DEA ARs and CRs applied to worldwide major oil companies

Data Envelopment Analysis (DEA) methods were applied to data of 14 major oil companies (Majors) for the years 1980–1987. The oil model focuses on the worldwide reserve exploration and oil production activities. Data were reported by Arthur Andersen & Co.'sOil & Gas Reserve Disclosures.Newly developed DEA theory was used to link the input and output multiplier bounds and to measure maximum and minimum profit ratios. Also, this theory was used to identify uniquely inefficient firms and to project them uniquely to the DEA frontier.The DEA profit and efficiency measures partitioned the firms into low and high achievers. Discriminant analysis of a similarly constructed data base lends statistical support to this partition.With DEA, top-managers of major oil companies may capture the cost savings/profit ratio gains of making inefficient firms efficient. DEA allows them to benchmark entire firms against the best-practice norm. Looking outwardly, they may gain much more from adapting best-practice competitor practices than from just looking inwardly searching for small marginal gains.