Chapter one:

1.0 Introduction

Capital budgeting is a crucial financial management process that involves evaluating and selecting long -
term investment projects to allocate resources effectively.Understanding the relationship between
capital budgeting and organisational performance is essential for optimizing decision -making and
enhancing operational efficiency. However, limited research has been conducted on this topic,
specifically within the context of South Sudan.Therefore , this study aims to fill this gap and provide
valuable insights into the capital budgeting practices of Dar petroleum operating company.

1.1 Background of the Study :

South Sudan, the world’s youngest nation, gained independence in 2011, and since then, it has faced
numerous challenges in establishing a stable and prosperous economy. The country is rich in natural
resources, particularly oil, which accounts for a significant portion of its GDP and government revenue.
The oil industry plays a vital role in driving economic growth and attracting foreign investments. DAR
Petroleum Operating Company, a joint venture between China National Petroleum Corporation (CNPC),
Petronas (Malaysia), Nilepet (South Sudan), and Sinopec (China), operates in South Sudan’s oil sector.

Capital budgeting decisions made by oil companies like DAR Petroleum have far-reaching implications
for the organization’s performance and, consequently, the overall economic development of South
Sudan. Efficient allocation of financial resources to viable investment projects is essential to maximize
returns, ensure sustainable operations, and contribute to the country’s socio-economic progress.
Therefore, conducting a case study on DAR Petroleum’s capital budgeting practices and their impact on
organizational performance will provide valuable insights into the broader context of capital budgeting
in South Sudan.The significance of this research lies in the context of the oil and gas industry in South
Sudan, which has experienced substantial growth and emerged as a key driver of the country's economy
. As Dar Petroleum Operating Company plays a pivotal role in the development and exploration of oil
reserves in the region, understanding the effectiveness of its capital budgeting practices becomes crucial
.

Capital budgeting, as a financial management process, plays a vital role in resource allocation and long-
term investment decisions However, there is a dearth of research examining capital budgeting practices
in South Sudan and their impact on organizational performance.
This study aims to fill this gap by shedding light on the specific context of capital budgeting within Dar
Petroleum Operating Company, the principle of capital rationing need to allocate limited financial
resources efficiently. Corporations often face budget constraints and must prioritize investment projects
based on their financial viability and strategic alignment. Effective capital budgeting enables companies
to allocate resources to projects that generate the highest returns and contribute to long-term financial
success.

Capital budgeting is a critical financial management process that involves evaluating and selecting
investment projects with long-term implications for a corporation's financial performance. It
encompasses the decision-making process of allocating financial resources to potential investment
opportunities. The goal of capital budgeting is to identify projects that generate positive cash flows,
enhance profitability, and contribute to the overall financial health of the corporation.

Financial performance, on the other hand, refers to the measure of how effectively a corporation utilizes
its resources to generate profits and create value for stakeholders. It envelopes various financial
indicators, including revenue growth, profitability ratios, return on investment (ROI), net present value
(NPV), internal rate of return (IRR), and other performance metrics. Evaluating financial performance
allows corporations to assess their ability to generate sustainable profits, manage risks, and allocate
resources efficiently.

According to Graham and Harvey (2001) has extensively discussed the relationship between capital
budgeting and the financial performance of corporations. Theory and Practice" emphasize the
importance of capital budgeting in evaluating investment opportunities. They examied the principles of
incremental cash flows, time value of money, risk assessment, and capital rationing as key components
of effective capital budgeting. These principles guide decision-makers in selecting projects that align
with the corporation's strategic objectives and maximize financial returns.

The impact south Sudan of capital budgeting on the financial performance of corporations may be
limited. However, research by Bol, Deng, and Atong (2019) researched"Capital Budgeting Practices in
South Sudan. A Survey of Selected Companies" provides insights into the capital budgeting practices of
corporations in South Sudan. Specific to Dar Petroleum Operating Company (DPOC), the study
examined the challenges faced by corporations in capital budgeting, such as inadequate financial
resources, lack of skilled personnel, and limited access to capital markets.
1.2 The statement of the research Problem

This study revolves around the need to understand the impact of capital budgeting on organizational
performance within Dar Petroleum Operating Company, located in Juba, South Sudan. While capital
budgeting plays a crucial role in resource allocation and long-term investment decisions, limited
research has been conducted on its specific application and effectiveness in the South Sudanese oil and
gas industry. Therefore, this study aims to investigate the relationship between capital budgeting
practices and organizational performance within Dar Petroleum, providing valuable insights for decision-
makers and contributing to the existing body of knowledge.

One aspect of the research problem is the identification of the capital budgeting techniques used by Dar
Petroleum. Different approaches, such as net present value (NPV), internal rate of return (IRR), and
payback period, have been employed in various industries and countries .However, it is essential to
determine which techniques are predominantly utilized within the Dar petroleum operating company
context and how they align with the company's investment decision-making process. Understanding the
specific techniques employed by Dar Petroleum will provide a foundation for analyzing their impact on
organizational performance.The research identifies constraints such as resource scarcity, lack of skilled
personnel, and limited access to capital markets, which can significantly affect the implementation and
effectiveness of capital budgeting strategies.

Another aspect of the research problem lies in assessing the effectiveness of capital budgeting practices
in Dar Petroleum. Prior studies have highlighted the challenges faced by resource-based industries,
including political instability, regulatory risks, and volatile oil prices . It is crucial to investigate how these
factors influence the decision-making process and whether the capital budgeting practices implemented
by Dar Petroleum effectively address these challenges. Analyzing the effectiveness of capital budgeting
practices will provide insights into potential areas of improvement and optimization.By conducting an in-
depth analysis of DPOC's capital budgeting strategies and their impact on financial performance, this
research aims to contribute to the existing literature on the subject, specifically within Dar petroleum
operating company and provide practical insights for decision-makers in the corporate sector.

The research problem involves examining the impact of capital budgeting on organizational
performance within Dar Petroleum. Organizational performance encompasses various dimensions,
including financial indicators, operational efficiency, and risk management . By assessing how capital
budgeting practices influence these performance measures, the study aims to identify the strengths and
weaknesses of the current approach. Understanding the impact of capital budgeting on organizational
performance will enable decision-makers to make informed decisions and develop strategies to enhance
overall company performance

The objective is to understand the challenges and opportunities faced by DPOC in implementing
effective capital budgeting practices to enhance its financial performance. In South Sudan, where
economic challenges and limited resources are prevalent, there is a need to investigate the relationship
between capital budgeting practices and financial performance.

It provides an opportunity to understand the extent to which capital budgeting impacts the performance
of Dar Petroleum Operating Company. The findings of this study will not only contribute to the academic
understanding of capital budgeting and financial performance but also offer practical implications for
decision-makers at DPOC and other corporations operating in South Sudan (Graham & Harvey, 2001;
Bol, Deng, & Atong, 2019).

1.3 Research Objectives of the study.

The objectives of this study are categorised into two:

General objective and specific

1.3.1 General Objective:

- To assess the impact of capital budgeting on the organizational performance of Dar Petroleum
Operating Company in Juba, South Sudan.

1.4 Specific Objectives:

(I)To examine the capital budgeting practices and strategies employed by Dar Petroleum Operating
Company in Juba, South Sudan.

(ii)To evaluate the impact of capital budgeting decisions on the financial performance of Dar Petroleum
Operating Company.

(iii) To establishe the relationship between capital budgeting and strategic decision-making at Dar
Petroleum Operating Company.
1.5 Research Questions:

The research questions that will guide this study are as follows:

1:What are the capital budgeting practices and strategies employed by Dar Petroleum Operating
Company in Juba, South Sudan?

2:What is the impact of capital budgeting decisions on the financial performance of Dar Petroleum
Operating Company?

3: What is the relationship between capital budgeting practices and financial performance of Dar
Petroleum Operating Company ?

1.6 Hypotheses:

H0: There is no significant relationship between the quality of capital budgeting practices and the
financial performance of Dar Petroleum Operating Company in Juba, South Sudan.

H1: There is a significant positive relationship between the quality of capital budgeting practices and the
financial performance of Dar Petroleum Operating Company in Juba, South Sudan.

1.7 Scope of the Study:

1.7.1 Content Scope:

This study focuses on examining the impact of capital budgeting on the organizational performance of
Dar Petroleum Operating Company in Juba, South Sudan. It specifically investigates the capital budgeting
practices, strategies, and decisions employed by the company, as well as their influence on financial
performance indicators such as profitability and cash flow generation.

1.7.2 Time Scope:

The study's time scope encompasses a specified period during which data will be collected and analyzed.
The exact time frame for this case study on Dar Petroleum Operating Company in Juba, South Sudan will
depend on the availability of historical financial data and the research objectives. It could cover a
specific period of four (4)months or include recent financial performance data.

1.7.3 Geographical Scope:

The geographical scope of this study is limited to the operations of Dar Petroleum Operating Company in
Juba, South Sudan. It aims to explore the specific context and challenges faced by the company in the
South Sudanese business environment.

1.8 Significance of the Study:

The findings of this study can have both theoretical and practical significance. Theoretically, it will
contribute to the existing body of knowledge on capital budgeting practices and their impact on
organizational performance in the specific context of South Sudan. Practically, the study's outcomes can
inform the management of Dar Petroleum Operating Company and other similar organizations in making
informed decisions regarding capital budgeting and resource allocation, ultimately leading to improved
financial performance and strategic outcomes.

1.9 Organisation of the study

CHAPTER ONE : provides an introduction and the background of the study.statement of the research
problem is also provided objectives of the study, scope of the study, justification, research questions,
research limits, hypothesis, significance of the study and Structure of the study ,under ethical
considerations of research methodology and definition of the terms are all entailed in the chapter.

CHAPTER TWO: provides Literature reviews and overview of capital budgeting , theoretical frameworks
for capital budgeting , capital budgeting practices in the public sector, capital budgeting and
organisational performance with the review of related studies .
CHAPTER THREE : RESEARCH METHODOLOGY , outlines the research design, data analysis methods and
ethical considerations detailing the best procedures and methods for the study to follow in collecting
data .

CHAPTER FOUR this section , presents the findings of the study such as data analysis, presentations and
discussion of the fundings .

CHAPTER FIVE: concludes the study with discussion of these findings draws conclusions from the data,
and formulates recommendations to enhance relationships between government and the traditional
governance structures like summary of the study, implications of the study, limitations of the study and
concluding remarks.

1.10 Definition of Key Terms:

1-Capital Budgeting: The process of evaluating and selecting investment projects for allocating financial
resources.

2- Organizational Performance: The overall effectiveness and efficiency of an organization in achieving

its objectives and goals.

3-Financial Performance: The assessment of an organization's financial health, profitability, and ability to
generate cash flow.

4- Profitability: The ability of an organization to generate profits and returns on investment.

5-Cash Flow Generation: The ability of an organization to generate positive cash flows from its
operations.
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