This includes for example wood mackenzies estimate of

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Unformatted text preview: ly, by the data that is available. Some oil companies appear to report extensively whereas others only publish that which they are required to do by law. Furthermore, despite the trend toward using non-financial measures (such as customer acquisition, retention and satisfaction, employee satisfaction and organisational learning (Chang and Morgan, 2000; van de Vliet, 1997; Halley and Guilhorn, 1997; Management Accounting, 1997; Lothian, 1987; Harper, 1984) to measure company performance, such criteria are either inappropriate for the upstream companies under investigation since several are integrated oil companies with both upstream and downstream business and hence issues of customer acquisition are irrelevant, or are not widely reported by the oil companies. Secondly, the selection of measures is restricted because investment decision-making in the oil industry is unique. Recall, from Chapter 5 that the oil industry’s investment decisions are characterised by a long payback period. In the case of exploration and development decisions, this time-period can be up to fifteen years. Therefore, to some extent, companies’ performances now are dependent on decisions taken many years ago when the industry did not routinely use decision analysis (Section 6.3 of Chapter 6). So to investigate the relationship between the use of decision analysis and oil companies’ business success, it is important that measures are selected that reflect the effect of recent decision-making. In the oil industry, this is best acknowledged by measures that indicate the successfulness of recent exploration decisions. This includes, for example, Wood Mackenzie’s estimate of a company’s total base value which is calculated by the values of commercial reserves, technical reserves (as defined by Wood Mackenzie) and the value of currently held exploration and Wood Mackenzie’s assessment of its potential. Therefore, the following criteria will be used in this study to be indicative of organisational performance in the upstream. Each measure is reviewed below with particular attention being focussed on the conclusions that the researcher will be able to draw by using the criterion. • The volume of booked reserves or proved reserves (PR). Proved reserves are reserves that can be estimated with a reasonable certainty to be recoverable under current economic conditions. Current economic conditions include prices and costs prevailing at the time of the estimate. Proved reserves must have facilities to 170 process and transport those reserves to market, which are operational at the time of the estimate or there is a reasonable expectation or commitment to install such facilities in the future. In general, reserves are considered proved if the commercial producibility of the reservoir is supported by actual production or formation tests. In this context, the term proved reserves refers to the actual quantities of proved reserves and not just the productivity of the well or reservoir (Society of Petroleum Engineers et al., 2000). For the company performance ranking, the volume of...
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This document was uploaded on 03/30/2014.

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