Financial Regulation and Governance Analysis

This assignment provides an in-depth examination of financial regulation and governance practices in the oil and gas industry. It includes a review of various research papers and articles on topics such as off-balance sheet financing, offshore petroleum regulatory regimes, and ethics and governance practices. The analysis focuses on the importance of effective financial management in the oil and gas industry and highlights key findings from relevant studies. This assignment is suitable for students studying finance, accounting, or business management.

Principle of financial
management

Table of Contents
INTRODUCTION...........................................................................................................................1
Industry Description.........................................................................................................................1
a.) The size of the industry and the level of competition............................................................1
b.) Regulator/s of the industry.....................................................................................................2
c.) Industry groups that help regulate behaviour........................................................................2
Company Description......................................................................................................................2
a.) The main source of business..................................................................................................2
b.) The ownership structure of your company...........................................................................2
c.) Company’s role within the Financial System.........................................................................2
Financial Instrument Analysis.........................................................................................................3
a.) The financial instruments of Big Star Limited company.......................................................3
b.) OBS business compared to Balance Sheet business of Big Star Limited company..............3
Part A: Financial Ratio Analysis .....................................................................................................3
a.) 3 key financial ratios of Big Star Limited company...............................................................3
b.) The financial ratios based on the financial statements..........................................................3
c.) Critical analysis of the financial ratios of Big Star Limited company....................................3
Part B: Competitor Analysis............................................................................................................3
a.) Identification of Big Star Limited company main competitors............................................3
b.) Basis of competition in the industry......................................................................................3
c.) Critical analysis of the competitors........................................................................................3
Financial Market Analysis ..............................................................................................................3
a) The financial players within the industry...............................................................................3
b.) The need for government intervention...................................................................................3
c.) Critical analysis of the company which includes unethical practices and compliance with
law. ..............................................................................................................................................3
Findings, Conclusion and Recommendations..................................................................................3
REFERENCES................................................................................................................................4
APPENDIX......................................................................................................................................6

INTRODUCTION
Financial management is an effective process which helps in formulating plan,
organizing, controlling, directing and monitoring the financial resources to achieve common
goals and objectives of the company effectively.
This study will highlight, the specific description of the industry with specific size and
the level of competition. This study will include company description and critically evaluate the
main source of business and the products and services offered by them. It will highlight, company's
role within the financial system. This study will examine financial instrument analysis.
Furthermore this study will highlight, financial ratio analysis to identify the strengths and
weakness of internal factors. This will also evaluate competitor analysis to identify the
opportunities and threats refer to external factors of the company. This study will also include
financial market analysis. Lastly, it will include conclusions and recommendations.
Big Star Energy is a oil and gas production and exploration company. This company is
headquartered in Australia. This company mainly focus on producing and exploring gas and oil
from its landholdings and well- bores which include Texas, USA, Midland Basin, Dawson
country.
Industry Description
a.) The size of the industry and the level of competition.
Big Star Energy mainly deals in oil and gas exploration industry sector company. It has
production in Texas, USA, Midland Basin, Dawson country. Big Star Energy limited company
mainly operates in natural gas sector and crude petroleum sector. This company deals in energy
sector, in oil, gas and coal industry. The sub- industry of this company in exploration and
production (Marti and Scherer, 2016).
The level of competition of this industry is moderate and the size of the oil, gas and coal
industry is also large as they export goods across the globe which leads to higher operational
efficiency, performance and productivity.
Australia is one of the 34th largest oil producing country in the world. The industry is
highly exposed to trade and focus on exporting the goods which will eventually increase the
industry revenue by 83% in 2019. Industry export heavily across the globe which influence
growth and volatility of oil and gas exploration industry.

b.) Regulator/s of the industry
The production, extraction and exploration of petroleum which mainly includes oil and
gas and it is effectively regulated at state, territory and federal level in Australia (Oil and gas
regulation in Australia: overview, 2019). Most oil and and gas production is regulated at territory
and state level. On the other hand, Commonwealth government regulates offshore production of
oil and gas (Offshore Petroleum Regulatory Regime, 2019).
c.) Industry groups that help regulate behaviour.
National Offshore Petroleum Safety And Environmental Management Authority
(NOPSEMA) And National Offshore Petroleum Titles Administrator (NOPTA) effectively
performs regulatory functions within specific oil and gas industry.
Company Description
a.) The main source of business.
Big Star Energy Limited company mainly deals in exploration and production services of oil
and gas. The main source of the business is to import and export goods and services across the globe.
It has wider scope and leads to long term sustainable growth and development of the Big Star Energy
Limited company (Gitman, Juchau and Flanagan, 2015). The products and services offered by Big
Star Energy Limited company are energy efficiency, energy generation, renewable energy spectrum,
oil and gas exploration and production, exports of oil and gas, etc. This Big Star Energy Limited
company mainly focus on producing and exploring gas and oil from its landholdings and well- bores
which include Texas, USA, Midland Basin, Dawson country.
b.) The ownership structure of your company.
Big Star Energy company is a limited company which is owned by trusts, individuals,
associations, institutions and corporations (Three Basic Types of Business Ownership Structures –
Advantages and Disadvantages, 2015). The ownership of the company is divided into the number of
shares owned by each individual. The stocks of the company are traded on stocks exchange and at
Antares Energy Limited. Limited company has its own legal identity and the owner shareholders of
Big Star Energy Limited company are not liable to all the profits and debts incurred buy the firm.
c.) Company’s role within the Financial System.
The Big Star Energy Limited company is traded on stock exchange with Antares Energy
Limited (ASX) code in BNL. They allows exchange of funds between various regulators like

investors, lenders, borrowers, institution, companies, etc. they offer various financial instruments and
are traded globally. Financial system mainly comprises of financial instruments, financial market,
financial institution and regulatory agencies (McKinney, 2015).
Financial Instrument Analysis
a.) The financial instruments of Big Star Limited company.
Big Star Limited company current asset of the company are strong and have strong cash
liquidity to off its debt. The current assets of the company is cash and cash equivalents, trade and
receivables. The non- current asset of the company is other assets, property, plant and equipments, oil
and gas properties, etc. the current liabilities of the company are trade and other payables, interest
bearing loans, borrowings. The non- current liabilities are provisions. Equity of the company are
contributed equity, reserves and accumulated losses. Big Star Limited company trade into various
financial instruments which mainly deals in shares, futures, options, stocks, short selling, long selling,
equities, derivatives, bonds, equity loans, interest rate swaps, interest rate options, bills, deposits,
certificate of deposits, forward rate agreement, foreign exchange, securities and debentures (Jordan,
Miller and Dolvin, 2015). The equity position of the company is very strong and it helps Big Star
Energy Limited company to maintain its financial position which leads to higher sustainable profit
and growth of the company. The financial instruments like bonds helps investor to earn fixed
percentage of income and also helps in raising capital of the company. Equity shares is a source of
long term capital for the company where large number of investors invest in shares, stocks, bonds of
the Big Star Energy Limited company.
b.) OBS business compared to Balance Sheet business of Big Star Limited company.
Off Balance Sheet (OBS) is a statement which does not includes liabilities and assets on the
company's balance sheet. These assets and liabilities are not recorded in the company's balance sheet.
OBS items are those which are not owned by the company. For example, collateral debt obligation,
securitized loan sold off as investment, etc (Off-Balance Sheet Financing (OBSF), 2019). Off Balance
Sheet (OBS) mainly comprises of operating leases, joint ventures, research and development,
partnerships, etc.
The balance sheet is a financial statement which includes all the assets and liabilities of the
company in a systematic manner. The assets included in balance sheet are cash and cash equivalents,
marketable securities, accounts receivables, inventory, fixed assets, long term investments, intangible
assets and prepaid expenses. The liabilities of the company includes wages payable, bank

indebtedness, rent, tax, utilities, interest payable, long term debt, dividends payable, deferred tax
liability, etc. (Joanna and Jenny, 2016).
Part A: Financial Ratio Analysis
a.) 3 key financial ratios of Big Star Limited company.
Financial ratios are important for the company which helps in identifying the financial
performance of the company. It is derived by critically evaluating income statement, cash flow
statement and cash flows of the Big Star Energy Limited company. It helps in effectively analysing
the risks and financial stability of the company (Robinson and et.al., 2015.). There are different types
of Financial ratios which mainly includes current ratio, quick ratio, turnover ratio, profitability ratio,
return on equity, return on assets, financial leverage, fixed asset turnover ratio, etc. these ratios helps
in effectively analysing the performance of the Big Star Energy Limited company.
Big Star Energy Limited company will focus on key ratios like profitability ratio, current ratio
and fixed asset turnover ratio. The current ratio of the company indicates liquidity of the company.
The ideal current ratio is 2:1. It states that company has sufficient cash to effectively measure the
company's ability to pay the debt. Higher the current asset of the company more the financial stability
to Big Star Energy Limited company.
The profitability ratio of the company indicates the ability of the company to generate
revenues and earnings (Henderson and et.al., 2015). It helps in identifying the ability to use the
existing assets of the company effectively to generate higher profit and value for the company and
shareholders of Big Star Energy Limited company. Higher ratio is favourable which states the
financial performance of the company is strong.
Fixed asset turnover ratio helps in indicating how well the company is using fixed assets of
the company in order to generate higher sales for the company. If the company's Fixed asset turnover
ratio is high it states that the fixed asset of the company are optimally utilized which generates higher
sales for the company.
b.) The financial ratios based on the financial statements.
Profitability ratio
Particulars Formula 2017 2018
Sales 345 502
Gross loss -141 -372
Net profit -2373 4669

Net profit ratio net profit /sales* 100 -687.8 930.1
Current Ratio current asset/ current liability * 100
current asset 254 546
current liability 238 485
1.07 1.13
Fixed asset turnover ratio net sales / fixed assets* 100
fixed assets 550 636
0.63 0.79
c.) Critical analysis of the financial ratios of Big Star Limited company.
The profitability ratio of the Big Star Energy Limited company for the year 2017 is -687.8 and
for the year 2018 is 930.1. It has been critically evaluated that, the probability of the company has
increased to a great extent. Company is performing exceptionally well and generating increasing
profit (Kara, ACAR ERDUR and Karabiyik, 2015). The current ratio of the Big Star Energy Limited
company for the year 2017 is 1.07% and for the year 2018 is 1.13%. It has been critically evaluated
that, the current ratio of the company is good and it has enough liquidity to pay off its liabilities. The
Fixed asset turnover ratio of the Big Star Energy Limited company for the year 2017 is 0.63% and for
the year 2018 is 0.79%. It has been critically evaluated that, the Fixed asset turnover ratio of the
company is good and is optimally utilizing the fixed assets of the company in order to generate higher
sales.
Part B: Competitor Analysis
a.) Identification of Big Star Limited company main competitors.
The major opportunity related with this industry is that the the oil, gas and coal industry
has expanded their output across the globe and the prices of oil and natural gas have also
declined (Zainudin and Hashim, 2016). This leads to higher revenue within this industry which
eventually leads to higher profit margins and strong global demand of Australian LNG.
The major threat to the Big Star Energy Limited company is that it has large number of
rivalry competitors are present in the market which will adversely affect the operational
efficiency of the business. The key competitors like Saudi Aramco, China National Petroleum

Corporation, Sinopec, ExxonMobil, Conoco Phillips, Chevron, Royal Dutch Shell, Kuwait
Petroleum Corp, Gazprom, Rosneft, Petro China and Statoil.
b.) Basis of competition in the industry.
The key basis of competition in this industry is related with price, quality, location and size of
the firms which largely affect the functioning of the Big Star Energy Limited company. Petroleum,
oil, gas and energy are provided at the competitive price with slight variance in the quality. It impose
major external threat on the functioning of the Big Star Energy Limited company ( Guo and et.al.,
2017). This eventually affects the operational efficient, performance and productivity and profitability
of the company. Effective brand image and goodwill of the company with large size of the firms helps
in attracting large customers and can import and export at the large extent across the globe.
Effective and appropriate location where large number of customers can be attracted in a
market helps in increasing the sales of the company which leads to higher generation of revenue and
profit. This leads to lower profit margins and market share for the competitor.
c.) Critical analysis of the competitors.
Exxon Mobil is one of the major player in the oil and gas industry. This company provides
best quality oil and gas to the different parts of the world. This is one of the competitors which is the
major opportunity for the Big Star Energy Limited company which will help in improvising the
quality by using effective resources which affect the profitability of the company in a positive manner.
The price of the Saudi Aramco is very high, this is the major opportunity for the Big Star Energy
Limited company to provide oil at an economic price.
Financial Market Analysis
a) The financial players within the industry.
The key financial players within the oil and gas industry are investors, borrowers,
financial intermediaries, regulators which largely influence the functioning of the Big Star Energy
Limited company. The financial player in the company interact with each other and maintain a
mutually beneficial resources (Easton and Sommers, 2018). This helps in analysing the mutual
relationship of the company where large number of financial players focus on developing strong
relationship between the each members of the company. It will focus on developing strong
relationship between each members of the company.

b.) The need for government intervention.
Government intervention is necessary to evaluate whether the company is performing and
functioning in an ethical manner or not. It will evaluate whether company is in adherence and
compliance with various other laws and standards for smooth functioning of the Big Star Energy
Limited company. Government intervention helps in critically evaluating the performance and in case
of unethical practice government will take necessary actions to resolve the issue and charge penalties.
Most oil and and gas production is regulated at territory and state level (Rejeb and Arfaoui, 2016). On
the other hand, Commonwealth government regulates offshore production of oil and gas which helps
in effectively regulating and identifying the resources in an effective manner and also identify any
unethical practices which are carried out. National Offshore Petroleum Safety And Environmental
Management Authority (NOPSEMA) And National Offshore Petroleum Titles Administrator
(NOPTA) effectively performs regulatory functions within specific oil and gas industry which identify
whether company is performing in adherence with various laws, regulations and standards.
c.) Critical analysis of the company which includes unethical practices and compliance with law.
In case of unethical practices the financial players of the company will not invest in the
company any further and will withdraw all the shares in an effective manner. Big Star Energy
Limited company is not into any unethical practice which leads to higher operational standards and
long term sustainability growth of the business.
Big Star Energy Limited company focuses on working in compliance and adherence with
various laws which mainly includes Petroleum Law and Policy in Australia, Oil and gas regulation,
health and safety act, etc. (Ethics and Governance Practices in the Oil and Gas Industry, 2011).
compliance with these standards and laws helps in smooth functioning of the business. Big Star
Energy Limited company focus on compliance with corporate social responsibility. It also focus on
reducing wastage and use green environment practices which leads to higher sustainable growth and
development of the company (DeFusco and et.al., 2015). High ethical standards is one of the most
important and core principle for Big Star Energy Limited company.
Findings, Conclusion and Recommendations
From the above conducted study it has been concluded that, Big Star Energy Limited
company is a oil and gas exploration industry sector company. It has been examined from the findings
that the company is performing financially well and focus on delivering the best products and services
across the globe. It has been examined that, the profitability ratio, current ratio and fixed asset

turnover of the company is favourable for the company. It has been concluded that, Big Star Energy
Limited company do not indulge in any unethical activities and work in compliance and adherence
with various laws, legislation, regulations and standards for smooth functioning of the business. It has
been examined from the financial statements of the company that, the financial market of the Big Star
Energy Limited company is very strong and healthy which leads to higher sustainable growth and
development of the business.
It has been recommended by the regulators that the Big Star Energy Limited company must
focus on reducing wastage to the minimum and optimum utilization of the resources. Regulators
must focus on reducing the wastage and deliver the best services to the company (Dewachter,
and et.al., 2015). They must also focus on delivering corporate social responsibility into the
company which creates goodwill and reputation for the company. I completely agree with this
recommendation, as it will help Big Star Energy Limited company to create effective goodwill and
brand image by practising CSR which will attract large number of customers across the globe with
higher market share.
The regulators also suggested that the Big Star Energy Limited company must focus on
optimally utilizing the resources of the company and must use green energy for long term growth
of the business. I completely agree with this recommendation, as it will help Big Star Energy
Limited company to protect the resources and do not over-utilize the resources which helps in future
success and growth of the business.
The regulators also recommended that the company must compliance with all the laws
and must get it updated on a timely manner which leads to higher sustainable growth and
development of the Big Star Energy Limited company. I completely agree with this recommendation
as it will help Big Star Energy Limited company in smooth functioning of the business with reduced
chance of penalties and obligations.
The regulators must take into consideration all health and safety measures to reduce the
impact of any hazardous activities on the business. The regulators have evaluated and recommended
that, Big Star Energy Limited company must focus on maintaining ethical practices into the company
which leads to higher sustainable growth of the business (Tiwari, Albulescu and Yoon, 2017). I
completely agree with this recommendation as it will help Big Star Energy Limited company in
protecting the interest of all the shareholders of the company and maintaining health and safety helps

in protecting employees from any hazardous activities. This helps in protecting human rights and also
leads to long term sustainable growth of the business.

REFERENCES
Books and journals
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Dewachter, H and et.al., 2015. A macro-financial analysis of the euro area sovereign bond
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Easton, M. and Sommers, Z., 2018. Financial Statement Analysis & Valuation, 5e.
Gitman, L.J., Juchau, R. and Flanagan, J., 2015. Principles of managerial finance. Pearson
Higher Education AU.
Guo, L and et.al., 2017. Automated competitor analysis using big data analytics: Evidence from
the fitness mobile app business. Business Process Management Journal, 23(3), pp.735-
762.
Henderson, S and et.al., 2015. Issues in financial accounting. Pearson Higher Education AU.
Joanna, G. and Jenny, H., 2016. Implementing Financial Regulation-Theory and Practice.
Jordan, B.D., Miller, T.W. and Dolvin, S.D., 2015.Fundamentals of investments: valuation and
management. McGraw-Hill Education.
Kara, E., ACAR ERDUR, D. and Karabiyik, L., 2015. Effects Of Corporate Governance Level
On The Financial Performance Of Companies: A Research On BIST Corporate
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contribution of management theory.Academy of Management Review.41(2). pp.298-323.
McKinney, J.B., 2015. Effective financial management in public and nonprofit agencies. ABC-
CLIO.
Rejeb, A.B. and Arfaoui, M., 2016. Financial market interdependencies: A quantile regression
analysis of volatility spillover. Research in International Business and Finance, 36,
pp.140-157.
Robinson, T.R and et.al., 2015. International financial statement analysis. John Wiley & Sons.
Tiwari, A.K., Albulescu, C.T. and Yoon, S.M., 2017. A multifractal detrended fluctuation
analysis of financial market efficiency: Comparison using Dow Jones sector ETF
indices.Physica A: Statistical Mechanics and its Applications. 483. pp.182-192.
Zainudin, E.F. and Hashim, H.A., 2016. Detecting fraudulent financial reporting using financial
ratio. Journal of Financial Reporting and Accounting, 14(2), pp.266-278.

Online
Ethics and Governance Practices in the Oil and Gas Industry. 2011. [ONLINE]. Available
through:<https://www.onepetro.org/conference-paper/WPC-20-3335>
Off-Balance Sheet Financing (OBSF). 2019. [ONLINE]. Available
through:<https://www.investopedia.com/terms/o/obsf.asp>
Offshore Petroleum Regulatory Regime. 2019. [ONLINE]. Available
through:<https://archive.industry.gov.au/resource/UpstreamPetroleum/
OffshorePetroleumRegulatoryRegime/Pages/default.aspx>
Oil and gas regulation in Australia: overview. 2019. [ONLINE]. Available
through:<https://uk.practicallaw.thomsonreuters.com/w-011-0184?
transitionType=Default&contextData=(sc.Default)&firstPage=true&comp=pluk&bhcp=1>
Three Basic Types of Business Ownership Structures – Advantages and Disadvantages. 2015.
[ONLINE]. Available through:<https://www.simplexpayroll.com/blog/2015/12/three-
basic-types-of-business-ownership-structures-advantages-and-disadvantages/>

APPENDIX