The impact the price of oil has on a product manufacturer in the oil and gas industry.

摘要

OFI Testing Equipment, Inc. (OFITE) is a manufacturer of laboratory testing equipment in the upstream oil and gas industry. This paper measures the dependency of OFITE's revenues on the price of oil. Moreover, the paper outlines a revenue forecast based on the price of Brent crude oil. The analysis finds that over 94% of the variability in OFITE's revenues is explained by the price of Brent oil. This information is important to OFITE owners and management if they wish to increase revenues when oil prices are flat or decreasing. A diversification strategy is one avenue owners could take to lessen OFITE's dependency on the price of oil.