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This chapter examines the oil and gas industry and the efficacy of vertical integration strategies. Using multiple theoretical lenses ranging from the resource-based view, transactions costs, and parenting perspective, the chapter considers different arguments associated with vertical integration. The 2011 breakup of ConocoPhillips and its global value chain helps address the question of which strategy is best – integrated or nonintegrated. We provide several conclusions about the structure of integration and value chains within the oil and gas industry. First, vertical integration based on the physical transfer of products between value chain activities will generate little firm advantage in the form of classical integration benefits, such as control over input quality or speed to market. Second, competing across the industry value chain as a hedge or strategy against industry cyclicality is not theoretically defensible. Third, pure play industry specialists can create value through management focus, agility, and, transparency for investors. Fourth, firms that compete across a wide range of industry value chain activities can create value-adding corporate strategies if they are able to leverage knowledge and assets across different industry sectors.

The long-term energy transition from fossil fuels to renewable energy challenges the future of oil and gas firms. The purpose of this paper is to explore how the world’s largest oil and gas firms’ strategies are responding to the transition.

The authors used content analysis of annual reports to examine the renewable strategies of the world’s largest publicly traded oil and gas companies. Data were analyzed using two complementary statistical methodologies to build a taxonomy of the patterns in strategic behaviors involving renewable energy.

Five transition archetypes are identified – three reflect an active pursuit of renewable energy, whereas the other two are more defensive in posture. The authors also find that the firm’s country context has an important bearing on renewable strategy. Both normative social pressures and regulatory pressures play key roles in influencing a firm’s commitment to a renewables’ strategy.

Using an innovative research method, we develop a new taxonomy to classify how the world’s largest oil and gas firms are shaping the transition from fossil fuels to renewable energy..

Using an innovative research method, the authors developed a new taxonomy to classify how the world’s largest oil and gas firms are shaping the transition from fossil fuels to renewable energy.

This study aims to examine whether US oil and gas companies engaged in earnings management during the 2011 Arab Spring, which resulted in significant increases in both crude oil and gasoline prices.

Following a similar research methodology from prior research, this study tests the existence of earnings management based on discretionary total accruals, current accruals and non-current accruals to determine whether both large petroleum refining firms and relatively small oil and gas-producing firms, jointly and separately, lowered reported earnings.

The results show that, overall, US oil and gas companies as a group engaged in income-decreasing earnings management during the Arab Spring. The results seem to support the political cost hypothesis. However, further analyses indicate that the results are driven by abnormal income-decreasing accruals of the relatively small oil and gas-producing firms, which are politically less sensitive.

The findings suggest that there may be other non-political cost incentives, such as income smoothing, for the relatively small oil and gas-producing firms managing earnings downward during periods of large oil price increases. However, the possibility for firms with reversals of income-increasing activity from other quarters is not ruled out.

This study not only is the first empirical study of earnings management by oil and gas companies during the Arab Spring, but also contributes to extant earnings management literature regarding political cost hypothesis, which still remains a major concern for US oil and gas companies.

The purpose of this paper is to examine the stock market reaction to the Gulf oil spill and determine if the markets exhibited rational pricing. On April 20, 2010, the US Coast Guard received a report of an explosion and fire aboard Transocean’s Deepwater Horizon offshore drilling rig. The resulting spill exceeded the Exxon Valdez oil spill as the worst in US history. With the total cost of the disaster reaching almost $54 billion for British Petroleum, clearly the spill had far-reaching effects on its market value. However, the more interesting question is what valuation effects might exist for other oil and gas firms, due to an increase in perceived risk for all offshore drilling and/or the likelihood of an increase in the regulation of the industry.

Because the new information was released piecemeal over time and has the potential to affect a number of firms simultaneously, Gibbon’s (1980) multivariate regression model methodology (MVRM) was used to examine share price reactions of firms in the oil and gas industry in the aftermath of the oil spill. This methodology allows one to test whether significant abnormal returns occur on days where new information is released. Further, one is able to test whether the market reaction was the same for each firm or whether the market differentiated between firms.

Evidence of abnormal returns was found for the majority of the information dates in our investigation. Further, the results reject the notion that the market reaction was the same for all oil and gas firms, leading to the conclusion that the market did differentiate between firms.

This research is important because the results support rational pricing of the US stock markets following this unexpected and catastrophic event. The market was examined over the period following the oil spill on multiple dates when important new information is provided. This study contributes to financial and economic research on market efficiency and reactions to major risk events.

The uncertainty that surrounds oil and gas exploration environments call for an examination at different angles. In terms of robustness, the purpose of this paper is to focus on three performance measurements: the amount of exploration investments, the growth rate of exploration investments, and the value at risk (VaR) of exploration investments.

The study utilizes the properties of discriminant analysis for deriving Z-score models that can be used for monitoring firms’ performance. A cointegration analysis is utilized as well in order to examine the level of cointegration between predictors of each performance measure. The sample includes annual data for 41 firms (local and multinational) working in the oil and gas industry in Egypt for the period 2009-2014.

The results show that amount and growth of exploration investment are quite robust performance measures in the oil and gas industry; VaR of exploration investment is sporadic as it firm-specific; and GDP, capital expenditure and operating expenditure are quite relevant for managing and monitoring growth of exploration investments.

The study offers robust evidence that amount and growth of exploration investment are quiet relevant for measuring firm performance in the oil and gas industry.

This paper examines the impact of audit quality on the managerial preferences between real and accrual earnings management (REM and AEM, respectively) in oil and gas firms operating in the Gulf Cooperation Council (GCC) member countries.

The study relies on the modified Jones model’s (Dechow et al., 1995) to capture AEM and employs Roychowdhury (2006) approach to examine the use of REM through abnormal cash flows, abnormal production and abnormal discretionary expenditures. Audit quality is measured by auditor-industry specialization. The analyses are based on a sample of 30 oil and gas firms from 2008 to 2019.

The findings highlight that sample companies may substitute between earnings management strategies and tend to shift from AEM to REM when audited by an industry expert. Further analysis points out that the trade-off decision of the pooled sample stems from both upstream and downstream sectors.

This study is subject to two main limitations. First, the narrowed scope of audit quality related factors due to the scarcity of corporate governance reports of companies. Second, the sample size is reduced.

The regulators and users of financial statements should be aware that REM strategy is used by oil and gas firms even when scrutinized by a high quality auditor, calling for extra caution when auditing or analyzing the financial information.

The current research is the first, unveiling the association between audit quality and the trade-off between AEM and REM in a less inspected sector and a unique institutional setting.

The purpose of this paper is to encourage accounting regulators to address diversity in practice in the reporting of environmental liabilities. When Canada changed to International Financial Reporting Standards (IFRS) in 2011, Canadian regulators asked the IFRS Interpretations Committee to interpret whether the discount rate to value environmental liabilities should be a risk-free discount rate. Old Canadian GAAP, and current US GAAP, allow for a higher discount rate, resulting in commensurately lower liabilities. International regulators refused to address this issue expecting no diversity in practice in Canada.

The focus is on a sample of Canadian oil and gas and mining firms. These domestic industries play a major role internationally and have significant environmental liabilities. The method is empirical archival, tracking firm characteristics and discount rate choice on transition to IFRS.

There is significant diversity in practice. About one-third of the sample firms choose a higher discount rate, avoiding a major increase in environmental liabilities on transition to IFRS. The evidence suggests that these firms have relatively larger environmental liabilities and that the discount rate decision is a strategic choice.

The sample is based on one country and may only be reflecting local anomalies that have no broader implications.

Diversity in practice in accounting for environmental liabilities is not acceptable. Accounting regulators should act to create consistent and comparable reporting practice.

Firms and managers facing larger environmental liabilities can choose to minimize environmental liabilities under IFRS, while it is the general public and society at large that bear the ultimate risk.

The paper pushes forward the debate on whether recognized environmental liabilities should reflect the interests of equity investors, or if other investors and stakeholders should be taken into account.

To combat concerns over the state of the natural environment, energy security and deteriorating air quality, the oil and gas sector needs to implement eco-innovations. Interest in eco-innovation is growing, as its implementation facilitates the transition toward sustainable development and a circular economy, while enabling firms to attain a competitive advantage vis-à-vis capabilities that foster sustainable economic and environmental development. However, literature on eco-innovation capabilities construct development, measurement and validation is scant. This study, therefore, develops an Eco-innovation Capabilities Scale for oil and gas firms.

Three dimensions of Eco-innovation Capabilities are identified through an extensive literature review and qualitative interviews. Exploratory and Confirmatory Factor Analysis is applied to data collected from managers of Malaysian Oil and Gas Services and Equipment (OGSE) companies.

Results reveal a parsimonious three-dimensional structure with nine items. The construct of eco-innovation capabilities is manifested by Product Service Stewardship, Environmental Pollution Prevention and Sustainable Development Commitment dimensions. Reliability analysis confirms the reliability and validity of the scale.

The eco-innovation capabilities scale should be useful to researchers in exploring dimensions, factors and outcomes of eco-innovation capabilities. Oil and gas firms play a key role in the global energy mix; hence managers of oil and gas firms may also find this scale useful in measuring their eco-innovation implementation.

The purpose of this paper is to provide an understanding of the major critical success factors involved in knowledge acquisition from an aging oil and gas workforce by outsourced service providers and find the outcome. In addition, the authors are also interested in finding out the outcome for the client and the service provider by following these critical success factors.

The authors shortlisted two outsourced firms for studying, primarily because they deliver lots of service support work to oil and gas firms. For the exploratory nature of this case study, a structured, open‐ended interview was conducted. Through face‐to‐face interviews with 12 senior managers, primary data were collected. Upon content analysis of data collected, the framework was evaluated.

The results of this study indicate that both client and service providers can benefit by following major critical success factors for knowledge acquisition. From the open‐ended interview with the two companies, it can be concluded that the service providers are able to grow their technical and domain capability through knowledge acquisition from ageing workforce and reduce the cost to client.

The study has been restricted to two service providers, with majority of operations carried out of India, focusing only on US/UK‐based oil & gas firms. Implication on theory is, by following these critical success factors, it is likely to be easier to acquire the knowledge from an aging oil and gas workforce.

The service provider firms can build their knowledge capability, reducing the cost to both client and service provider. Further study with more service providers at the global level may help in pooling larger data. The primary contribution of the paper is in introducing the critical success factors with various associated activities that drive knowledge acquisition from an aging workforce.

The primary contribution of the paper is in introducing the critical success factors with various associated activities that drive knowledge acquisition from an aged workforce in the oil and gas industries. Second contribution is in highlighting the role of these critical success factors in gaining various benefits to client as well as to service providers.

The need for businesses to gain profit through the provision of high-quality services has driven the organizations to outsource business activities and functions that are considered not integral to the core business. The purpose of this paper is to identify key outsourced activities and to explore their influence on the organizational performance of the targeted locally owned oil and gas companies in Ghana. Also, the study explores key benefits and challenges associated with adopting outsourcing strategies.

The primary data were collected using a survey from 80 participants working for different oil and gas companies in Ghana.

The study revealed that most of the outsourced activities include transport services, information technology (IT) consulting and business consulting services, system infrastructure provision and management and logistical services. Also, key outsourcing reasons were reducing operational costs, avoiding major investment costs in technology, providing consistent and improved service delivery, accessing current technology and expert knowledge and focusing more on core business activities. Outsourcing is significant to enhance the performance of an oil and gas company; however, outsourcing could also result in the conflict of firm culture with outsourced vendors, and inefficient management and loss of innovative capacity are possible negative effects of outsourcing.

The study targeted mainly locally owned oil and gas companies operating in Greater Accra regions of Ghana and including other areas is recommended in the future. Also, the research sample size was 80 participants for this study, and a larger sample should be used in the future.

There is a paucity of research in management outsourcing in Ghana’s oil and gas industry. To the best knowledge of the authors, this study presents the first research of its kind and the findings will be valuable for the targeted companies. The results from this study can also be used by other companies operating in similar oil and gas business environments operating in other oil and gas producing countries particularly in Africa and Asia. Also, the result from this study can greatly benefit other companies already adopting, or considering adopting, outsourcing and operate in similar service-providing sectors within Ghana or in other countries with similar business environments.