Economic Evaluation of Petroleum Opportunities

Ed SavageINSTRUCTOR: Ed Savage
DISCIPLINE: Engineering
COURSE LENGTH (DAYS): 2 Days
CEUS: 1.6
AVAILABILITY: In-House

 

WHO SHOULD ATTEND: Engineers, Geoscientists, Planners, Managers, Supervisors, Financial or Oil & Gas Accounting Staff plus anyone who is involved in building or evaluating economic models.

COURSE DESCRIPTIONProper decision making requires a thorough understanding and consistent application of economic evaluation techniques throughout an organization; failure to achieve correct and consistent economic analysis will result in less than optimum application of available capital.  To achieve this, everyone involved must understand the economic analysis process:  why we do it, the components involved, the calculations, and the proper application of the resulting metrics.

Participants will learn from the ground up: cash flow, discounting, metrics calculations, and proper application of those metrics. Skills will be learned by building an economic model of a Production Sharing Contract.

Risk and uncertainty will be illustrated by demonstrations and exercises after which we will apply what we’ve learned to economic analysis.  We will look at techniques of handling uncertainty in reserves, producing rates, costs, and prices.

Culmination will be a full scale evaluation model of the Eagleford Shale play in the US.

LEARNING OUTCOMES:

  • Basic concepts and components of economic analysis.
  • How to build a cash flow model using a typical Production Sharing Contract.
  • Discounting, why and how.
  • How to calculate economic metrics and how and when to use them properly.
  • Why reserves are log normally distributed.
  • Concepts of risk and uncertainty and why risk is not the same as uncertainty.
  • How to handle risk and uncertainty in economic evaluations.

 

COURSE CONTENT:

  • What is Economic Analysis and why do we run them?
  • Components of an Economic Analysis
  • Building a PSC cash flow model, undiscounted and discounted
  • Metrics, definitions, calculations and appropriate usage
  • Reserve distributions: the importance of log normal distributions to understanding oil and gas reserves
  • Risk vs. Uncertainty
  • Risk assessment
  • Making decisions under risk and uncertainty
  • Ranking problem incorporating risk and uncertainty
  • Building a full scale evaluation model: the Eagleford Shale

 

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