Key elements of the course:
- Foundation Topics in Oil and Gas
- Key Issues in Oil and Gas Finance and Accounting
- Analysing Petroleum Companies Financial Statements and Competitive Benchmarking
- Best Practices in Advanced Capital Budgeting and Risk Analysis in the Oil and Gas Industry
- Derivatives and Energy Risk Management
- Accounting for Derivatives
- Best Practices in Valuation of Mergers and Acquisitions in the Energy Industry
- Accounting for Production Costs and Company Evaluation
- Case Studies in all Topics Covered for both upstream and downstream
- Receive a copy of the new book: Energy Finance and Economics: Analysis and Valuation, Risk Management and the future of Energy - edited and coauthored by course instructor Dr Betty J. Simkins
Course overview
Finance and accounting are two of the core management functions in all organisations. The maximisation of financial resources is a key factor for success. However, in the challenging oil and gas industry, the rapid changes in geopolitics and economic conditions have brought forth many more risk factors in the competitive landscape. These factors have caused the industry to be one of the world’s most challenging and complex business environments.
There is a need for risk identification and financial management to be grounded in timely, accurate forecasts and performance data. It is crucial that leaders in the oil and gas industry be equipped with wide-ranging knowledge in finance and accounting to achieve strategic planning and decisionmaking. This five-day course will give participants expertise to assist in achieving long-term success to enhance your company’s competitive performance.
Methodology
The course is taught in a highly interactive manner with an emphasis on participant questions and inquiry. Professor Simkins offers considerable flexibility in exploring some topics further than planned, while de-emphasising other topics if the group prefers.
Practical applications and minicases are frequently used along with participant exercises. All delegates will have the option to receive a copy of Energy Finance and Economics: Analysis and Valuation, Risk Management, and the Future of Energy (forthcoming in 2012, published by Wiley), edited and coauthored by the course instructor Dr. Betty Simkins.
Who should attend?
This course will provide value to personnel from the following areas:
- Finance Managers and Directors
- Finance Controllers
- Accounting Managers and Auditors
- Finance and Business Analysts
- Staff Finance and Accounting Professionals in a Leadership Role
- Technical Professionals in the Finance Function
- Business Development
- Key Personnel in the Oil and Gas Industry
- Bankers and Professionals who work in Energy Lending
Day 1
Budgeting and Forecasting Strategies in the Oil and Gas Industry
Session 1: Laying the foundation - Global energy outlook, supply and demand balance brought about by a rapidly changing world
- Setting the stage for finance and accounting strategies for oil and gas companies
- Global energy outlook
- Energy supply and demand issues
- Current views on energy price projects
- Human capital shortages, unproven technology, and unknown geology
- Future trends of oil and gas
Session 2: How oil and gas companies differ from other industries and key issues in oil and gas accounting and finance
To understand the financial prospects of an oil and gas company, one must understand how they differ from other industries and key issues related to reporting.
- Special accounting treatment for Oil and Gas companies
- Analysing the different accounting methods and financial statements
- Determining the proper classification of oil and gas costs: capitalise, expense, exploration costs, development costs, production costs
- Revenue recognition: when is it revenue and when it is not?
- Fair value and industry accounting issues
Session 3: Observing the role of International Accounting Standards (IAS) and future issues as they apply to Oil and Gas companies
- Overview of critical issues related to international petroleum accounting
- Observing the role of International Accounting Standards (IAS) in the future of financial statements for oil and gas companies
- Where they came from
- What does it mean to companies now and in the future
- Value chain and significant IAS accounting issues
- Upstream Oil and Gas specific differences between IAS and U.S. GAAP
Session 4: Analysis of international oil companies financial statements – Part 1
This two-part session will continue with topics covered in the prior session on IAS by applying them to financial statement analysis. Delegates will learn 10 important factors in reading and analysing the financial statements of international oil companies. The main focus will be on learning how to analyse the company’s success in exploring and producing oil and gas reserves and understanding the concept of competitive benchmarking of the company against other energy companies. This session is helpful in gaining knowledge as a business professional working in the energy industry, a potential investor or lender in the oil and gas industry and an individual seeking employment in this industry. Delegates will analyse the financial statements of a leading international oil company.
Topics covered include:
- Energy ratios specific to oil and gas companies
- Reading oil and gas reserve disclosures
- Analysing production replacement and reserve replacement
- Analysing finding costs and reserve replacement costs
- Reserve life index
- Key profitability indicators
Day 2
Optimising Budget Models and Capital Investment Analysis
Session 1: Analysis of international oil companies financial statements – Part 2
The second part of this two-part session will continue with topics covered in the first part. Delegates will analyse the financial statements of leading international oil companies.
- Case studies and Excel applications
- Bloomberg applications
Session 2: Competitive benchmarking
This session will cover the critical topic of competitive benchmarking. When companies compare themselves to their peers, they usually have a number of the following significant advantages over outsiders:
- They thoroughly understand the industry or sector
- They often have employees that have recently transferred from the peer companies. (This provides them an inside look at costs, wages, management, special problems, and a host of other perspectives – this information is difficult to obtain for individual investors)
- If a competitor produces a product, the benchmarking companies often have the engineering wherewithal to reverse engineer, test, and thoroughly understand what the competition has, has done, or is doing
Session 3: Capital budgeting and risk analysis in the Oil and Gas industry
Valuation of Oil and Gas assets is a critical and challenging process. The uncertainty of production, prices, capital costs and construction delays, among other factors, makes it difficult to value projects. In this session, leading analytical skills and techniques used in Excel will be discussed and illustrated using real case studies on financial forecasting and analysis.
- Recap of traditional capital budgeting methods
- Net Present Value (NPV), Internal Rate of Return (IRR), modified IRR, payback period and discounted payback period
- Advanced analytical skills, techniques, and challenges in oil and gas capital budgeting including:
- Oil and gas production, oil and gas prices, cost of capital, construction costs, and startup delay
Session 4: Case study applications and open discussion of crucial issues
Attendees will analyse case studies of actual international firms operating in the oil and gas industry to further explore issues covered in the sessions covered today. Attendees will also have the opportunity to discuss crucial issues facing them with delegates in attendance. Open discussion will follow with suggestions and recommendations. This is an excellent opportunity to interact in a stimulating group setting with other participants.
Day 3
Advanced Capital Budgeting and Risk Analysis and Expert Issues about Derivatives and Risk Management in the Oil and Gas Industry
Session 1: Advanced capital budgeting and risk analysis in the Oil and Gas industry
Would you like to master financial forecasting and analysis? If so, this session is a “must” in gaining the cutting-edge skills necessary for sophisticated financial analysis and modelling of oil and gas projects. In this session, Monte Carlo simulation will be used to model uncertainty for key value drivers of large oil and gas projects. Monte Carlo simulation is a powerful tool that can help evaluate what can happen to an investment’s future cash flows and summarise the possibilities in a probability distribution. This is particularly helpful in oil and gas project analysis since the outcomes from large investment projects are often the result of the interaction of a number of interrelated factors (or value drivers) that are highly uncertain.
- Risk analysis of oil and gas projects using Excel
- Sensitivity analysis, sensitivity charts, and scenario analysis
- Advanced risk analysis using Monte Carlo simulation
- Distribution fitting and correlation assumptions
- 5 basic rules of thumb in choosing probability distributions
- Three popular probability distributions for use in simulation models
- Displaying and understanding output - Tornado Charts, etc
- Modelling energy prices in capital budgeting risk analysis
- Techniques and challenges in modelling energy prices
- Modelling energy prices using mean reverting processes incorporating Poisson jumps
- Case studies and Excel applications
Session 2: Case study applications and open discussion of crucial issues related to advanced capital budgeting and risk analysis
Attendees will analyse case studies of actual international and Middle Eastern firms operating in the oil and gas industry to further explore issues covered in the sessions covered today. Attendees will also have the opportunity to discuss crucial issues facing them with delegates in attendance. Open discussion will follow with suggestions and recommendations. This is an excellent opportunity
to interact in a stimulating group setting with other participants. Attendees will also analyse an oil and gas investment project from the banker's viewpoint, to help determine potential financing from financial institutions for projects being considered.
Session 3: Current issues about derivatives and risk management in the Oil and Gas industry
Oil and gas companies are facing many financial risks currently and risk management is a critical issue for these firms. Risk management encompasses the identification and assessment of the risks that materially affect company value and enterprise risk management addresses the
implementation of a company-wide strategy to manage those risks.
In this session, participants will learn about the following topics:
- What do we mean by risk management and why do firms manage risks?
- How hedging can increase firm value
- Introduction to terminology and instruments used in the energy derivatives markets
- Energy price volatility, types of derivative markets
- Lessons from hedging mistakes: Recent hedging disasters
Session 4: Advanced topics in hedging and risk management
Do you need more knowledge or want to learn more about derivatives and hedging in this complex industry? If the answer is yes, this session is a must for you. In this session, we pick up where we left off in the last session and cover more advanced topics related to risk management
Topics covered include:
- Hedging, basis risk, and factors affecting basis
- Petroleum and natural gas price risks and risk management strategies
- Options (calls, puts, collars, floors, caps)
- Energy swaps
- Value-at-Risk (VAR) and Cashflow-at-Risk (CAR)
- The Greeks (delta, vega, theta, rho, and gamma) and what they mean
- Energy trading
Day 4
Advanced Topics in Valuation of Oil and Gas Companies
Session 1: Valuation of Oil and Gas companies using relative valuation using market comparables – Part 1
- Introduction to relative valuation for oil and gas companies
- Valuation of oil and gas companies using the Method of Comparables
- Valuing an IPO
- Most commonly used valuation ratios (multiples) and DCF valuation techniques for oil and gas companies
- Enterprise valuation using EBITDA and EBITDX multiples
- EBITDA and firm free cash flow
- Why use EBITDA/EBITDX multiples rather than cash flow multiples?
Session 2: Valuation of Oil and Gas companies using relative valuation using market comparables – Part 2
- Valuing a privately held firm
- The effect of risk and growth potential on valuation multiples
- Adjusting the multiple valuation metric for the private oil and gas firm discount
- Equity valuation of an oil and gas firm using the priceearnings (PE) multiple
- Valuing a division using the PE method – example for Exxon Mobil’s Chemical Division
- Case study applications
Session 3: Case Study: Valuation of ExxonMobil’s Acquisition of XTO Energy using Relative Valuation
In this session, we will focus on valuation of a fairly recent acquisition – Exxon Mobil’s purchase of XTO Energy. Was XTO worth the $41 billion offered by ExxonMobil? There are many different methods by which to value firms in the industry; often other industry firms are used as benchmarks in the valuation process. Several will be explored here. There are five questions to be addressed specifically, they include: (1) What should the acquisition price for XTO shares have been? (2) Which comparable firm is the best comparison firm for XTO? (3) Why did ExxonMobil want to acquire XTO? (4) Based on the analysis, did ExxonMobil overpay for XTO or get a bargain? And (5) What additional information could help with this analysis?
Session 4: Open discussion of crucial issues from Days 1 through 4
In this final session of day 4, delegates will have the opportunity to further explore issues covered in the course. Attendees can choose cases to analyse that most closely match their areas of interest and will have the opportunity to work in a stimulating group setting with other participants. Delegates can share experiences, make suggestions, and query the group for their insights on topics of high concern in the oil and gas industry.
Day 5
Advanced Topics in International Accounting Standards and US GAAP for Oil and Gas Companies
Session 1: Accounting for Hedging Under IFRS – IAS 39 and US GAAP Financial Accounting Standards (FAS) 133
What are the current accounting standards as they relate to risk management? In this session, we will discuss these very issues as they relate to US GAAP and IAS
Topics included cover:
- How should a company account to its shareholders for the derivatives it holds?
- Example of a speculating position and hedging position
- FAS 133 and IAS 39 (fair value hedge, cash flow hedge, speculative transaction) including definition of hedges, accounting of hedges, and criteria for hedging
- Measuring hedge effectiveness under FAS 133 and IAS 39.
Session 2: Case study applications in hedging and risk management for oil and gas and accounting applications
Session 3: Accounting for production costs and company evaluation
Production costs refer to the costs incurred in the production phase. Typically these costs include the cost of producing or lifting the oil and gas to the surface, field treatment, field transportation, gathering, and storage. In this session, accounting for production costs will be covered.
Topics covered include:
- Typical production costs and allocation of production costs
- Crude oil and gas production
- Performance measurement and evaluation
- Revenue determination in joint operations
- Case examples
Session 4: Course wrap-up
In this final session, delegates will have the opportunity to further explore issues covered in the course.
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Betty J. Simkins Ph.D.
Betty J. Simkins, Ph.D., is the Williams Companies Professor of Business and a Professor of Finance in the Department of Finance at Oklahoma State University’s Spears School of Business. She received her Ph.D. from Case Western Reserve University and also has an MBA and B.S in Chemical Engineering.
Professor Simkins is not only a well-known academic but has conducted trainings and consulted globally on the topic of oil and gas finance and accounting. She has worked in the energy industry for ConocoPhillips and Williams and currently serves on the Executive Advisory Committee of the Conference Board of Canada’s Strategic Risk Council which is responsible for the implementation of Enterprise Risk Management in Canada. Her book on ERM, Enterprise Risk Management: Today's Leading Research and Best Practices for Tomorrow’s Executives, is a Wiley best seller. She has coauthored more than 50 journal articles and book chapters and has also won a number of best paper awards for her work (the most recent being the Best Paper in Risk Management from the Financial Management Association International). She has a 2012 forthcoming book to be published by Wiley titled Energy Finance and Economics: Analysis and Valuation, Risk Management, and the Future of Energy.
Courses run by this instructor
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.
10-13 Jul 2012 (London, UK)
This intensive four-day course will shows delegates how to build a power model from a skeleton model incorporating a range of Excel and applied financial techniques.
Each session focuses on a particular aspect of modelling and applies it to the case model.
11-14 Sep 2012 (Singapore, Singapore)
15-18 Jan 2013 (Singapore, Singapore)
This intensive four-day Financial Modelling in Excel for the Power Sector course will shows delegates how to build a power model from a skeleton model incorporating a range of Excel and applied financial techniques. Each session focuses on a particular aspect of modelling and applies it to the case model.
21-24 Aug 2012 (Lagos, Nigeria)
Many business models fail due to poor planning,
haphazard development, inherent errors and lack
the ability to provide clear financial analysis. This course shows delegates how to build a power model from a skeleton model incorporating a range of Excel and applied financial techniques.
3-7 Sep 2012 (London, UK)
This five-day course will give participants expertise to
assist in achieving long-term success to enhance your
company’s competitive performance.
25-29 Jun 2012 (New York, United States)
This five-day course will give participants expertise to
assist in achieving long-term success to enhance your
company’s competitive performance.
16-18 Jul 2012 (London, UK)
This in-depth and practical three day course will demystify finance and cover best practices in financial analysis. By the conclusion of the course, delegates will be able to communicate easily in financial terms. They will
be able to comprehend and interpret financial information, understand the importance of cashflow, match their capital budgets to realistic targets, and accurately analyse capital investments. Most importantly, delegates will learn best practices in all of these areas.
4-6 Jun 2012 (Singapore, Singapore)
This three-day course focuses on the accounting
standards, corporate reporting and financial analysis that
relate specifically to the oil and gas industry. Case studies, financial reports, and financial disclosures from real-world oil and gas companies will be used throughout the program to enhance and reinforce learning.
17-19 Dec 2012 (New York, United States)
This in-depth and practical three day course will demystify finance and cover best practices in financial analysis. By the conclusion of the course, delegates will be able to communicate easily in financial terms. They will
24-27 Sep 2012 (Dubai, United Arab Emirates)
This 4-day course will enable participants to gain practical skills and confidence in preparing an economic situational report for any country as a key part of strategic planning for your sector. Whilst Developing a clearer and deeper understanding of the wider macroeconomy and the implications for the oil & energy industry.
This course has now expired please email us to find out when the course will next be running.