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Starting with data from 1985, we have been reporting and analyzing oil and gas industry benchmark performance ratios for all sectors (independents, majors, pipeline/utility and diversified) for the oil and gas industry, utilizing a Kirkpatrick Energy Associates (KEA) database [Johnsen et. al. 1999, Rizzuto et. al. 1999, Johnsen et. al. 1996, Rizzuto et. al. 1995]. Unfortunately, KEA discontinued producing this database in 1999. Luckily, the Energy Group at Raymond James & Associates (RJA) has a database that is quite similar to the KEA data set and we are grateful to Raymond James for allowing us to use their data for this benchmarking research.
The RJA database uses public company 10Ks for financial information and SFAS 69 disclosures for operating data. RJA augments this data with stock price information for purposes of developing valuations and research reports on companies. The RJA database focuses only on the independents sector of oil and gas industry. Thus, the key difference in our research this year is that we do not report on the performance of other sectors of the oil and gas industry (majors, pipelines/utilities, and diversified). For independents, we continue to provide benchmark data in the following three areas:
Financial: liquidity, leverage, asset utilization, profitability, and shareholder value;
Exploration strategy: reserve replacement and finding costs; and
Asset quality/operations: reserve life, reserve mix, revenue operating efficiency.
Readers should review the ratio definitions in Appendix 1 as some of our definitions and ratios have changed as a result of the migration to the RJA database. The 1999 data set includes 100 independent firms while the 2000 data set includes 94 independent firms. The actual number of companies used to calculate each benchmark ratio will vary from the total based on the elimination of "outliers" from the sample. Outliers result from: 1) missing values and 2) values that significantly distort the mean value. Similar to our prior benchmarking studies, the screening criteria used for each variable are included in Appendix 2.
This paper is organized into three major sections. The first section provides an overview of differences in key benchmark ratios for 1999 and 2000. The next section compares these ratios by sales quartile. The final section compares these ratios by performance quartile, i.e., the actual ratio from lowest to...