ENVIRONMENTAL DECOMMISSIONING COSTS AND FINANCIAL PERFORMANCE: A STUDY OF LISTED INDIGENOUS OIL AND GAS COMPANIES IN NIGERIA

Abstract

This paper examined the relationship between environmental decommissioning costs and financial performance of Nigerian listed indigenous oil and gas exploration and production companies. It used an ex-post facto research design. The study's population consists of three Nigeria Exchange Group-listed oil and gas companies, whereas the sample size consists of two Nigeria Exchange Group-listed oil and gas exploration and production companies. The data came from the businesses' annual reports and accounts. To test the hypotheses, the study uses E-views version 10.0 and basic linear regression of cross sectional panel data analysis. The hypotheses were developed using Hausman's findings on random and fixed effects models, co-integration, and granger causality links. The findings show that environmental dismantling costs have no positive or significant relationship with return on equity or return on assets, that environmental conventional building demolition costs have no positive or significant relationship with return on equity but do have a positive and significant relationship with return on assets, and environmental decommissioning cost have neither positive or substantial financial performance benefits. The study concludes that, in the long run, the high costs of environmental decommissioning to restore the environment of oil host and bearing communities to its near-natural state have no bearing on the financial performance of Nigeria's publicly traded oil and gas exploration and production companies.