Unconventional plays requiring large, high cost development programs now dominate the North American onshore Oil and Gas business. Large drilling programs are often justified and forecast based on ‘type curves: forecasts for a typical single well, intended to be repeated as many times as necessary to represent an extensive drilling program. When companies want to add uncertainty analysis to their forecasts, that work often begins with extending the type curve to include a range of possible single well outcomes, often by including the production forecast for a P10 and P90 well on the curve.
SPE-179971- Comprehensively Valuing an Asset: How a Holistic Value Approach Aligns With Specific Corporate Goals (Abstract)
Valuing an asset is not simply taking total potential revenue and deducting from it the estimated cost to produce that revenue. Likewise, an asset with the highest net present value (NPV) is not necessarily the best investment for a company to make. More important than its potential to generate revenue, defining the value of an asset depends on the context of the company portfolio to which the asset belongs as well as the current and future environment and infrastructure surrounding that asset.
SPE-179969 – Solutions to 5 Strategic Issues Plaguing Executives in 2015-2016: Solving the Right Problems With Portfolio Management (Abstract)
This paper will discuss three examples where companies have used portfolio management models to rapidly explore strategic scenarios in an effort to answer strategic issues. The examples illustrate how portfolio functions including optimization, uncertainty analysis and integrated financials have allowed some companies to efficiently plan in these volatile times. The examples illustrate solving strategic issues such as rapidly exploring strategic investment scenarios, assessing investment options at multiple commodity price points, balancing financial and operational metrics, balancing near and long term performance and rapidly developing capital allocation strategies.
SPE-179968 – Integrating Planning, Financial and Economic Data: Closing the Integrity Gap (Abstract)
Alianza Casabe, a Technical Collaboration venture between Ecopetrol and Schlumberger in Colombia, was finding that ensuring data integrity between the planning, finance and economic models being used by different stakeholders for investment decisions required a substantial amount of interaction and data reconciliation. Economic scenarios were only appraised at a high level of granularity, reducing the ability to factor in economic metrics at the individual well or projects level, as part of the selection of the best possible portfolio. At the same time, existing systems were turning all planning milestones into protracted exercises demanding very high effort by all participants to deal with the intense manual data manipulation, reconciliation and quality control required. Alianza Casabe set out to enhance and simplify the planning processes, to improve efficiency in annual work plan preparation, facilitate performance tracking during execution and most important improve overall investment decisions quality.
Corporations often begin each year with a corporate strategy, a business plan and high expectations of success from their pending business operations. As they execute the business plan they meet with successes and failures, all the time wondering if they should reassess future business plans. Are they better off drilling the remainder of the proposed opportunities, or should they reconsider other opportunities? These decisions are frequently impacted by emotion and intuition as much as by technical analysis.
Throughout the year, corporate executives routinely share information with analysts and stakeholders about their results to date. The information reflects their reactions to the results received to date as tempered by their expectations for the remainder of the year. This system of information collection, analysis, decisions and communication frequently lacks consistency and can be quite time consuming.
This paper will illustrate how companies can use portfolio management techniques to improve the efficiency of their business plan monitoring and the quality of the information available to the
decision process. We will show how portfolio management can be used to track corporate performance and continually reassess the remaining business plans throughout the year. As results are derived, the company can use portfolio processes to monitor the expected business results and the probability of meeting their goals. We will illustrate how portfolio management can help decision makers determine when to change plans and when to stay on the planned course.
Every exploration and production company has the difficult task of deciding between a large number of competing oil and gas projects for future investments. Many companies are developing corporate strategies and making investment decisions without considering the relationship between the two. The result is a less than optimal financial performance and failure to meet corporate goals.
The application of portfolio analysis within the strategy and investment stages provides a disciplined and systematic method of analyzing these relationships. Portfolio analysis can be used to develop and compare strategies given a “pool” of investments. Conversely, portfolio analysis can also be used to evaluate individual investments with respect to how they impact the
company’s ability to meet its strategy. Effective portfolio analysis requires high-quality data addressing such questions as: what assets are currently owned, which ones might be purchased, what stakes might be acquired, or what stakes might be developed in the near future? By taking on a particular economic project, is another opportunity missed that has a better net return?
This presentation will illustrate the use of portfolio analysis to develop and compare alternate strategies that a company might pursue. The examples illustrate how projects and corporate performance measures interact and how the interactions create new opportunities for the corporation. The interactions can be quantified in terms of simple graphical summaries that allow decision-makers to compare alternate strategies and quickly assess the business performance trade-offs they will likely face when they select one strategy over another.
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