7.17.      Wildcat activity. Wildcats are wells drilled to find and produce oil and/or gas in an improved area or to find a new reservoir in a field previously found to be productive of oil or gas or to extend the limit of a known oil or gas reservoir. Table 7.7 gives data on these variables*:

Y = the number of wildcats drilled

X2 = price at the wellhead in the previous period (in constant dollars, 1972 = 100)

X3 = domestic output

X4 = GNP constant dollars (1972 = 100)

X5 = trend variable, 1948 = 1, 1949 = 2, ..., 1978 = 31

See if the following model fits the data:

 

Yt   = β1 + β2 X2t + β3 ln X3t + β4 X4t + β5 X5t + ut

a.    Can you offer an a priori rationale to this model?

b.     Assuming the model is acceptable, estimate the parameters of the model and their standard errors, and obtain R2 and R¯ 2 .

c.     Comment on your results in view of your prior expectations.

d.     What other specification would you suggest to explain wildcat activ- ity? Why?

 

 

 

TABLE 7.7
		Domestic
		output
	Per barrel	(millions of	GNP,
Thousands	price,	barrels	constant
of wildcats,	constant $,	per day),	$ billions,	Time,
(Y )	(X2)	(X3)	(X4)	(X5)
8.01	4.89	5.52	487.67	1948 = 1
9.06	4.83	5.05	490.59	1949 = 2
10.31	4.68	5.41	533.55	1950 = 3
11.76	4.42	6.16	576.57	1951 = 4
12.43	4.36	6.26	598.62	1952 = 5
13.31	4.55	6.34	621.77	1953 = 6
13.10	4.66	6.81	613.67	1954 = 7
14.94	4.54	7.15	654.80	1955 = 8
16.17	4.44	7.17	668.84	1956 = 9
14.71	4.75	6.71	681.02	1957 = 10
13.20	4.56	7.05	679.53	1958 = 11
13.19	4.29	7.04	720.53	1959 = 12
11.70	4.19	7.18	736.86	1960 = 13
10.99	4.17	7.33	755.34	1961 = 14
10.80	4.11	7.54	799.15	1962 = 15
10.66	4.04	7.61	830.70	1963 = 16
10.75	3.96	7.80	874.29	1964 = 17
9.47	3.85	8.30	925.86	1965 = 18
10.31	3.75	8.81	980.98	1966 = 19
8.88	3.69	8.66	1,007.72	1967 = 20
8.88	3.56	8.78	1,051.83	1968 = 21
9.70	3.56	9.18	1,078.76	1969 = 22
7.69	3.48	9.03	1,075.31	1970 = 23
6.92	3.53	9.00	1,107.48	1971 = 24
7.54	3.39	8.78	1,171.10	1972 = 25
7.47	3.68	8.38	1,234.97	1973 = 26
8.63	5.92	8.01	1,217.81	1974 = 27
9.21	6.03	7.78	1,202.36	1975 = 28
9.23	6.12	7.88	1,271.01	1976 = 29
9.96	6.05	7.88	1,332.67	1977 = 30
10.78	5.89	8.67	1,385.10	1978 = 31

Source: Energy Information Administration, 1978 Report to Congress.