Performance Measurement And Management in the Upstream Oil And Gas Sector

Abstract

The concept of performance measurement and management (PMM) has gained a wide publicity among the International Oil and Gas Companies. Recent years have witnessed transformation from traditional financial PMM to a more sophisticated approach that encompasses both financial and non-financial aspects of a business. This paper is aimed at measuring the financial performance of International Oil Companies (IOCs) and assessing whether the performance is being improved over the three years covered. Data Envelopment Analysis (DEA) is used to develop a model using principles of Linear Programming, in measuring the performance and assessing whether such performance is being managed. Total assets and running cost are used as an input while three financial ratios and an oil reserve ratio are used as output to determine whether the inputs are best utilised in generating the outputs and whether the outputs generated are worth the input. The paper reveals that, oil companies measure their performance in order to reveal areas that need attention, but most of the oil companies in the sample have unfavourable performance. However, no evidence that their performance has been improved (managed) over the period covered.