weijermars. Petroleum Business Strategies for Maintaining Positive Cash Flow and Corporate Liquidity Under Volatile Oil and Gas Prices as the Sustainable Energy Transition Unfolds. J. Finance Account. 2017, 5(1), 34-55. doi: 10.11648/j.jfa.20170501.14

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AMA Style

Maria do Socorro Cirilo Agostinho, Ruud Weijermars. Petroleum Business Strategies for Maintaining Positive Cash Flow and Corporate Liquidity Under Volatile Oil and Gas Prices as the Sustainable Energy Transition Unfolds. J Finance Account. 2017;5(1):34-55. doi: 10.11648/j.jfa.20170501.14

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@article{10.11648/j.jfa.20170501.14,
  author = {Maria do Socorro Cirilo Agostinho and Ruud Weijermars},
  title = {Petroleum Business Strategies for Maintaining Positive Cash Flow and Corporate Liquidity Under Volatile Oil and Gas Prices as the Sustainable Energy Transition Unfolds},
  journal = {Journal of Finance and Accounting},
  volume = {5},
  number = {1},
  pages = {34-55},
  doi = {10.11648/j.jfa.20170501.14},
  url = {https://doi.org/10.11648/j.jfa.20170501.14},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jfa.20170501.14},
  abstract = {To determine how the financing strategies and tactics of petroleum companies are affected by volatile market conditions, a cash-flow analysis was conducted of 30 oil companies with market capitalization ranging from USD 95 million (juniors) to USD 360 billion (majors). Our focus is on two critical recovery periods: 2004-2008 and 2009-2014. These intervals of market recovery are separated by the Great Recession of 2008-2009. The companies are divided into six traditional peer groups, classified by market capitalization and credit rating: oil majors, public private partnerships (PPP oils), independents, unconventionals, small caps, and juniors. Our analysis indicates that a high impact commodity price shock such as occurred during the global recession of 2008/2009 is more damaging to smaller companies than to bigger companies. However, post-recession data indicates that several of these smaller companies were able to recover and modify their practices to better protect themselves against future recessions. Smaller companies reduced dependence on external financing (from 35% to 15%), and of 16 companies in the “smaller” classification, 5 completely eliminated the need for long-term borrowing due to significant improvement in retained earnings. Success factors identified in this study include balancing capital expenditure with cash flow from operations, diversifying investments, divestiture of some assets, and focused efforts to reduce cash operating costs.},
 year = {2017}
}

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TY  - JOUR
T1  - Petroleum Business Strategies for Maintaining Positive Cash Flow and Corporate Liquidity Under Volatile Oil and Gas Prices as the Sustainable Energy Transition Unfolds
AU  - Maria do Socorro Cirilo Agostinho
AU  - Ruud Weijermars
Y1  - 2017/02/10
PY  - 2017
N1  - https://doi.org/10.11648/j.jfa.20170501.14
DO  - 10.11648/j.jfa.20170501.14
T2  - Journal of Finance and Accounting
JF  - Journal of Finance and Accounting
JO  - Journal of Finance and Accounting
SP  - 34
EP  - 55
PB  - Science Publishing Group
SN  - 2330-7323
UR  - https://doi.org/10.11648/j.jfa.20170501.14
AB  - To determine how the financing strategies and tactics of petroleum companies are affected by volatile market conditions, a cash-flow analysis was conducted of 30 oil companies with market capitalization ranging from USD 95 million (juniors) to USD 360 billion (majors). Our focus is on two critical recovery periods: 2004-2008 and 2009-2014. These intervals of market recovery are separated by the Great Recession of 2008-2009. The companies are divided into six traditional peer groups, classified by market capitalization and credit rating: oil majors, public private partnerships (PPP oils), independents, unconventionals, small caps, and juniors. Our analysis indicates that a high impact commodity price shock such as occurred during the global recession of 2008/2009 is more damaging to smaller companies than to bigger companies. However, post-recession data indicates that several of these smaller companies were able to recover and modify their practices to better protect themselves against future recessions. Smaller companies reduced dependence on external financing (from 35% to 15%), and of 16 companies in the “smaller” classification, 5 completely eliminated the need for long-term borrowing due to significant improvement in retained earnings. Success factors identified in this study include balancing capital expenditure with cash flow from operations, diversifying investments, divestiture of some assets, and focused efforts to reduce cash operating costs.
VL  - 5
IS  - 1
ER  -

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Author Information

Maria do Socorro Cirilo Agostinho

Harold Vance Department of Petroleum Engineering, Texas A&M University, TAMU College Station, Texas, USA
Ruud Weijermars

Harold Vance Department of Petroleum Engineering, Texas A&M University, TAMU College Station, Texas, USA

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APA Style

Maria do Socorro Cirilo Agostinho, Ruud Weijermars. (2017). Petroleum Business Strategies for Maintaining Positive Cash Flow and Corporate Liquidity Under Volatile Oil and Gas Prices as the Sustainable Energy Transition Unfolds. Journal of Finance and Accounting, 5(1), 34-55. https://doi.org/10.11648/j.jfa.20170501.14

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ACS Style

Maria do Socorro Cirilo Agostinho; Ruud Weijermars. Petroleum Business Strategies for Maintaining Positive Cash Flow and Corporate Liquidity Under Volatile Oil and Gas Prices as the Sustainable Energy Transition Unfolds. J. Finance Account. 2017, 5(1), 34-55. doi: 10.11648/j.jfa.20170501.14

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AMA Style

Maria do Socorro Cirilo Agostinho, Ruud Weijermars. Petroleum Business Strategies for Maintaining Positive Cash Flow and Corporate Liquidity Under Volatile Oil and Gas Prices as the Sustainable Energy Transition Unfolds. J Finance Account. 2017;5(1):34-55. doi: 10.11648/j.jfa.20170501.14

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@article{10.11648/j.jfa.20170501.14,
  author = {Maria do Socorro Cirilo Agostinho and Ruud Weijermars},
  title = {Petroleum Business Strategies for Maintaining Positive Cash Flow and Corporate Liquidity Under Volatile Oil and Gas Prices as the Sustainable Energy Transition Unfolds},
  journal = {Journal of Finance and Accounting},
  volume = {5},
  number = {1},
  pages = {34-55},
  doi = {10.11648/j.jfa.20170501.14},
  url = {https://doi.org/10.11648/j.jfa.20170501.14},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jfa.20170501.14},
  abstract = {To determine how the financing strategies and tactics of petroleum companies are affected by volatile market conditions, a cash-flow analysis was conducted of 30 oil companies with market capitalization ranging from USD 95 million (juniors) to USD 360 billion (majors). Our focus is on two critical recovery periods: 2004-2008 and 2009-2014. These intervals of market recovery are separated by the Great Recession of 2008-2009. The companies are divided into six traditional peer groups, classified by market capitalization and credit rating: oil majors, public private partnerships (PPP oils), independents, unconventionals, small caps, and juniors. Our analysis indicates that a high impact commodity price shock such as occurred during the global recession of 2008/2009 is more damaging to smaller companies than to bigger companies. However, post-recession data indicates that several of these smaller companies were able to recover and modify their practices to better protect themselves against future recessions. Smaller companies reduced dependence on external financing (from 35% to 15%), and of 16 companies in the “smaller” classification, 5 completely eliminated the need for long-term borrowing due to significant improvement in retained earnings. Success factors identified in this study include balancing capital expenditure with cash flow from operations, diversifying investments, divestiture of some assets, and focused efforts to reduce cash operating costs.},
 year = {2017}
}

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TY  - JOUR
T1  - Petroleum Business Strategies for Maintaining Positive Cash Flow and Corporate Liquidity Under Volatile Oil and Gas Prices as the Sustainable Energy Transition Unfolds
AU  - Maria do Socorro Cirilo Agostinho
AU  - Ruud Weijermars
Y1  - 2017/02/10
PY  - 2017
N1  - https://doi.org/10.11648/j.jfa.20170501.14
DO  - 10.11648/j.jfa.20170501.14
T2  - Journal of Finance and Accounting
JF  - Journal of Finance and Accounting
JO  - Journal of Finance and Accounting
SP  - 34
EP  - 55
PB  - Science Publishing Group
SN  - 2330-7323
UR  - https://doi.org/10.11648/j.jfa.20170501.14
AB  - To determine how the financing strategies and tactics of petroleum companies are affected by volatile market conditions, a cash-flow analysis was conducted of 30 oil companies with market capitalization ranging from USD 95 million (juniors) to USD 360 billion (majors). Our focus is on two critical recovery periods: 2004-2008 and 2009-2014. These intervals of market recovery are separated by the Great Recession of 2008-2009. The companies are divided into six traditional peer groups, classified by market capitalization and credit rating: oil majors, public private partnerships (PPP oils), independents, unconventionals, small caps, and juniors. Our analysis indicates that a high impact commodity price shock such as occurred during the global recession of 2008/2009 is more damaging to smaller companies than to bigger companies. However, post-recession data indicates that several of these smaller companies were able to recover and modify their practices to better protect themselves against future recessions. Smaller companies reduced dependence on external financing (from 35% to 15%), and of 16 companies in the “smaller” classification, 5 completely eliminated the need for long-term borrowing due to significant improvement in retained earnings. Success factors identified in this study include balancing capital expenditure with cash flow from operations, diversifying investments, divestiture of some assets, and focused efforts to reduce cash operating costs.
VL  - 5
IS  - 1
ER  -

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