advanced petroleum economics & risk analysis

www.petroEDGEasia.net

ADVANCED PETROLEUM ECONOMICS & RISK ANALYSIS

Your Expert Course Director: Peter Wright Principal Economist Robertson CGG Company

Peter is currently Principal Economist with Roberson UK in the Petroleum Reservoir & Economics department. He manages and makes contributions to various techno-economic studies, data room evaluations and Competent Persons Reports (CPRs) in the UK, Italy, Egypt and Malaysia

in collaboration with

Conduct this training course in-house for more effective savings! Call us at +65 6741 9927 or email to [email protected]. For more information, visit us at

www.petroedgeasia.net

ADVANCED PETROLEUM ECONOMICS & RISKS ANALYSIS 7 – 11 August 2017| Kuala Lumpur, Malaysia

Course Overview We are currently in the midst of one of the deepest downturns in the upstream industry in recent years. Challenging times are ahead for those looking to invest capital and grow their companies in this environment.

Petroleum Economics is all about the allocation of scarce resources. Investment capital is certainly that scarce resource at the moment. In this environment, companies are looking for people to develop highly advanced skills in upstream petroleum economic and financial analysis to answer questions such as:

Which are my most profitable assets?

Which regions of the world offer the best returns?

Could this buyers’ market be one to take advantage of in our M&A activities?

As an IOC (International Oil & Gas Company), is now the time to negotiate new terms with the government? How do we do it?

How can we compare projects to ensure capital is optimally utilised?

How is the price downturn impacting our Profit & Loss Account and Balance Sheet?

How can we optimally structure project finance

If we could negotiate a 20% cost cut from our suppliers how does that impact the overall economics of the project?

What do the economics of LNG and Unconventionals projects look like?

This advanced economics course will provide a through insight into the world of upstream petroleum economics and risk analysis to address these questions and many more.

This course covers some of the more advanced topics around oil and gas asset economics, valuation, fiscal design and risk. It covers three main areas:

Cashflow and corporate valuation After a brief refresher of cashflow fundamentals, the topic is expanded to cover the importance of both cashflow and accounting- based metrics in order to value assets for acquisitions/divestments. To this end the accounting fundamentals around P&L account, balance sheets and earnings are discussed, particularly where they interact with economics.

Petroleum fiscal design After a refresher of the fundamentals of tax/royalty, production sharing contracts and risk service contracts, we aim to provide the delegate with an in-depth understanding of the fiscal levers particularly those that are biddable or negotiated. The workshop is a team based exercise: A “negotiation scenario” is played out where the team has to select a suitable set of fiscal terms for the production sharing contract and argue its case.

Risking techniques The more advanced risking topics are discussed around sensitivity analysis, decision trees and Monte Carlo simulation.

Unconventionals and LNG Unconventionals (shale oil and gas) and LNG are rapidly changing the dynamics of the oil and gas industry. Petroleum economists need to have an understanding of how these sectors are evolving and their potential impact, as wells as how to analyse typical opportunities and projects. This module provides delegates with an introduction and basic understanding of the key issues and drivers

Who Should Attend? This 5 day practical course is an ideal next step from our introductory course on upstream petroleum economics and risk analysis; ‘An Introduction to Petroleum Economics & Risk Analysis’. Delegates should either have attended this course, or have had meaningful exposure to upstream petroleum economics and risk analysis in the work place. Delegates should have a reasonable knowledge of Microsoft Excel ™ and bring a laptop loaded with Microsoft Office™ to the course.

Who will you meet? You will meet participants from all technical and commercial disciplines from oil and gas companies, governments, banks, legal and accounting organisations.

Course Materials Delegates will be provided with electronic copies of all workshop solutions and examples, and a comprehensive hard copy course manual.

mailto:[email protected]

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5 DAY COURSE AGENDA

DAY 1 DAY 2 THE FUNDAMENTALS OF CASHFLOW ANALYSIS & VALUATION Discounted Cash Flow Refresher

Cashflow Equations

The time value of money, compounding & discounting

Real vs Nominal cashflows

Point forward/life cycle economics Asset Evaluation Metrics

Key economic metrics (NPV, IRR, DPIR, Payback)

When to use discounted/undiscounted metrics/ what they mean

Valuing an asset, making development & investment decisions

Delegate Q&A’s

Global Fiscal Systems

The tax & royalty fiscal system

Production Sharing Contracts

Risk Service Contracts

Global case studies across all three systems

Delegate PSC modelling exercise

Fiscal Design

Different methods of sliding scale (production, R-factors, rate

of return, hybrids)

Step vs Incremental methods

Understanding the issues around each method

Selecting an appropriate sliding scale to influence activity

Progressive vs Regressive systems

Selecting an appropriate scale for ‘self-adjusting mechanism’

Measuring and comparing government take

Case Studies to illustrate fiscal

incentivisation/disincentivisation: Norway, Libya, UK, Bahamas

DAY 3 DAY 4

Fiscal System Design Workshop

A team exercise to set the terms in a production sharing contract. Terms

will have to meet corporate hurdles and need to be attractive to the host

government. This will be based on a Microsoft Excel model. Delegates

will be provided with sets of input assumptions and economic scenarios

on which to calculate suitable economic metrics and carry out

appropriate sensitivity analysis. Based on their analysis, the teams will

recommend a set of fiscal terms and argue their case.

VALUATION TECHNIQUES

Economics vs Financial Analysis

Financial statements: P/L and Balance Sheet

Financial metrics: (EBITDA, earnings, debt ratios)

P&L: description of line items

Balance Sheet: description of line items

Successful Efforts vs Full cost accounting

Impairment Test: The link between finance and reserves

reporting

Conflicts arising between accounting accruals based and

economics cash based approaches

Exercise to analyse company financial statements and assess

trends

CORPORATE VALUATION

Cost of Capital

CAPM, Dividend valuation models

Betas: leveraged and equity

Adjustment of discount rate for risk: arguments for and against

Real Option methodology

Valuation Methods:

Understanding incremental & ringfence analyses

Workshop Exercise: finding an appropriate acquisition price

Drivers for acquisition and divestment

Earnings multiples

Enterprise Value (EV)

Adjusted Present Value (APV)

Financing your Project

Corporate Finance Outline

Project Finance

Reserves Based lending

Tax implications

Hedging

Case Studies

Risking Techniques

Brief overview of sensitivity analysis

Tornado diagrams, decision trees and cumulative probability

plots

Exercise: Balancing risk and return to optimize farm in

Assessing Value of Information (VOI)

Probability distributions

Monte Carlo Analysis: method, advantages, limitations,

correlation (The Monte Carlo method will be demonstrated

using Crystal Ball™)





DAY 5 Introduction to Unconventionals

What is an unconventional resource?

Unconventional resources: Heavy Oil, Bitumen, Tight Gas, Coalbed Methane (CBM), Shale Gas, Shale Oil, Hydrates

The economics of unconventional vs conventional development/production

Unconventionals environmental considerations Fiscal Systems in an Unconventional setting

The unconventional fiscal environment

Appropriate fiscal incentives to encourage development

Case Studies: US, Canada, Australia, UK

The Economics of LNG Projects

The LNG process and costs

LNG pricing around the world

Calculation of the LNG netback price

Construction of the LNG economic model

Determination of transfer price between the Upstream project and LNG plant

Consideration of the returns to the LNG project versus the returns to the Upstream project

Summary and Closing Remarks After the course delegates will be sent fully functioning electronic copies of the fiscal model solutions as well as all excel based examples studied during the course.

Your Expert Faculty:

Peter Wright Principal Economist Robertson CGG Company

Peter is currently Principal Economist with Roberson UK in the Petroleum Reservoir & Economics department. He manages and

makes contributions to various techno-economic studies, data room evaluations and Competent Persons Reports (CPRs) in the UK, Italy, Egypt and Malaysia.

Prior to 2013, he was an independent petroleum economist for 9 years. He dealt with all aspects of petroleum economics including commercial evaluations,

training, transaction support, economic or financial modelling, cost estimating and budgeting & forecasting. Projects evaluated have comprised both onshore

and offshore oil & gas fields, shale gas, FPSO investments, gas storage, carbon capture, pipelines, oil field rehabilitation, and refinery construction. His clients

included Petrofac, Senergy, RPS Energy, Blackwatch, PGS Reservoir, Mitsui, Marubeni Corp, Sumitomo Corp, FirstAfrica Oil, Rocksource and lastly Third

Energy. Before becoming an independent consultant in 2004, Peter was Director and petroleum economist with DS+A and Indeva Energy Consulants. Peter

has an MBA from Cranfield School of Management (1990) and a MA in Engineering, Downing College, Cambridge (1981). His key areas of expertise include

asset and company valuations, Competent Person’s Reports, financial and economic modelling, fiscal regimes, portfolio management and training. He is a

member of the Society of Petroleum Engineers (SPE).

What past participants have said about previous economics training courses by PetroEdge: - “Very good course for non-economists for understanding the basics of Petroleum Economics & PSCs” Executive Analyst, PETRONAS

“Great course, has opened up my eyes and share a lot of light on many “grey areas” of my knowledge of the industry” Legal Executive, Brunei National Petroleum Company

“The course was an ideal introduction to the economics that drive the upstream Petroleum decision making process and the external influences that can impact upon these

decisions.” Middle East & Asia Pacific Regional Accounting Centres Director, Baker Hughes

“A good course and overview with a very knowledgeable trainer” Petroleum Engineer, APA Group

“General overview on Petroleum Economics & PSC modelling workshop brings enlighten and comprehensive understanding regarding the subject” Senior Project Engineer -

Project Management Division, SKK Migas

“PetroEdge courses are focussed and well designed to be applicable to a narrow-medium audience-therefore good value.” Sales Manager, CGG Multiclient & New Ventures

“A thoroughly interesting and comprehensive understanding of the practise of context of economics in the petroleum industry” Senior Compliance Officer, NOPTA

“This course has broaden my ideas on the production sharing concepts and I think it will be effective if applied in the Mining Industry” Policy Officer, Department of mineral

policy & Geohazards Management (PNG)





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ADVANCED PETROLEUM ECONOMICS & RISK ANALYSIS

R E G I S T R A T I O N F O R M


advanced petroleum economics & risk analysis

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