PETROLEUM INVESTMENT ANALYSIS – OPPORTUNITY EVALUATION, RISK ASSESSMENT, ECONOMICS, STRATEGIES

PETROLEUM INVESTMENT ANALYSIS – OPPORTUNITY EVALUATION, RISK ASSESSMENT, ECONOMICS, STRATEGIES
INSTRUCTORS: Margaret ‘Maggie’ Dalthorp PhD

DISCIPLINE: Introductory & Multi-Disciplinary
COURSE LENGTH (DAYS): 2
CEUS: 1.6
PUBLIC/ IN-HOUSE/ BOTH: Both
WHO SHOULD ATTEND:
Engineers, Geoscientists, Planners, Managers, Supervisors, Financial or Oil & Gas Accounting Staff, A&D Analysts, Petroleum Investors, or anyone involved in evaluating petroleum investments.
COURSE DESCRIPTION:

The oil & gas industry is a business of high risks and high rewards. To be successful industry personnel need to know the tools necessary to accurately and consistently evaluate income potential and associated risks. The basis of successful decisions is the establishment of a process that properly identifies the range of outcomes available within a project. Throughout the evaluation process risks need to be identified and quantified in relation to outcomes, and in a manner that allows a meaningful comparison to other available projects. The areas of uncertainty within a project also need to be identified and considered in the evaluation. It is important that the initial project evaluation is conducted by personnel with knowledge of economic evaluation tools, because the project design determines revenue streams. Projects create cash flows and economic analysis is used to evaluate the current value of future cash flows. The economic assessment of the project will be used to determine which projects are viable investments, and understanding the common economic benchmark tools is crucial for successful decisions. Deciding which projects to pursue in a limited capital environment can be difficult. Strategies for putting together a portfolio approach to investment decisions apply to oil & gas investments. Competitive bidding situations require another set of strategies to assess the bidding climate and competition that can impact the success of project implementation. Tools are also available to assess multiple objective decisions.

The course encompasses a broad, applied and practical approach to assessing, risking, economically evaluating and developing strategies for identifying and acquiring opportunities in the oil and gas industry.

LEARNING OUTCOMES:
• Understand the methods and procedures necessary to evaluate an opportunity such that the project cash flows and risk can be properly used in investment decisions.
• Understand the difference of risk and uncertainty and how important it is to accurately and consistently apply risking for successful investment decisions.
• Understand the basic concepts of economic analysis, discounting cash flows, and the ways to economically measure and compare opportunities.
• Understand investment decision strategies such as portfolio analysis, competitive bidding models, optimal working interest percentages, and project partnering.

COURSE CONTENT

Opportunity Evaluation
• The use of analogues to assess reservoir and reserve character.
• Data sources and uses in the evaluation process.
• Reserve estimates, log normal distributions, reservoir decline considerations.
• Project timing, infrastructure and design considerations.
Risk Analysis
• Concepts of risk and uncertainty and the difference between the two.
• The mechanics of project risking.
• Identifying and quantifying key variables.
• When to put probabilities into opportunity evaluation models.
• Reality checking assessment results.
• Develop a cumulative frequency distribution for outcomes.
Economic Analysis
• Converting project expectations to cash flows.
• Present Value concepts – how to value tomorrow’s dollars today.
• Setting up the economic evaluation, timing decisions, cash flow variations and variable curves.
• Measuring the opportunity – cash flow, timing, accounting, and risk yardsticks.
• Identifying and assessing sensitivities.
Strategies
• The Capital Asset Pricing Model and the prudent investor – Portfolio Theory applications.
• Opinion analysis and the role of subjective probability.
• Competitive Bidding using bidding patterns and a bidding model.
• Partnering and working interest evaluations for risk diversity and cash flow.
• Multiple objective decision analysis.

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