Valuing Oil and Gas Companies by Nick Antill download in pdf, ePub, iPad
Whether or not onshore operating costs can be expected to vary directly with the number of wells is a matter of circumstances and judgment. Economic evaluations are seldom made simply for curiosity.
It might be appropriate to spread such costs over a number of wells or make a judgment as to expected frequency of occurrence. Present worth calculations to factor in the time value of money are applied to the projected cash flow stream, and the results are reported. Sometimes the process is the reverse and involves the distribution of interests.
This section does not delve into the U. The most frequently used procedure to assess the value of a property is deterministic.
Calculating the discount factor with Eq. This type of analysis is essentially a decision tree calculation of expected results, given the circumstances described. Similarly, a third party could be investigating how a recent change in tax rates or structure might affect those in the acquisition market. There is the risk of nationalization, operational restrictions, and social unrest in foreign host countries.
In practice, cash flow schedules in the majority of reserves reports do not include overhead expenses except for those billed to nonoperating working interest owners by the operator of the property. Sometimes there are attempts to value oil and gas interests on a multiple of current income with the current income rate expressed in dollars per month or dollars per year. At one time, there were many court cases involving take-or-pay provisions of contracts between producers and pipeline companies. The results are summarized at the reserves category level.
It is not a model of the depletion process of a reservoir. If there is a comparative method that helps you become comfortable with the result of a valuation, use it.
The list is potentially endless. This will not help much in determining the breadth of the value range that might be revealed by Monte Carlo simulation, but it should help in coming up with values approximating the mode. The payment of interest reduces the total future net revenue and absolute profit in terms of total dollars. Those distributions might be determined with the aid of a reservoir simulator, but it is not expected today that the software be linked or integrated. While the summary is quite helpful, caution is necessary.
It is usually a mistake to eliminate costs classed as nonrecurring. The term present worth profile probably stems from the shape of the graph when the present worth values are plotted with the discount rates typically represented on the x-axis.
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