Attend this practical and interactive four-day training course and enhance your knowledge on the following key areas:
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Discounted cash flow
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Capital budgeting techniques
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Oil & Gas asset net cash flow – project components
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Oil & Gas asset net cash flow – economic components
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Oil & Gas asset net cash flow – taxation and government take components
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Oil & Gas asset net cash flow determination
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Advanced petroleum economic techniques
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Discrete economic solutions
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Probabilistic economic solutions
- Continuous economic solutions
- Plus: Upstream economics workshop: the taxation case study
- Plus: Upstream exploration prospect valuation workshop
- Plus: Upstream economics workshop: the PSC case study
This practical Euromoney Energy Training course will enable delegates from all technical and commercial disciplines to understand the theories and methods used to value oil and gas prospects. The four-days will reveal the fundamental aspects of upstream petroleum economics and risk analysis. Through computer-based exercises, participants will construct economic models, incorporating relevant cash flow data for case study projects and scenarios.
How this Introduction to Upstream Petroleum Economics and Risk Analysis course will help you
By attending this highly interactive and practical course you will:
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Study upstream petroleum economic discounted cash flow evaluation methodologies
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Understand the derivation, calculation & application of economic metrics
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Learn the components of an oil/gas field cash flow
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Evaluate investment opportunities in exploration, development & production
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Construct production sharing contract, tax & royalty concession models
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Learn about international fiscal systems
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Understand uncertainty & risk in exploration & economic evaluation
Day 1
Oil & gas asset discounted net cash flow
Introduction
- Objectives of undertaking an economic analysis
- What makes the oil and gas industry different?
Discounted cashflow
- The time value of money, compounding & discounting
- Discount rate, discount factor & discount method
- The cost of capital and the hurdle discount rate
Capital budgeting techniques
- Undiscounted methods (PIR, payback, exposure)
- Discounted methods (e.g. NPV, IRR, DPIR)
- Valuing an asset, making development & investment decisions
Oil & gas asset net cashflow – project components
- Reserves, production and sales profiles
- Tariff income
- Capital, operating, transportation & abandonment Costs
- Working interests, carried interests, ORR’s & NPI’s
Day 2
Oil & gas asset net cashflow – economic components
- Inflation, cost escalation, real versus nominal cash flows
- Oil and gas prices
- Interest rates & exchange rates
Oil & gas asset net cashflow - taxation & government take ccomponents
- Production sharing contracts
- Royalty & taxation systems
- Risk service & other systems
- Calculating royalties, taxes, cost recovery and profit oil splits
Oil & gas asset net cashflow determination
- Oil company (investor) net cash flow
- State oil company net cash flow
- Government net cash flow
Upstream economics workshop: the taxation case study
- Introduction to the European gas field, taxation based case study
- Establishing the economic model framework, structure & calculation flows
- Understanding the taxation structure & algorithms
- Determining the field, economic & fiscal data and building the input decks
- Step by step construction and audit of the taxation model
- Running the economic cases & evaluating the results
- Summary and closing remarks
Day 3
Upstream economics workshop: the PSC case study
- Introduction to the West African oil discovery, PSC based case study
- Establishing the economic model framework, structure & calculation flows
- Understanding the PSC fiscal structure & algorithms
- Determining the field, economic & fiscal data and building the input decks
- Step by step construction and audit of the PSC model
- Running the economic cases & evaluating the results
- Summary and closing remarks
Day 4
Advanced petroleum economic techniques
- Aggregation and consolidation analysis
- Ring-fences
- Incremental analysis
Discrete economic ssolutions
- Sensitivity analysis
- Spider & Tornado diagrams
Probabilistic economic solutions
- Expected value and decision tree analysis
- Farm-In and Farm-Out analysis
- Exploration prospect portfolio management
Continuous economic solutions
- Risk versus uncertainty
- Distributions and Central Limit Theory
- Monte Carlo simulation
Exploration prospect valuation workshop
- Calculation of the prospect minimum economic reserve
- Establishment of the prospect commercial reserves distribution
- Construction of the Risk Tree of all outcomes
- Determination of the geological and commercial chance of success factors
- Calculation of the success case expected value and the prospect EMV
- Drill or no-drill decision?
Summary & conclusions
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Tim James
Tim James joined Beardall, Parry & Associates, a UK based petroleum reservoir consultancy, in January 2004 and is now a Principal Economist in the BP&A Department of FRL. During this time he has undertaken a range of economic evaluations across the Middle East, North and West Africa, Pakistan, India and NW Europe. He has also provided upstream economics and risk analysis training courses both in the UK and Norway.
Tim trained and qualified as a Chartered Management Accountant and moved into the oil and gas industry with Premier Oil plc in 1995 working in both Pakistan and London. For the two years to the end of 2003 he worked as their UK Commercial Analyst in an analytical and management role covering a wide range of commercial activities including field valuations for development, acquisitions and disposals, asset management, gas contract management and the administration of the Sales and Marketing function.
Prior to that, he was UK Finance Manager with responsibilities for the maintenance of economic models, management of budgets and half and full year financial reporting. Tim spent time in Premier's islamabad office where experience was gained in both financial and project accounting.
Courses run by this instructor
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