Financial return and energy return on investment analysis of oil sands, shale oil and shale gas operations

People's focus on either financial benefit or ecological benefit makes decisions on unconventional oil and gas extraction hard. This paper combines the energy return ratio with the financial return ratio through a comprehensive analysis model, which is more parsimonious and more objective than other comprehensive analysis models. The model was applied to analyze the comprehensive energy/financial efficiency of seven sample unconventional petroleum (oil and gas) companies in North America. Among them, four are oil sands operating companies with the largest oil sands production and three are shale oil and shale gas operating companies with the largest number of drilled but uncompleted shale wells, and complete available data. Results of our analysis indicate that during the most recent seven years the selected companies' energy return ratio and financial return ratio of unconventional oil and gas extraction operations show obviously different tendencies as a result of oil price fluctuations. However, their comprehensive energy/financial efficiency indicators show no significant trend, which was different from the cases for either one of the individual indicators. We demonstrated that a comprehensive indicator combining both energy and financial efficiency indicators could be more accurate than either one of them individually, to measure the sustainability and the true value of a company or business unit, recognizing both economic and biophysical value. We concluded by suggesting that the energy return on investment indicator and the comprehensive efficiency indicator both be disclosed and audited along with financial and commodity reserves metrics. Such a summary statistic will be more useful for investors and public policy analysts than the various energy efficiency statistics buried in the Global Reporting Initiative (GRI) reports voluntarily produced by various companies. We argue that this summary statistic would provide incentives for companies to innovate and to improve efficiency as well as meet public policy objectives in energy and environment even when the commodity price makes it easier to meet financial objectives. (C) 2019 Elsevier Ltd. All rights reserved.