Lever Up and Drill: A Statistical Analysis of Practical Financial Decisions Made by Oil and Gas Industry Executives

Zachary Ennis, University of Pennsylvania


This research paper analyzes the results of a survey distributed to 394 oil and gas executives. Respondents were asked to provide their outlook on commodity prices, methodologies for estimating prices, preference for different valuation techniques, and priority of various capital structuring decision factors. The analysis includes single and multi-variable regressions that demonstrate correlations between different survey categories. The analysis suggests that price outlook is on average higher than the public futures market, but the popularities of different price estimation methodologies have no correlation with outlook average price or probability density. Other cross-category findings of note were the positive correlation between use of hurdle rate analysis and priority of setting a target capital structure, the negative correlation between use of IRR/hurdle analysis and priority of comparable company debt levels, the negative correlation between use of NPV and priority of interest tax shields, and the significance of our bankruptcy cost multivariate regression model.


Date Posted: 14 September 2017