Day 3

Petroleum Economics, Finance and Risk for Decision Making

Multi-year cash flow analysis of an oil / gas field development
Cash flow components: revenues, costs and fiscal elements
Income, EBITDA and cash flow: why analysts need to monitor a range of financial indicators
How funds flow through an oil and gas production company
Discounting cash flows: future values, present values and discount rates
Net Present Value (NPV) and other profitability indicators and yardstick
Simulation and sensitivity models
Inflation issues: nominal vs. real terms for cash flow analysis
Decision trees to evaluate optionality
Cost of capital and project finance options
Leveraging assets by combining equity and debt finance
Credit rating, debt to equity ratios and credit headroom issues
Financial and non-financial Key Performance Indicators (KPIs) to monitor achievements
Risk and opportunity (uncertainty) in oil and gas field life cycles
Analysis of sub-surface and above-ground uncertainties
Expected Monetary Value (EMV): adjusting cash flows using risk factors
Dealing with oil and gas price volatility
Oil and gas pricing, trading and hedging techniques

Exercise

Case Study