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Use of AS$ET and Economic Toolkit in ConocoPhillips

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Why We Use ASSET and Economic Toolkit in Exploration ... PNC .50. ENPV = ($140MM) PC .50. ENPV = $600MM. Reserves = 600MMbbl. Dry Hole. Geological Success ... – PowerPoint PPT presentation

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Title: Use of AS$ET and Economic Toolkit in ConocoPhillips


1
Use of ASET and Economic Toolkit in
ConocoPhillips
  • Vlad Morakhovsky
  • Upstream Exploration and Business Development,
    Investment Appraisal

November 13, 2003
2
Outline
  • Why We Use ASSET and Economic Toolkit in
    Exploration Economics
  • Evaluation Methodology
  • Case 1 Discrete Probabilistic Tree Example
  • Case 2 Customizing Analysis to ConocoPhillips
    needs with the Economics Toolkit Monte-Carlo
    Simulation with the In-House Technical Tool
  • Conclusions

3
Why We Use ASET and Economics Toolkit
  • Applied in exploration economics
  • Flexibility negotiation support, speed and
    modeling time, i.e. terms sensitivity runs
  • Standardization modularity/codes in country
    files , i.e. standard depreciation modules
  • Balance between flexibility and standardization

4
Evaluation Methodology
  • Probabilistic Analysis which takes into account
  • Geological Risk
  • Commercial Risk
  • Key Uncertainties if the Prospect is a
    Commercial Discovery

5
Evaluation Methodology Continued
Commerciality Criterion Usually Based on
Discovery Reserve Size
PD .60 ENPV (90MM)
ENPV 38MM
PS .40 ENPV 230MM
6
Evaluation Methodology Continued
  • Uncertainties in Cases Given Commercial Success
    Can Be Modeled Via
  • Discrete Cases with Assigned Probabilities or
  • Monte-Carlo Simulation

7
Case 1 Discrete Probabilistic Tree
  • Three Engineering Cases Corresponding to Low,
    Base and High Reserve Sizes are built
  • Key Uncertainties, i.e. price and costs, are
    modeled through multiple nodes wizard

8
Tree Example
9
Tree Example
10
Tree Example
11
Tree Example
12
Case 2 Monte-Carlo Simulation Approach
  • In-house technical tool ProAct
  • Use of Monte-Carlo simulation
  • Choice of many technical experts
  • Need to have the capability to run interactive
    economics for every iteration within the
    technical Monte-Carlo simulation

13
Evaluation Methodology Monte-Carlo Simulation
PD .60 ENPV (90MM)
ENPV 38MM
PS .40 ENPV 230MM
Probability
NPV
14
ProACT Architecture (One Iteration)
15
Interaction Between Components
ProACT Values
Country file
16
Minimum Economic Field Size Estimation
1000
800
600
400
NPV, MM
200
0
-200
-400
0
100
200
300
400
500
600
Reserves, MMbbl
17
Interaction Between Components
ProACT Values
Country file
18
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19
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20
Interaction Between Components
ProACT Values
Country file
21
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22
Evaluation Methodology Monte-Carlo Simulation
PD .60 ENPV (90MM)
ENPV 38MM
PS .40 ENPV 230MM
23
Conclusions
  • ASET was successfully applied in valuations of
    world-wide exploration opportunities
  • Introduction of the Economics Toolkit allows
    interaction with in-house tools while taking
    advantage of the strengths of the fiscal engine

24
Thanks
  • Bruce Dingeman
  • Mike Mitchell
  • Cindy Loya
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