An Interactive 5-Day Training Course
Exploration Economics & Value Assessment
Exploration Economics and Value for Decisions
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Duration
5 Days
Price
$ 3,500
Starting From
16 Aug 2027
Home Geology and Geoscience Exploration Economics & Value Assessment
Exploration Economics & Value Assessment
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Exploration Economics & Value Assessment - GG-ECON-PEA27
| Code | Date | Time | Duration | Location | Currency | Early Bird Fee Per Person |
|---|---|---|---|---|---|---|
| GG-ECON-PEA27 | 16 - 20 Aug 2027 | 10 AM CST | 4 Hours Per Day |
Online |
USD |
3500 |
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Exploration Economics & Value Assessment
This training covers exploration economics and value assessment. It works through cash flow construction, fiscal systems and their effects, discounting and value measures, risked value and expected monetary value, decision trees for exploration choices, value of information, portfolio and campaign economics, commercial threshold and minimum economic field size, farm-out and equity economics and the presentation of value to decision makers.
Description
A prospect is drilled because it is expected to create value, and that expectation depends as much on the fiscal terms, the development cost, the timing and the chance of success as on the volume. Geoscientists who understand the economics make better recommendations, because they can see which technical uncertainty actually affects the decision, and because they can identify prospects that are large, well understood and worth nothing under the applicable terms.
This training covers exploration economics for technical staff. Cash flow construction is established first, covering the elements of a project cash flow and the arithmetic. Fiscal systems and their effects follow, covering royalty, tax, production sharing and the very different outcomes they produce for the same field. Discounting and value measures are then developed, covering net present value, internal rate of return and their interpretation. Risked value and expected monetary value follow. Decision trees for exploration choices are then addressed. Value of information is developed as the tool that justifies data acquisition. Portfolio and campaign economics follow. Commercial threshold and minimum economic field size are then addressed. Farm-out and equity economics follow. The training closes with presentation.
Minimum economic field size is the number that disqualifies most prospects. In any given fiscal and cost environment there is a volume below which a discovery cannot be developed profitably, set by the infrastructure required, the well count, the fiscal terms and the price assumption. In deepwater frontier areas it can exceed a hundred million barrels. A prospect whose P50 volume is below that threshold has a chance of commercial success far lower than its chance of geological success, and the two are frequently confused in prospect inventories.
Fiscal terms can matter more than volume. The same discovery under a favourable concession and under a harsh production sharing contract with a high state take can differ in value to the contractor by a large multiple, and in marginal cases one is developable and the other is not. Progressive terms that take a larger share as profitability rises compress the upside, which particularly affects the value of the high case that exploration is drilled for. Running the economics with the actual applicable terms, rather than a generic model, changes prospect rankings.
Expected monetary value is the right ranking measure and it is routinely misused. The expected value of a prospect is the chance of commercial success times the value if successful, less the cost of failure times its probability. It is the correct basis for comparing prospects and for deciding whether to drill. The common errors are using geological rather than commercial success probability, using the mean success case value when the distribution is skewed, and omitting the cost of the unsuccessful outcome entirely.
Finally, value of information connects the technical programme to the decision. The question of whether to acquire seismic, drill an appraisal well or run a test is answerable: if the information would change the decision, its value is the improvement in expected outcome it produces, and that can be compared against its cost. Where the information would not change what is done, it has no decision value whatever its technical interest. Running this calculation before committing appraisal expenditure is a short exercise with a high success rate at avoiding waste.
By the end of this training, participants will be able to:
- Construct project cash flows from technical and cost inputs
- Apply fiscal systems and assess their effect on value
- Calculate and interpret discounted value measures
- Distinguish geological from commercial chance of success
- Calculate expected monetary value for prospect ranking
- Build and solve decision trees for exploration choices
- Perform value of information analysis on data acquisition options
- Determine minimum economic field size for a setting
- Assess portfolio and campaign economics
- Present value assessments to decision makers
The training builds economic models on real prospect and development data. Participants construct cash flows, apply alternative fiscal terms to the same discovery to compare outcomes, and calculate minimum economic field size for stated settings. Decision trees and value of information calculations are built for appraisal choices. Prospects are ranked and the rankings defended.
Organisations sending participants to this training will:
- Rank prospects on commercial rather than technical grounds
- Apply actual fiscal terms in prospect evaluation
- Distinguish commercial from geological chance of success
- Justify appraisal expenditure with value of information
- Screen out prospects below economic threshold early
- Improve the commercial literacy of technical staff
Participants will:
- Build and interpret project cash flows
- Assess fiscal system effects
- Calculate expected monetary value
- Build decision trees
- Run value of information analysis
- Present value assessments credibly
- Exploration geoscientists
- New ventures and business development staff
- Reservoir engineers in appraisal and development
- Planning and portfolio staff
- Subsurface team leaders
- Technical staff ranking prospects
- Commercial staff working with technical teams
Module 1 - Cash Flow Construction
- Cash flow elements
- Production profile input
- Price assumptions and forecasts
- Revenue calculation
- Capital expenditure phasing
- Operating expenditure structure
- Exploration and appraisal cost treatment
- Abandonment cost provision
- Timing and its effect
- Real against nominal terms
- Inflation treatment
- Cash flow model construction
Module 2 - Fiscal Systems
- Concession and tax royalty systems
- Royalty structures
- Corporate and special petroleum taxes
- Production sharing contracts
- Cost recovery mechanisms
- Profit oil splits
- Service contracts
- Ring fencing and its effects
- Progressive and regressive terms
- State participation
- Government take calculation
- Comparing fiscal regimes on one field
Module 3 - Value Measures
- Time value of money
- Discount rate selection
- Net present value calculation
- Internal rate of return
- Limitations of internal rate of return
- Payback period
- Profit investment ratio
- Unit technical cost
- Breakeven price
- Measure selection by decision type
- Capital constrained ranking
- Interpreting value measures together
Module 4 - Risk and Expected Value
- Geological chance of success
- Commercial chance of success
- Minimum economic field size and its effect
- Probability of commercial success derivation
- Value of the success case
- Skewed distributions and mean against median
- Cost of failure
- Expected monetary value calculation
- Risked value for ranking
- Common errors in expected value
- Risk tolerance and its effect
- Using expected value for decisions
Module 5 - Decision Trees
- Decision tree structure
- Decision and chance nodes
- Branch probabilities
- Outcome valuation
- Rolling back a tree
- Optimal decision identification
- Sequential drilling decisions
- Appraisal then develop decisions
- Options to abandon
- Multi-well campaign trees
- Sensitivity of the decision to probabilities
- Communicating tree results
Module 6 - Value of Information
- Value of information concept
- Decision dependence of information value
- Perfect information value
- Imperfect information and reliability
- Seismic acquisition value assessment
- Appraisal well value assessment
- Well test and core data value
- Information that would not change the decision
- Cost of delay in the calculation
- Value of flexibility
- Presenting value of information results
- Using it to set the technical programme
Module 7 - Portfolio and Campaign Economics
- Portfolio concepts
- Aggregating prospect value
- Risk diversification across prospects
- Probability of at least one success
- Campaign value against single well value
- Learning value in a campaign
- Capital allocation across opportunities
- Efficient frontier concepts
- Portfolio balance and risk appetite
- Common risk and its portfolio effect
- Sequencing for value
- Portfolio reporting
Module 8 - Commercial Thresholds and Presentation
- Minimum economic field size calculation
- Development concept cost drivers
- Infrastructure and tie-back economics
- Standalone against tie-in developments
- Threshold sensitivity to price and terms
- Farm-out economics and promote structures
- Equity and carried interest effects
- Valuing an exploration position
- Presenting economics to technical audiences
- Presenting economics to management
- Stating assumptions and sensitivities
- Common presentation failures
Upon successful completion of this training course, delegates will be awarded an official Certificate of Completion issued by the Petroleum Engineers Association (PEA), an ISO 9001:2015 certified training organization. The certificate carries 10 Credits and formally records the total learning hours completed.
Each certificate is signed by the Course Facilitator and the CEO of the Petroleum Engineers Association, and serves as verifiable proof of professional training that delegates can present to employers and professional bodies worldwide.
Frequently Asked Questions
All course bookings made through PEA are strictly non-refundable. By registering for a course, you acknowledge and accept that all fees are payable in full and are not subject to refund under any circumstances, including changes in personal or professional commitments or partial attendance.
PEA reserves the right to make reasonable adjustments to course content, trainers, or schedules where necessary, without entitling delegates to a refund. Comprehensive details of each course — including objectives, target audience, and content — are clearly outlined before enrolment, and it is the responsibility of the delegate to ensure the course's suitability prior to booking.
For any inquiries related to cancellations or bookings, please contact our support team, who will be happy to assist you.
