Improving management of oil and gas assets through derivatives

Book · Tue Dec 31 04:00:00 EST 1996

OSTI ID:468252

Stibolt, R D

As markets for futures, swaps, and options have grown and matured in the oil and gas industry, the question of how companies should make use of such financial derivatives naturally arises. The simplest models of risk versus return in modern finance theory are based on a world in which the costs of external and internal financing are the same and all risk is either systematic or can be diversified by shareholders. In this simplified world, derivatives must be viewed as purely speculative instruments that can add nothing to shareholder value. However, in the real world of financial distress, imperfect information, and misaligned management/shareholder risk attitudes the use of these instruments can add significant value. This paper explores the sources of this potential for value creation, including a look at improving organizational alignment, information consistency, capital structure, and management of real assets.

• OSTI ID: 468252
• Report Number(s): CONF-961003--
• Country of Publication: United States
• Language: English

Related Subjects

02 PETROLEUM
58 GEOSCIENCES
FINANCIAL DATA
FORECASTING
OIL FIELDS
PETROLEUM INDUSTRY
RESOURCE MANAGEMENT