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

摘要

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.