AN INNOVATIVE APPROACH FOR PORTFOLIO ANALYSIS AND INVESTMENT DECISIONS IN THE OIL AND GAS INDUSTRY

摘要

Any single investment in the oil and gas industry is evaluated for its contribution to the long term portfolio strategy, through its impact on production, costs, financial ratios, risk exposure,.... This evaluation is subject to significant uncertainties (commodity prices, production rates,…), adding complexity to the economic models. On the other hand, decisions must be taken in shortest time to catch opportunities. This paper proposes a new economic model for investment decisions, with the double objective of accelerating the evaluation phase and providing better information to make decisions. This model, supported by a collaborative interface, consolidates information coming from all departments (production, commercial, engineering, finance, portfolio). Next, specifics Oil and Gas fiscal models (PSA, royalties, provisions) are applied and results are consolidated at asset affiliate and portfolio levels. Then, tens of economic criteria (NPV, technical costs, production ratios, Break-even Price, …) are calculated and graphically represented in a dashboard directly aimed at the decision makers. Once having such a consolidated model, any investment strategy can be evaluated in a short time. Multi-level sensitivity analyses are available to give the most complete vision of possible future outcomes. The first level of sensitivity is given by specific input parameters that are managed at a global level (WACC, commodities price, inflation, exchange rate). As such, any variation in a global input will be automatically reported on the overall portfolio. The second level of sensitivity is provided by the Monte Carlo simulation, calculated from the model uncertainties, either threats or opportunities. Each uncertainty is characterized by a probability and an impact variable applied on any model parameter, such as global inputs, production profiles and costs.. The ultimate level of sensitivity is the definition of the portfolio Efficient Frontier. Considering multiple investments strategies, the probabilistic approach is adding the risk dimension through the Value at Risk (VaR). Over risk-exposed strategies can be excluded, and optimal strategies are unequivocally identified on the Efficient Frontier. The innovative contribution of the solution is the ability to perform typical and what-if evaluations of assets or portfolio, as well as addressing any uncertainty impacting cash flows. The oil and gas industry is producing risk-based information at many stages (production forecast, schedule and cost risk assessments), however such information is barely consolidated for investment decisions. An integrated and automated asset/portfolio economic model raises valuable typical and risk-based indicators to the highest levels of management.