AFC-108 PETROLEUM ECONOMICS AND FINANCIAL INVESTMENT

Petroleum companies are evolving to become more complex in their operations and yet remain nimble. Most companies' portfolio/projects are growing larger, more expensive and going offshore. As commodity oil & gas prices (from conventional and unconventional sources) and costs fluctuate dramatically in a matter of weeks, it is more prudent than ever to be able to develop scalable budgets and make apt investment plans that are accurate and flexible. The company's budget can either be its roadmap to success or its hindrance to executional excellence.

 

Historically petroleum companies have relied on the outdated budget processes built solely to control costs and not manage operations. Costs should be tied to revenues to insure that the company is achieving its greatest potential and highest level of success. The ability to properly create and manage the operations through the company's budgets and plans is paramount in the 21st century oil & gas company. 

 

Topics:

1. Cash flow: revenue, capital and operating costs, excel-based exercises

2. Economic evaluation: net present value concepts, sensitivity and risk analysis, decision trees, royalty, sources of capital, incremental economics, sunk costs, inflation, annuity, profitability indexes, etc

3. Budgeting: examples and exercises, long-range/strategic planning

4. Cash versus write-off decision: depreciation, depletion, and amortization (DD&A)

5. How to read an annual report: statements, financial ratios, what is and is not included, reading between the lines ad fine prints

6. Worldwide business operations: concessions, licenses, production sharing contracts, risk services agreements, joint ventures, weighted average cost of capital, sources of funding, debt and equity

7. Economics/performance appraisals: purchase, lease, sell, lease-to-own options

8. Practical tips on format and inclusion of economic factors in excel-based analysis

9. Business ethics in investment economics