ECONOMIC CONSEQUENCES OF PEAK OIL FOR THE MAJOR MULTINATIONAL OIL AND GAS COMPANIES

Antonio García-Amate (), Alicia Ramírez-Orellana () and José Muñoz-Torrecillas Mª ()
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Antonio García-Amate: University of Almería, Spain
Alicia Ramírez-Orellana: University of Almería, Spain
José Muñoz-Torrecillas Mª: University of Almería, Spain

Eurasian Journal of Business and Management, 2018, vol. 6, issue 1, 23-41

Abstract: The main goal of this work is to analyze the financial statements of the five major multinational oil and gas companies, for the 2011-2015 period, in the framework of the peak oil phenomenon. Peak oil can affect key financial indicators (e.g., earnings volatility, leverage) that are used by managers, investors, and stockholders and which may potentially lead to changes in the decision making by management. Our results show that the decline in oil production affects the decisions about investment in new oil wells, leverage, dividends paid, shares purchased and net income involving the five major companies. In addition, we study the evolution of oil prices, and its influence in several items of the financial statements. Even though oil prices were at high levels during 2011-2014, however, the net income of the five companies actually declined due to the impact of peak oil. Finally, data for the last year studied (2015) indicate a general deterioration in return ratios and other accounting variables. Although the new investments should have been profitable, they have been influenced by peak oil, compromising the economic position of the companies. The advice to these companies would be to relax their investments, especially during a period of falling oil prices. Company managers need to recognize the prolonged duration of peak oil and price trends to promote profitability recovery decisions.

Keywords: Brent; Earnings; Financial Statement Analysis; Oil and Gas Industry; Peak Oil; Production (search for similar items in EconPapers)
Date: 2018
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