Economic Decision-Making Practices in the U.S. Petroleum Industry

Introduction Investments or capital expenditures form the frame-work for a company's future development and are a major determinant of efficiency and competitive power. Consequently, the wisdom of corporate investment decisions has a profound effect upon a company's future earnings and growth. From the standpoint of the stockholder, an effective capital expenditure program is apparently the only bulwark against the seemingly endless inflationary spiral. From the standpoint of labor, capital expenditures represent the basic source of future income which must exist before wage advances can be made. Any business is continuously faced with the problem of making investment decisions. For the large integrated oil company, opportunities for investment exist in enterprises ranging from marketing to petrochemical, to exploration for and development of producing oil properties. Even for the very small business the problem of reinvestment of earnings, expansion, or diversification is a continuing one. Foresighted judgment is an essential requisite for wise decisions about capital expenditures. However, for such judgment to be sound, it must be based on an analysis of all the facts, many of which may be extremely technical and complex. Management needs an objective means of measuring the economic worth of individual investment proposals in order to have a realistic basis for choosing among them and selecting those that will mean the most to the company's prosperity and growth. Probably a business organization will not have adequate investment capital at its disposal to make all the investments which have the potentiality of producing a profit; and even given unlimited capital, there is a maximum number of investment opportunities which can be efficiently handled with a given size organization. Therefore, it is apparent that either limited capital or the size of the organization may restrict the number of investments which can be made in a given period. Choosing among these investment opportunities, therefore, is of paramount importance.

Petroleum engineering education is tied directly to the needs of the drilling and production sectors of the petroleum industry. The demand for petroleum engineering graduates has experienced the same boom-and-bust cycles as the petroleum industry. Since 1956, undergraduate petroleum engineering enrollments have been as low as 1,000 and as high as 10,000. These extreme fluctuations in enrollment have caused severe problems for petroleum educational programs. The article describes undergraduate petroleum engineering programs, effects of new technology and new areas of emphasis in the petroleum engineering curricula.

The petroleum engineer has been identified almost exclusively with the petroleum and natural gas industries and his role has been viewed primarily as being related to the drilling for and primarily as being related to the drilling for and producing of oil and natural gas, which I shall producing of oil and natural gas, which I shall refer to collectively as petroleum resources. Both the field of knowledge and the art which are unique to petroleum engineering have applications beyond the field of petroleum resources. Some of these applications are germane to the development of other energy sources, but other applications are related to non-energy activities. In order to give you my ideas on petroleum engineering in non-petroleum energy areas, I will need to tell you how I visualize petroleum engineering. In 1963 I prepared a talk for the AIME Annual Meeting under the title "Objectives for Petroleum Engineering - A Definition of Petroleum Petroleum Engineering - A Definition of Petroleum Engineering." I reviewed that paper in preparation for this presentation and I found the 1963 preparation for this presentation and I found the 1963 analysis to be equally valid today. From it, I reproduce the following definitions "I define engineering as the activity of man by which the physical systems of nature are controlled or by which physical systems, combining nature and art, are created and controlled." "My definition of petroleum engineering is that part of engineering which is concerned with the control of the systems made up of the fluid containing rocks of the earth, the flow of fluid within these rocks, the wells through which he fluids are conducted to and from the surface of the earth, and the surface processes coupled thereto." This definition of petroleum engineering might be construed as being too limited because it refers only to fluid containing rocks. Fundamentally, the unique knowledge area and professional work of the petroleum engineer are involved whenever fluids are petroleum engineer are involved whenever fluids are moved into and/or out of the earth through individual wells and/or well systems. The earth strata involved may have been fluid bearing naturally or may contain only those fluids that have been introduced. In 1963 this analysis led me to moke the following observation - "Within the rocks of the earth, it is possible to create systems of fluid movement and control for the disposal of waste fluids from the surface of the earth. It is possible to create such systems also for storage possible to create such systems also for storage of fluids within the confines of the earth, and for the recovery of minerals other than oil and gas. It is conceivable that such systems may have value as underground reactor beds or underground purifying systems. The system viewpoint allows purifying systems. The system viewpoint allows creative imagination for our objectives." Even at the time I wrote my discussion in 1963, the disposal of wastes, the recovery of salt and sulfur through well systems, the recovery of geothermal heat, the in situ recovery of coal, the in situ recovery of oil shale, and similar uses of well systems were being practiced or proposed. Of course, well systems had been used for recovery of water for many centuries. It was the petroleum industry that produced the incentive for the development of the knowledge and art which we call petroleum engineering. It is for this reason that we use the adjective "petroleum" to describe the knowledge area. Had there been an incentive from some other industry, i.e., from oil shale, coal, or geothermal, or from some other national goal, such as radioactive waste disposal, before the petroleum industry incentive occurred, the profession might have developed a different name. If I were to try to coin a more appropriate descriptive title, I might suggest "subsurface fluid engineering." However, I do not suggest that we try to change the name. Now, let me turn to same of the non-petroleum energy situations in which I think the petroleum engineer may find a role because of his professional knowledge. First, let me categorize the professional knowledge. First, let me categorize the resource systems for energy as follows:the direct solar radiation system;the atmosphere/ ocean system;the biological system; andthe fossil system.

This is a brief paper which describes the current state of expenditures in the areas of research and development in the petroleum industry and the associated support industries. It tracks the decline in research in the US with that of other countries. It also shows graphically how the research and development expenditures, as compared to other major US industries, is on the decline. It goes on to compare the methods of utilizing these research funds between petroleum companies to show that most research and development comes directly from a need of the company at a particular point in time. The paper closes by providing recommendations for a long-term research and development operation of the overall petroleum industry.

To understand the changes that occur cyclically in engineering manpower supply/demand trends in the petroleum industry, it is desirable to have an awareness of some of the major activities and factors affecting such trends; of starting Petroleum Engineering salaries relating to that background; of the on-going engineering salary status which developed from these activities; and of the large effect that high starting and on-going salaries do have in attracting and retaining engineers within the petroleum industry. It is important to realize that changes in industry trends can be brought about both by economic and political decisions, in both domestic and international activities. There is no single entity or group, which by itself sets the climate for engineering manpower trends in all of the parts of the petroleum industry. Rather, it is set by the political and economic decisions of nations affecting the industry, and by the interactions of a very large number of companies and individuals, from the diverse and multiple parts of the industry, in creating demand for engineers of the various types and levels needed by their organizations. Each organization must continually monitor and find ways to meet its needs for engineers for the present and foreseeable future, as to the various engineering subfunctions which must be filled in drilling, production, reservoir, process, mechanical, electrical, and other engineering activities.

Petroleum engineering as a discipline has historically been intimately allied with a single industry. As such, the discipline is often viewed as being more of a technical specialty than as a fundamental discipline in the same sense as chemical, civil, electrical, or mechanical engineering. However, there are distinctive factors that make petroleum engineering fundamentally different from other engineering disciplines, much in the same way that mechanical engineering is different from chemical engineering. These differences make petroleum engineers best qualified to deal with the general class of engineering problems involving fluid movement within the earth, even in such non-energy related areas as hydrology and underground waste disposal. In addition to the need for petroleum engineers for hydrocarbon extraction, it is likely that as we move into the next century, many natural resource problems will require increasing reliance on technical expertise that can and should be supplied by what are currently called petroleum engineers. Nomenclature has forced petroleum engineering into being a narrowly-perceived discipline, when in reality it possesses as much or more breadth as any other engineering discipline. The time is at hand for the discipline of petroleum engineering to stake out a claim to address all engineering problems involving fluid transport in the earth. No other engineering discipline provides a more appropriate base of knowledge and methodology. An example undergraduate curriculum is proposed for the education of petroleum engineers for the 21 st century. It is further proposed that the term "petroleum engineering" may not be entirely appropriate to fully describe this more fundamental emerging discipline.

Purpose: With the expansion of the quality level of activity as well as the widespread development of economic affairs, financial and investment decisions are among the most complex issues that arise in order to obtain the best return and desirability in the best conditions. In this regard, financial managers, given the primary responsibility for these decisions, seek to establish relationships between the factors of the firms in the firm, including investment opportunities. The purpose of this paper is to examine the relationship between management ability and political connection with investment opportunities. The QT ratio and market to book ratio (MTB) are used to measure corporate investment opportunities. Methodology: Corporate political connection is defined by Fasio's political cost variables and the use of the TOPSIS multi-criteria decision-making models and the Shannon entropy weighting method. In order to test the hypotheses, 116 companies listed in Tehran Stock Exchange during the period 2014-2019 were selected for the sample. Findings: The results of the analysis using the generalized least squares hybrid regression (GLS) method indicate that there is a significant and positive relationship between management ability and investment opportunities in Tehran Stock Exchange companies. There is a negative and significant relationship between political connection and investment opportunities. The political connection also does not affect the relationship between management ability and investment opportunities. Originality/Value: The purpose of this paper is to examine the relationship between management ability and political connection with investment opportunities. The QT ratio and market to book ratio (MTB) are used to measure corporate investment opportunities.

The use of interwell tracer tests is becoming increasingly important to the petroleum industry. In addition, the interwell tracer test has proven to be an efficient tool to investigate reservoir flow performance and reservoir properties that control gas and water displacement processes. Tracer data has been used to reduce uncertainty attributed to well-to-well communications, vertical and horizontal flow, and residual oil saturation. Unfortunately, at present, analysis of the tracer response is still largely qualitative in nature, and most information provided through the monitoring of the tracers is not quantitative. Among the numerous papers found on tracer technology, only a few include history matching of water-tracer test results and only one paper includes history matching of gas tracer test results. This paper describes the development of interwell tracer analysis methods in the petroleum industry, from the first qualitative tracer study in the 1950s to the latest quantitative tracer study in 2000. The results of our study indicate that only a small number of interwell tracer studies employed advanced numerical modelling methods. In addition, tracer analysis methods in the petroleum industry are not well studied. However, they are far better studied in the hydrology industry. Tracer modelling methods deserve to be given more attention, so that petroleum engineers can take better advantage of results from costly interwell tracer tests. Introduction Although tracer tests(1) were developed for tracking the movement of groundwater in the early 1900s, they were neglected by the petroleum industry until the mid-1950s. At this time, petroleum engineers(2, 3) started to conduct tracer tests for determination of fluid flow in waterflooded reservoirs. In the petroleum industry, solvent is sometimes injected into oil or gas bearing formations for the purposes of producing more hydrocarbons. Tracers can be added to the injected solvent to determine where the injected solvents go. The subsurface flow in the reservoir is anisotropic, and the reservoirs are usually layered with significant heterogeneity. As a result, solvent movement in the reservoir is difficult to predict, especially in reservoirs containing multiple injectors and producers. However, the flow paths can be identified by tagging solvents at each injection well with a different tracer and monitoring the tracers that appear at each producing well. Therefore, multiple tracers are often used for interwell tracer tests in the petroleum industry. Interwell tracers can provide information on flood patterns within the reservoir. This information is reliable, definitive, and unambiguous. Thus, it helps reduce uncertainties about flow paths, reservoir continuity, and directional features in the reservoir. Therefore, petroleum engineers can obtain information on reservoir continuity from the amount of each tracer produced from each well. Reservoir barriers can be identified by non-recovery or delayed recovery of specific tracers. At the same time, tracer test data can help determine residual oil saturation. Tracer test results also provide information on fracture characteristics in a naturally fractured reservoir. Interwell tracer tests have been applied in many petroleum producing fields across the world. The majority of these fields are located in North America and Europe.

The petroleum industry holds long- and short-term environmental risks. Besides production fluids, all petroleum industry activities involve either use of fluids, which contain abundant substances, or waste generation, both associated with potential risk to the environment. The principal environmental risk associated with the petroleum industry is the risk of fluid spill/emission to the environment. Although in recent decades the risk analysis methodologies have matured, to date there is still no universally accepted methodology for environmental risk assessment in petroleum industry. In this chapter, the petroleum industry’s environmental incident history and statistics are presented. The environmental impact of the petroleum industry’s activities, its extent, and trends are analyzed. The overview of pollution sources with associated environmental risk is given along with the analysis of the causes and consequences of incidents in the petroleum industry.

PurposeThis study seeks to assess the mediating role of financial service branding on investment decisions from the perspective of financial service investors.Design/methodology/approachField data were obtained from 403 individuals and corporate investors in financial service institutions who invested savings and pensions funds into short to medium term financial instruments from an emerging market in sub-Saharan Africa (SSA). Data were analysed using the partial least squares structural equation modelling technique (PLS-SEM).FindingsBranding significantly mediates return on investment (ROI) decisions. However, the ROI did not have a significant direct effect on investment decisions. ROI has a significant indirect effect on investment decisions due to branding influence on investors.Research limitations/implicationsData collected was cross sectional. Future research can use longitudinal data for better long term planning. Study can also be done in other emerging economies to determine how the financial sector characteristics for each country can be a source of difference from branding and investment standpoint.Practical implicationsAlthough consumer investment decisions are logically influenced largely by ROI, investors place savings and pensions into financial instruments largely managed by reliable corporate brands with solid reputation known as safe havens for hedging lifetime investments.Originality/valueThis study covers the research gap in brand power and the reputation of financial service institutions as well as the investment decisions of financial service investors in emerging Sub-Saharan African.

This paper examines the influence of optimism among the top management team members on corporate investment and financing decisions. We develop an optimism measure based on voluntary insider transactions that is applicable to all officers and directors of a firm. Our results suggest that corporate policies are not solely influenced by an individual CEO's optimism, but rather driven by the attitudes of top management team members as a group. In fact, we find that the impact of CEO optimism on corporate investment and financing decisions depends on the optimism of other officers and/or directors. In contrast, if several other officers and/or directors, apart from the CEO, are optimistic, their influence is significant, independent of CEO optimism. Our analyses include all public US companies within the Compustat universe for a time span of 20 years.

Results of the October 1990 SPE Member Salary Survey indicate an increase of about 3 to 5% in salaries received by SPE members over salaries reported in October 1989. Results of the 1991 SPE Starting Salary Survey reflect an increase in starting salaries accepted by B.S. graduates in petroleum engineering to $3,347/month. This figure is up 9.7% from a year ago and is the largest increase in starting salaries since 1982.

Purpose This study aims to examine the impact of stock market valuation on corporate investment. Specifically, it attempts to understand the influence of both the fundamental and non-fundamental components of stock price on firms’ investment decisions. Design/methodology/approach The study decomposes the market-to-book (MB) ratio into three components, namely, firm-level mispricing, industry mispricing and growth component to examine the effect of each of these components on corporate investment decisions. Based on the literature review, four testable hypotheses concerning the relationship between market valuation and corporate investment have been generated. These hypotheses have been tested on the panel data of 1,311 Indian Public Limited Manufacturing Firms using a pooled data regression model. Findings The study finds that both the fundamental and non-fundamental components of stock price influence the investment decisions along with the cash flow variable. The market valuation–investment nexus is more pronounced in the case of equity-dependent firms, which shows that stock valuation affects corporate investment predominantly through the equity transaction channel. Further, the positive relationship between industry mispricing and corporate investment demonstrates that the market sentiment also affects firms’ investment decisions. Originality/value The relationship between the different components of market value and corporate investment decisions has not been explored in India. Hence, the present study is unique because it breaks the MB ratio down into growth and mispricing components and examines the impact of each of these components on corporate investment.

American Institute of Mining, Metallurgical and Petroleum Engineers, Inc. This paper was prepared for the 42nd Annual Fall Meeting of the Society of Petroleum Engineers of AIME, to be held in Houston, Tex., Oct. 1–4, 1967. Permission to copy is restricted to an abstract of not more than 300 words. Illustrations may not be copied. The abstract should contain conspicuous acknowledgment of where and by whom the paper is presented. Publication elsewhere after publication in the JOURNAL OF PETROLEUM TECHNOLOGY or the SOCIETY OF PETROLEUM ENGINEERS JOURNAL is usually granted upon request to the Editor of the appropriate journal provided agreement to give proper credit is made. Discussion of this paper is invited. Three copies of any discussion should be sent to the Society of Petroleum Engineers office. Such discussion may be presented at the above meeting and, with the paper, may be considered for publication in one of the two SPE magazines. Introduction In August, 1967, an analysis was made of information pertaining to present and past participants of the Petroleum and Geological Engineering "Honors Scholars" Program at the University of Oklahoma. This study was conducted for the purpose of discovering ways to determine the scholastic success of a prospective honor scholar and to enable more accurate selection future participants. Included in this study is a listing of information concerning each student's ACT (American College Test) standard scores and grade point average. Letters and questionnaires were sent to each student, and through the students' cooperation, much of the data was collected. This paper describes the background of the Honors-Distinguished Scholars Program at OU, discusses the findings about the students in the study, gives an analysis of the information, and offers suggestions for further improving the selection of honor scholars. It should be noted that this is an initial report. As the program continues more inclusive information may be gathered about the scholars' university program, industry achievement, and the quality of their success. BACKGROUND OF THE HONORS PROGRAM In 1963, believing that outstanding high school students should be given the opportunity of participating in and gaining from a highly enriched educational experience, members of the faculty in the Oklahoma University School of Petroleum and Geological Engineering began thinking of ways to unite further the student in Petroleum Engineering and the petroleum industry in which the student expected someday to work. Noting that the school already had a scholarship program established with many participating petroleum companies, the Petroleum Engineering faculty devised a program which would permit stronger involvement of both the student and the company. The "Honors Scholars" Program was thus initiated in the Fall of 1964. Requirements for Admittance to the Program The requirements for admittance to the honors program are high in order to insure outstanding performance of the participants.

Summary Using a team development approach, ARCO Oil and Gas Company has developed an integrated microcomputer database system for petroleum engineers. This system provides a framework for compact storage, retrieval, and interchange of data between various technical applications. It also gives the engineer an ability to manage all common oilfield data for input, analysis, and reporting. High resolution graphics, "help" screens, and consistent user interface standards allow the engineer to readily utilize the capabilities of the petroleum engineering applications with very little manipulation of input data. This paper describes the management process used in development of the system and discusses several of the major considerations critical to the system's design. In an effort to bridge the gap between computer science and petroleum engineering technologies, a specific software development team was created consisting of ARCO petroleum engineers, ARCO computer scientists, and consultants from the microcomputer software industry. This team approach to software development allowed the implementation of petroleum engineering technology with appropriate consideration of available computer possibilities. The team was headed by a petroleum engineer who defined the capabilities desired of the software, while the computer specialists on the team provided dynamic feedback and suggestions for ways to accommodate the petroleum engineering tasks on a microcomputer. Much consideration was given to meeting computer industry standards and leaving options open for future expansions. Questions regarding mainframe links, networking, compatibilities with other computer systems, and future hardware/software developments were ever present in design of the ARCO system. More importantly, the system had to work efficiently with today's hardware and be developed at a minimum cost. The completed software system is a direct result of synergistic input from team members and provides a workable framework for development of future petroleum engineering microcomputer software.