Oil and Gas Project Managment Case

Проект для университета.

Задание ниже + в приложенном архиве.

1. Introduction

Pentland is a medium size prospect, with recoverable reserves of:-

400 million barrels of oil (36º API)

200 * 109 standard cubic feet [scf] of gas

A conceptual design has been prepared, based on a template and a steel jacket, with pipelines

of 30 miles and 50 miles required to export liquid and gaseous products to the nearest facilities

offshore.

It is estimated that this development will cost about £750 million, with an annual operating

expenditure of £45 million (both in 2004 terms). In addition, export tariffs of £0.60 per barrel

and £0.40 per 103 scf (both 2004 terms) are expected. Provided that the economic climate does

not cause a delay to the investment decision, fabrication could begin in 2005, with production

expected in 2009.

2. Economic Assumptions

Management is pessimistic about the oil market and has requested a conservative analysis. The

following are to be assumed:-

Oil Price (2004):- $14 per barrel [Constant in “money of the day” terms]

Gas Price (2004) $2.50 per 103 scf [Constant in “money of the day” terms]

Exchange Rate $1.65 / £ [Constant]

Inflation Rate 3 % per annum [Constant]

3. Project Capex (£2004 Millions)

Year Exp.&App Dev. Wells Platform + Export Abandon.

NUMBERS IN ARCHIVE

Questions [pfq]

4. Oil and Gas Production

Year Oil Production000 bopd Gas Production106 scfd

NUMBERS IN ARCHIVE

5. Taxation (£ millions mod)

Year Tax Payments

NUMBERS IN ARCHIVE

EVALUATION PROCEDURE

Assume that data and questions relate to mid 2004.

Part One

1. Construct Cash Flow matrix in Pounds of the day

2. Calculate Net Cash Flow

3. Convert to 2004 Pounds

Part Two

4. Plot cumulative Cash Flow against Time

5. Estimate or calculate the following simple Measures of Value:-

Payback

Terminal Cash Surplus

Maximum Capital Outlay

Profit to Investment Ratio

6. Compute Net Present Value with Discount Rate of

12 percent and using mid 2004 as the time origin

7. Is this a worthwhile investment ?

Part Three

8. Construct the NPV Profile and use it to estimate a value for the Internal Rate of Return

(IRR)

9. As a check, compute the NPV for i = IRR (estimated) and compare with zero.

10. Normalise the NCF and investigate the impact of this on IRR.

Section B

1. Please estimate approximate exploration risk (total probability of success) for Petroleum

Prospects A and B below?

2. What prospect you as an Executive Officer would you select for your company to proceed with

exploration and development in terms of risk and why?

3. What prospect you would select for your company to proceed with exploration and

development in terms of volume of potential reserves and company revenue and why?

Figure of cross section. Potential prospects in Maracaibo basin, Venezuela.

Section C

Using your previous data for medium size field prospect with reserves of 400 million barrels of oil

(36 API) in Project A please make analysis and estimation if project will start at 2020 not at 2004.

Exploration and Appraisal expenses were at 2018 and 2019.

Inflation rate (2020): 1.19% per annum

Oil price (2020): 33$ per barrel

Exchange rate (2020): 1.22$ per pound

Please make the same calculation keeping the rest project parameters unchanged.

Please compare Project A if proceed at 2004 and 2020? Would you proceed or not with the project

now at 2020 and explain why? Project development at what timeframe would be more beneficial and

why?

Please write brief Executive Summary and e-mail me together with Excel sheets for 2 projects A

2004 and 2020.

Section D

You have scouting information for different companies and 2 different types of oil and gas project

Cases from different locations. You might also find from open sources information in the Internet

about you projects if you want. However, based on the given data and your current knowledge

please make brief SWOT analysis, if you have data make at hand estimation of reserves,

production, potential CAPEX (in terms high, medium, low) and possible revenues and

attractiveness or not of the projects at current 2020 conditions. Use current 33$ per barrel oil price,

for gas use open sources price if necessary.

For every project please decide from the point of you of stakeholder (company, etc) for what type of

business decision you go? Would you go for participation, development, purchasing, selling,

keeping away from project, etc move that might be in your cases or not in order to make financial

profits for your stakeholder now and in the near and medium future? Please briefly explain why and

include your brief calculations if you have one to your SWOT.