Oil and gas exploration is a high risk, high cost and high reward industry. Investment analysis has become more complex and more critical for corporate success with the high volatility in energy markets as well as an increased number of exploration and development projects in challenging technical, political and operating environments. The recognition and quantification of uncertainty, risk and economic value are fundamentally important skills for oil and gas professionals and decision makers. This course is designed to provide industry professionals with suitable training to understand and apply the tools and methods of identifying, quantifying and managing risks and uncertainties involved with prospect evaluation, resource assessment, portfolio management and exploration project valuation.
Those working on exploration, appraisal and development projects will find it highly relevant to attend this course.
The course is designed for
- Drilling engineers
- Production engineers
- Reservoir engineers
- Exploration managers and team leaders
- Commercial managers or land men
- Business development managers
- Personnel involved in assessing the value and viability of exploration projects
- Other personnel, including non-technical, that need to improve their understanding of risk analysis, prospect evaluation and petroleum economics
The objective of this course is to provide participants with the necessary skills to apply the methods of risk analysis, prospect evaluation and exploration economics. These skills combined with the appropriate decision analysis techniques will provide participants with knowledge and tools to evaluate and rank exploration prospects, undertake exploration basin analysis and manage exploration portfolio’s to maximize long term value and align with strategic organizational goals.
The program will include a review of probability and statistics fundamentals necessary for the risking of prospects, the development of reserves distributions and commonly used probabilistic estimation skills. Participants will also cover more advanced risk based estimation techniques such as Monte Carlo analysis as well as commonly used probabilistic software. The calculation and use of expected monetary value (EMV) which is commonly used in evaluating and ranking exploration and appraisal projects will be covered in detail. Participants will also be introduced to decision analysis techniques used in oil and gas, value of information and portfolio management fundamentals.
The program will focus on enabling participants to understand and apply the tools and methods of identifying, quantifying and managing risks and uncertainties involved with prospect evaluation, resource assessment and project execution through the exploration, development and production life cycle. Mastering these concepts and the learning of the methods of analysing and making risk based decisions is expected to result in improved evaluation and management of exploration projects.
The program will include cash flow model development, extensive calculation exercises, sensitivity analysis and group breakout sessions designed to generate participant interaction, develop competence and confidence. Modelling will include fiscal terms and commonly used taxation regimes such as production sharing contracts and profit based royalty regimes used in the oil and gas industry . Participants will gain an appreciation of the effect of fiscal terms on project value and risk.
The discussion of economics will include an in depth review of key physical project assumptions including reserves, production rate, capital costs, operating costs and project schedule. In addition to project assumptions the course will include an introduction to financial markets and commodity markets to develop an appreciation of the external influences affecting exploration and production projects. This discussion will include current trends and likely ranges for commodity pricing, inflation and international exchange rates.
In addition to theoretical analysis techniques participants will review case studies to appreciate important risk management techniques to mitigate exploration risks, manage costs and reduce the time frames of the exploration investment cycle. This course will also enable course participants to appreciate the likely operational risks, the uncertainty of reserves estimation and the potential vulnerability of development projects that determine the commercial success or failure of a project. The understanding of these concepts and the learning of the methods of analysing and making risk based decisions is expected to result in improved management of exploration projects.
The decision analysis module will include fundamentals of decision analysis, decision trees, sensitivity analysis and simulation, value of information, real option valuation, prospect evaluation and portfolio evaluation. Participants will also review and analyse the effects of commonly used commercial constructs used in exploration portfolio management such as joint ventures, acreage swaps and farm outs.
Participants will also discuss the importance of developing in house teams which are capable of competently evaluating exploration projects and portfolios as well as the presentation of exploration project assessments and economics to enable consistent, informed decision making within their organisation.
The course will also include many relevant case studies illustrating the attributes of both successful and unsuccessful exploration projects and programs. All topics will be complemented with in-class examples, case studies and breakout sessions.
For more information on this course please contact us.
Introduction and Petroleum Industry Trends
Participant introduction and discussion of course objectives
Financial, commodity markets and macro economics
Review of recent industry pricing (oil and gas) and cost trends
Industry health, safety, environment and community trends
Political and social trends affecting the industry
Important technical innovations influencing exploration project economics
Cash flow model development
Discounted cash flow concepts and NPV calculation
Cost of Capital Estimation utilising the capital asset pricing model
Internal Rate of Return and key project performance measures.
Expected monetary value and risk cover concepts
Profit Investment Ratio
Introduction to commonly encountered fiscal and tax regimes
Incorporating fiscal terms and tax into economic models
Development of post tax valuations
Risk and Uncertainty Concepts
Understanding probability and statistics as well as uncertainty concepts
Appropriate use of probability distributions
Developing key probabilistic estimation skills
- Probabilistic reserves and resource estimation techniques
- Probabilistic cost estimation
- Estimating with uncertainty
- Estimating cost of capital for projects
Risk and uncertainty management principles
Risk assessment and mitigation
Financial Risk Analysis
Incorporating risk management in decision making
Decision Analysis for Petroleum Exploration
Fundamentals of decision analysis
Decision trees, sensitivity analysis and simulation
Monte Carlo simulation
Value of information
Real option valuation
Application of Bayes’ theorem
Decision Analysis Implementation - Oil and Gas Project Evaluation
Concept selection, planning and implementation
Cost estimating techniques
Commodity pricing and off take variability
Political, HSE, labor and stake holder considerations
Project vulnerability analysis
Prospect risk analysis and valuation
Probability of prospect success
Historical versus actual success rates
Geological components of prospect success
Geological, economic and economic chance of success
Independent versus dependent chance factors
Monitoring and improving predictive performance
Prospect evaluation using EMV
Play analysis and assessment
Key geological concepts for play analysis
Concepts and techniques for risking exploration plays
Probability of play success
Geotechnical data requirements
Systematic analysis of plays
Exploration portfolio valuation and management
Valuation of exploration ventures using option pricing theory
Risk and risk aversion in exploration
Performance of exploration portfolios
Exploration portfolio management
Matching play and portfolio attributes to business strategies
Assessment of exploration performance and finding costs
Methods for acquiring petroleum rights
Joint ventures, acreage swaps and farm outs
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Esanda Engineering Ltd
Esanda is an independent upstream oil and gas consultancy specialising in industry specific training and field development planning services. Our operations are supported by our UK and Australia offices.
Esanda is a specialist training provider serving the global upstream oil and gas industry. Our training providers are practicing industry specialists who develop our in house courses and work with clients to build bespoke training for their staff.
We pride ourselves on being able to bring hundreds of man years of experience to the training sector and the positive feedback we receive from our satisfied clients.
Our courses evolved over 15 years ago with a focus on Field Development Planning, which included a strong emphasis on costing and economic analysis as well as concept selection for our clients. The range of clients includes those involved in Onshore, Offshore, Subsea, GTL, LNG and unconventional developments. This work and client training has allowed us to build strong expertise in these areas with practical and up to date knowledge of the subject areas.
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