Robustness of Firm-Specific and Macroeconomic Determinants of Exploration Investments: Implications from Egyptian Oil & Gas Industry

Abstract

The uncertainty that surrounds Oil and Gas exploration environments call for an examination at different angles. In terms of robustness, this study focuses on three performance measurements: (a) the amount of exploration investments, (b) the growth rate of exploration investments and (c) 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 co-integration analysis is utilized as well in order to examine the level of co-integration between predictors of each performance measure. The sample includes annual data for forty one firms (local and multinational) working in the Oil and Gas industry in Egypt for the period 2009-2014.The results show that (a) amount and growth of exploration investment are quite robust performance measures in the Oil and Gas industry, (b) VaR of exploration investment is sporadic as it firm-specific, (c) 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 quire relevant firm performance in the Oil and Gas Industry.