Course Description

 

Financial considerations for projects and investments are an ever increasing concern. This is especially true as petroleum projects become more complex and costly.

Successful companies work using a decision making framework which includes a strict project progression (or gating) procedure to allow sound financial decisions to be made based upon a rigorous analysis of risk and uncertainty.

It is therefore critical that all key members of the team understand the financial risks involved in business decision making. This training is an excellent primer for professionals outside the financial field as well as refresher course across a wide range of financial topics for the finance or accounting professional.

Development of projects using multi-disciplinary teams is a necessity. These professionals will learn terms and concepts that are vital in development of the understanding required.

The career path to increased responsibilities and corporate advancement must include a clear understanding of business financial considerations and risk analysis.

 A training course that creates a decision making framework for analyzing, interpreting & evaluating the vast economic & risk parameters of oil & gas projects

Course Objective

 

·         Gain a broad understanding of economics in the petroleum industry

·         Learn the language of financial and accounting professionals

·         Understand cash flow and profit analysis techniques

·         Perform discounted cash-flow economic evaluations

·         Examine profitability and capital efficiency Indicators including:
– Net Present Value (NPV) and Internal Rate of Return (IRR) analysis
– Finding, lifting and development costs
– Profitability Index, payback time and maximum exposure

·         Apply screening and ranking techniques

·         Use probability, expected monetary value and value of information

·         Deal with uncertainty through risk and sensitivity analysis

·         Explore the differences between additional vs accelerated reserves

·         Understand the different petroleum fiscal environments

·         ~

 

Who Should attend?

 

·         Any professional involved in the planning, execution or auditing of upstream oil and gas projects

·         Project decision making contributors, including: Petroleum and chemical engineers, geologists, geophysicists, legal and government

·         Finance/accounting staff and commercial personnel desiring a refresher or an opportunity to apply economic and finance tools in project decisions

Course Outline

 

 

Petroleum economics	• Cash flow versus profits
	• Revenue concepts – cash flow, revenue vs costs
	• Fiscal systems and petroleum agreements
Project economics	• Input requirements for an economic analysis
	• Revenues
	• Capital costs
	• Fixed vs variable operating costs
	• Taxes and royalties
	• Depreciation
	• Inflation
	Case Study:
	Setting up a project cash flow; laptop based
	Cash flow analysis
	• The Discounted Cash flow (DCF) technique
	• Net Present Value (NPV) and discount rates
	• Cost of Capital
	• Company financing
	Case Study:
	NPV and discount factors; laptop based
	Profitability and project performance indicators
	• Profitability
	• NPV
	• Rate of Return (IRR, RRoR)
	• Payback time and maximum exposure
	• Profitability Index
	• Unit Technical Cost (UTC – Finding, Development and Lifting costs)
	• Breakeven analysis
	Case Study:
	Performance indicators; laptop based
	Risk and uncertainty in decision making
	• A logical method for defining uncertainties and risks
	• Technical risks (volumetric and production forecast uncertainty)
	• Project risks (cost estimates, project timings)
	• Economic risks (fiscal system, oil price)
	• Mitigating risks – sensitivity analysis
	Case Study:
	Sensitivity analysis; laptop based
Exploration and appraisal	Probability concepts
decision making	• Probabilistic volumetric estimates
	• Probability of success
	• Expected monetary value
	• Decision Tree Analysis (DTA)
	Case Study:
	DTA in the context of field appraisal
Mature field projects	Accelerated and increased reserves
	• Accelerated reserves – economics
	• Increased or new reserves – economics
	• Review of performance indicators for ranking mature projects
	Case Study:
	Analysis of an acceleration project; laptop based