Course dates
| Dates |
Location |
Price |
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| 4-6 Sep 2012 |
Oslo, Norway |
£3,730.00 |
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This 3–day course will provide delegates with all the necessary practical skills to model and value oil and gas companies, from the perspective of an investor, an equity analyst or a participant in a corporate transaction, whether a corporate or an advisor.
During the course, participants will:
- Discuss the background industry economics and fiscal structures
- Learn how to model individual oil and gas assets, and how asset models consolidate into corporate accounts
- Understand the accounting issues that are specific to the industry relating to reserves, exploration, treatment of inventory and proportionate consolidation of joint ventures
- Understand the accounting treatment of hedging activities and the interplay between use of hedging and the company’s cost of capital
- Learn techniques for building political risk into the cost of capital
- Apply oil and gas industry performance and valuation metrics to screen a universe of companies
- Learn how to adapt a standard going concern DCF routine to the valuation of exploration and production or integrated oil companies
- Discuss the drivers to and the techniques for assessing the potential success of industry consolidation and M&A activity
Course Overview
Basic financial accounting information provides a very poor view of performance in the oil and gas sector, because of the timing differences between value addition through discoveries and the resulting uplift to profitability. This presents challenges both when conducting comparative and intrinsic valuations of companies.
This course will explain application of upstream performance measurement and adjusted return on capital analysis to provide delegates with the ability to detect underlying value addition and to reflect it in their valuations.
The course provides the industry knowledge to enable participants to produce and interpret useable models of assets and companies in the oil and gas sector. It shows how to model the often complex tax regimes, under which as much as 80 per cent of the value of assets may accrue to the host government, rather than the private contractor. And it explains the techniques required to value commercial reserves, uncommercial reserves and exploration opportunities.
Oil and gas corporate valuations, whether produced for investment purposes or of acquisition targets, may take the form of liquidation models or of going concern models. Participants will thoroughly review both approaches, and their strengths and weaknesses. Throughout the course, techniques such as discounted cash flow, probability trees and real options analysis are explained and applied to case studies from the oil and gas industry.
Methodology
Issues are introduced and discussed using slides and company information – reports and accounts, Bloomberg data and consensus forecasts – and then for each topic Excel spreadsheets are built and used to analyse the relevant problem. Simple models are used to illustrate the underlying points, but the larger case studies are based on real companies and the more substantial models used should form a solid basis for participants to apply to real investment decisions after the course.
Prerequisites: A basic understanding of Excel
Who should attend?
The course will be of value to professionals in the following areas:
- Energy investment bankers
- Oil and gas company corporate planners and strategists
- Oil and gas equity analysts
- Investors
- Oil and gas M&A accountants and lawyers
- Credit analysts
Day 1
Oil and gas industry economic background
- Demand, supply and reserves
- Prices and margins
- Transport, trade and markets
- State versus private oil companies
- Reserve definitions and categories
Commercial oil and gas assets
- Introduction to upstream tax structures
- Introduction to upstream asset models
- Linkage between asset models and corporate accounts
- Accounting for joint ventures and associates
Case study: Participants review and complete simple tax/royalty and production sharing contract field models and linkage to company accounts.
Technical reserves and exploration acreage
- What are technical reserves?
- Application of real options analysis to out-of-the-money assets
- Problems applying financial option models to real assets
- Exploration programmes and probability trees
Case studies: An option model is used to value an asset comprising technical reserves, and acreage is valued by applying probability trees to a programme of exploration and appraisal.
Exploration and production companies
- Economic features of E&P companies
- Reserve replacement and performance measures
- Full cost versus successful efforts accounting
- SEC supplementary oil and gas reporting
- Modified return on capital employed
Case study: SEC returns for an upstream operation are analysed to determine corporate upstream performance and modified profitability.
Day 2
Exploration company forecasting
- Linking barrels to dollars
- Capital expenditure, replacement costs and reserve replacement
- Reserve life and production profiles
- Fixed assets and depletion
Case study: Participants complete a financial forecast for an exploration and production company.
Cost of capital for the oil and gas industry
- Review of CAPM and implications for oil and gas
- Implications of financing for oil and gas discount rates
- International versus local: what currency to use
- Hedging policies and their implications for the cost of capital
- Interpretation of accounting for derivatives
- Adjusting for political risk
Case study: Participants review the cost of capital for a case study company.
DCF valuation of upstream companies
- Review of unleveraged free cash flow
- Standard approaches to terminal value
- The value driver approach to terminal value
- Liquidation models and reinvestment upside
- Reserve replacement approach to exploration company corporate DCF
Case study: Participants review a standard corporate DCF model, then apply an oil specific approach to a case study company.
Day 3
Forecasting and valuing integrated oil companies
- LIFO and FIFO accounting standards
- Modelling downstream businesses
- Volumes, margins and returns
- Consolidating segment forecasts
- Value driver approach to integrated oil company corporate DCF
Case study: Participants review and complete a consolidated forecast and valuation of an integrated oil company.
Multiples and comparative company analysis
- Introduction to performance and valuation metrics
- Applying DuPont analysis to oil and gas companies
- Enterprise value versus equity value metrics
- Cash flow versus profit metrics
- Oil specific metrics
Case study: A comparative company analysis is used to explain relative share prices for a universe of oil companies.
M&A
- Rationale for and history of M & A transactions
- Examples of oil and gas transactions: what drives success or failure?
- Estimating and quantifying synergies
- Accounting for mergers and acquisitions
Case study: delegates calculate pro-forma financial leverage and eps accretion/dilution for a potential acquisition.
Course summary and close
Oslo hotel, Oslo, Norway
This programme takes place on a non-residential basis at a central Oslo hotel. Non-residential course fees include training facilities, documentation, lunches and refreshments for the duration of the programme. Delegates are responsible for arranging their own accommodation, however, a list of convenient hotels (many at specially negotiated rates) is available upon registration.
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Nick Antill
Nick Antill read Economics and Politics at Bristol University and began his career in the oil industry, working for BP and Saudi Aramco. He subsequently transferred to the financial services industry, spending 16 years as an equity investment analyst, specialising in oil and gas companies. He was responsible for the European oil and gas research teams for a number of investment banks, notably ABN AMRO Hoare Govett, BZW and, finally, Morgan Stanley, where he worked during the latter part of the 1990s.
At Morgan Stanley, he was personally responsible for writing investment research on the European integrated oil majors and for marketing it to investment institutions globally. This period coincided with a dramatic concentration of the industry, via wide-spread mergers, in which Morgan Stanley was a prominent advisor. Nick’s team wrote extensively on the drivers to corporate activity and its likely consequences.
He has co-authored, with Robert Arnott, ‘Valuing Oil and Gas Companies’ (Woodhead Publishing, 1994 & 2000), an introduction to the oil and gas industry for financial professionals which focus on measuring company performance and deriving stock market values. He also co-authored, with Kenneth Lee, ‘Company valuation under IFRS’ (Harriman House, 2005 & 2008), a comprehensive introduction to techniques for company forecasting and valuation, along with the interpretation of financial statements published together with the International Financial Reporting Standards. It has also been translated into Russian.
Interested in holding this course in-house? Please fill out your details and a member of our team will be in touch with more information.
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Course dates
| Dates |
Location |
Price |
Add dates to my diary |
Brochure |
Register |
| 4-6 Sep 2012 |
Oslo, Norway |
£3,730.00 |
Add dates |
|
Register now |