Corporate Finding And Development Costs-1984-1986
Authors: Grecu John , Ziff Paul H. 
Published: March 2010

Introduction
The purpose of this study is to compare the relative efficiency of 42 leading oil and gas producers in finding and developing new hydrocarbon reserves in western Canada over the 1984–1986 period. The analysis and interpretation of results was conducted primarily at the single company level. The group and industry indicators were then derived by aggregating the 42 individual results
In the absence of established and widely accepted Canadian norms for individual performance evaluation. we have defined a uniform methodology and calculated consistent corporate performance standards.
In the U.S., a number of publications deal with this subject, but all Canadian studies to date dealt only with macro-industry or regional figures. The main cause for this discrepancy lies in the significant differences in public reporting practices between the two countries. Whereas in the U.S. the federal securities regulatory body (S.E.C.) imposes very rigid disclosure requirements on all publicly listed oil and gas companies, in Canada, there is no similar federal authority, and no common standards, making comparative analysis very difficult.
Our study bridged this gap by using standardized input data, obtained directly from the 42 companies participating in the study. The access to corporate information not otherwise available enhanced considerably the confidence level in the accuracy and comparability of the data.

Methodology

Time Period
The approach of the study is empirical, using only historical reserve and cost data. The analysis period covered includes two years of strong activity, marking the recovery from the effects of the ill-fated NEP (1984, 1985) and a year which witnessed the OPEC-caused price collapse (1986). Given the longer term nature of the search for hydrocarbon reserves, i.e. the time span of full-cycle economics, the three-year time horizon of the study is probably the lower limit to draw any trend-related conclusions. Future studies will add data on an annual basis, reaching the desired five-year span in 1989.

Corporate Sectors
The participants in our study include, with a few exceptions, the largest public and private Canadian oil and gas producers. Our sample represents about two-thirds of total industry spending over the 1984–1986 period. To make comparisons between individual companies meaningful, we have grouped them in three sectors (integrateds: 7 companies; senior producers: 13 companies; and medium and junior producers: 22 companies) based on similarities in size and make-up of existing assets.

Finding and Development Cost
As the long-term corporate objective is to attach new, cash-flow generating reserves, in our study we have zeroed in on full-cycle economics (total replacement or on-stream cost). Exploration finding cost is a first step but not the only one. In some areas, development costs for drilling and tangibles (plant, pipe, etc.) may be double the initial exploration outlay. Our approach includes both exploration and development costs, providing the most relevant measure for total company performance. Recognizing the widespread use, especially by explorationists, of the finding cost in the stricter sense, the latter is also presented throughout the study as a sub-case.

Oil vs Gas
A perennial problem in finding cost analysis is the equivalency of oil and gas.