PETRO 4300 S 11 CLASS 6

PETRO 4300 S 11 CLASS 6 - PETRO 4300 PROPERTY (ASSET)...

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PETRO 4300 PROPERTY (ASSET) EVALUATION LECTURE 6
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DECLINE ANALYSIS
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WHAT HAVE WE COVERED ALREADY EXPONENTIAL LIMITING CASE OF HYPERBOLIC DECLINE b = 0 WHY IS WIDELY USED? THE PRODUCTION HISTORY OF AN ASSET THAT PRODUCES WITH THIS TYPE OF BEHAVIOUR WILL PLOT AS A STRAIGHT LINE ON : A) RATE VS TIME ON SEMILOG GRAPH B) RATE VS CUM OIL PRODUCED Q t = Q i * EXP ( - Dn * t) Dn = - Ln (Q t2 /Q t1 ) * 1/t t = - Ln (Q t2 /Q t1 ) * 1/Dn Np = (Q t1 - Q t2 ) / Dn HYPERBOLIC GENERIC CASE MORE DIFFICULT TO USE SINCE THE PRODUCTION HISTORY OF AN ASSET WITH THIS BEHAVIOUR DOES NOT PLOT AS A STRAIGTH LINE DECLINE RATE IS NO LONGER CONSTANT AND IS CONTINUOSLY CHANGING WITH TIME Q t = Q i / (1+ b * D i * t)^(1/b) D i /D 2 = (Q i /Q t2 )^b t = ((Q i /Q t2 )^b -1)/b*D i Np = (Q i /((Di * (1-b)))*(1- (Q 2 /Q i )^(1-b))
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HARMONIC “UPPER BOUNDARY” OF HYPERBOLIC DECLINE ON A SEMILOG PLOT OF RATE vs CUMULATIVE PRODUCTION PLOTS AS A STRAIGHT LINE Q t = Q i / (1+ D i * t) D i /D 2 = (Q i /Q t2 ) t = ((Q i - Q t2 )/D i * Q t2 Np = (Q i /Di) * Ln (Q 2 /Q i )
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ECONOMIC LIMIT PRODUCTION FROM AN OIL AND GAS ASSET IS USUALLY EXTRAPOLATED TO THE POINT WHERE THE NET REVENUE FROM THE OPERATION OF THE ASSET IS EQUAL TO THE OPEARTING EXPENSES. AT THIS TIME THERE IS NO MORE FINANCIAL REASON TO CONTINUE TO OPERATE WHEN CALCULATING THIS LIMIT ONE MUST BE VERY CAREFULL AS TO WHAT COSTS ARE INCLUDED ESPECIALLY COST SUCH AS OVERHEAD.
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RESERVE TO PRODUCTION RATIO R/P PROVIDES A QUALITATIVE SCREENING TOOL FOR QUICK EVALUATION/COMPARISON OF ASSTS WITH VERY LIMITED AVAILABLE INFORMATION. R/P = Np/Q FOR EXPONENTIAL Np=(Q1-Q2)/Dn R/P = 1/Dn IN REALITY R/P CHANGES WITH DURING THE LIFE CYCLE OF AN ASSET. SOME RULES OF THUMBS ON R/P CHANGES: INCREASING R/P --- RESERVES OVERSTATED DECREASING R/P ---> RESERVES UNDERSTATED R/P OVER 9 SHOULD BE CAREFULLY REVIEWED FOR SINGLE WELLS PO0PERTIES PRODUCING FROM SIMILAR GEOGRAPHICAL AND GEOLOGICAL ZONE SHOULD HAVE COMPARABLE R/P VALUES
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RESERVES SIMPLEST DEFINITION RESERVES ARE YOUR NET SHARE OF HYDROCARBON VOLUMES THAT HAVE NOT YET BEING PRODUCED AND ARE EQUATED TO A POSITIVE NPV. THEY ARE THE REAL FUTURE VALUE OF THE ASSET YOU ARE “LOOKING AT” THEY ARE ALWAYS AN ESTIMATE SINCE YOU CANNOT “MEASURE” THERE IS ALWAYS A CERTAIN AMOUNT OF RISK/ UNCERTAINTY RELATED TO THESE ESTIMATED VOLUMES.
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CASH FLOW ANALYSIS
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RISK WITH RESPECT TO THE CASH FLOW MODEL What are the main factors that could impact a cash flow analysis ???? Oil or Gas prices Expenses State and Local Taxes Federal tax deductions Financial Terms Availability of Capital
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RISK WITH RESPECT TO THE CASH FLOW MODEL What happens to the value of a discounted net cash flow as the value of the effective discount rate increases ????
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PETRO 4300 S 11 CLASS 6 - PETRO 4300 PROPERTY (ASSET)...

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