Petroleum Economics

Key Learning Outcomes: • Gain a comprehensive understanding of economics in the petroleum industry • Understand cashflow and profit analysis techniques • Perform basic economic and financial evaluations • Learn marginal vs total cost analysis • Study probability, expected value and sensitivity analysis • Deal with uncertainty through risk analysis and hedging • Gain the ability to incorporate financial considerations in the decision making process … and other essential topics. See detailed course programme inside.

Course Highlights

Key learning outcomes:

Gain a comprehensive understanding of economics in the petroleum industry
Understand cashflow and profit analysis techniques
Perform basic economic and financial evaluations
Learn marginal vs total cost analysis
Study probability, expected value and sensitivity analysis
Deal with uncertainty through risk analysis and hedging
Gain the ability to incorporate financial considerations in the decision making process

… and other essential topics.

For details of the course trainer, please download the course brochure

Booking Information

Dates	Prices	Book This Course	Discount
18 - 19 Oct 2010	£ 2199		-
28 - 29 Mar 2011	£ 2199		-

Course Programme

Petroleum Macro Economics

• Supply and demand
• Energy Economics
• Impact of economic growth on energy
• Affects of fiscal and monetary policy
• International and national impacts
Petroleum Micro Economics

• Theory of the firm in the petroleum sector
• Revenue concepts – cashflow and revenue
• Cashflow versus profits
• Fixed costs vs variable costs
• Marginal costs
• How costs, revenues and profits vary with output
Project Economics

• Revenues
• Capital and operating costs
• Taxes and royalties
• Depreciation
• Inflation
Capital Markets and Finance

• Company financing
• Investment alternatives
• Cost of capital
• Market assessment of oil and gas stocks
• Times earnings
Capital Budgeting in the Petroleum Industry
• Building blocks: reserves, resources and
production forecasts
• Estimating project revenues over time
• Estimating costs and cash outlays over time
• Looking at net cashflows
External Factors Affecting Project Analysis

• Economic growth on economies
• Oil prices
• Inflation rates
• Interest rates
• Interest rate yield curves
• Government takes
Decision Criteria and Cashflow Analysis

• Introduction to Net Present Value
• Internal Rate of Return
• Payback
• Profitability
• Discount rates
• Break even analysis

Case Study Session:

Participants will critically assess a real world

project proposal, developing revenue and cost

flows and perform financial analysis

Risk and Uncertainty in Decision Making

• Identifying project risks in
– Revenues
– Production flows
– Oil prices
– Costs
– Interest rates
Probability Concepts

• Expected outcomes
• Probability curves
• Best and worst case scenarios
• Decision trees
• Psychology of decision making in uncertainty
Risk Management

• Examining alternatives and their costs
• Abandonment
• Flexibility
• Hedging
Sensitivity Analysis
• Identifying likely outcomes
• Weighted average cost of capital
• Examining rates of return under various
scenarios
Corporate Analysis of Risk and Return

• Portfolio theory and diversification techniques
• Opportunity costs of capital
• Investment alternatives
Beyond the Numbers

• Corporate views of risk
• Marketing, negotiations and concessions
• Presentation of project analysis results

Case study session:

Participants will critically assess a real world

project proposal, developing revenue and cost

flows and perform financial analysis. This will be

finished with a prepared outline for presentation

to senior management.