E conomic E v a lua t ion of

P r ospect s a nd P r oducing
P r oper t ies - E P P
Dis cip line: Petroleum Business
L evel: Foundation
Durat io n: 5 days
Ins t ruct o r( s ) : T im Nieman, John Schuyler

Property sales and acquisitions, lending, and investment joint ventures abound in the
petroleum industry. What is most important for decision-making is to know the value of
the subject asset. T he evaluation model is central to understanding a project and valuing
each party's interest. T he model is the basis for communicating among project team
members, managers, and partners. In this course participants learn good evaluation
modeling practice and the decision analysis process. Appraisal modeling methods for
upstream investments and operating decisions are discussed and experienced in this
hands-on workshop. T he learning objective is a process for delivering a credible and
well-documented evaluation of reserves (or resource) and economic worth. Risk and
decision analysis techniques are integral. Personal computer spreadsheets and other
software are discussed. Optionally, computers with spreadsheet software may be used
in this class. Model inputs include assessments about geologic, engineering and
economics. Example calculations show typical engineering formulas employed in
property evaluation. Drilling schedule, initial production rate and decline, product price
and cost escalations, fixed and variable operating costs, simple taxes, and deal
structure are added. T he forecasting model translates the physical and economic
project/asset description into resource/reserves, production and cash flow forecasts,
and several decision criteria. Participants are encouraged to bring examples from their
work for discussion. Please contact us if you wish to submit a problem in advance for
possible use as a class exercise. Management buy-in and participation are essential to
the success of decision analysis in an organization. T he course instructor will be
pleased to present a short executive briefing to managers and executives not attending
the course. Please contact us if you would like to arrange a briefing session at some
point during the training week.

Des ig ned Fo r:
Engineers, geologists, geophysicists, managers, planners, and persons new to analysis
and evaluation responsibilities

Y o u Will L earn:
How T o:

Describe the elements of the decision analysis process and the respective roles of
management and the analysis team. Describe the decision framing phase and
influence diagramming.
Express and interpret judgments about risks and uncertainties as probability
distributions. Explain common biases and techniques to reduce. Discuss popular
statistics and common mistakes.
Represent discrete risk events in Venn diagrams, probability trees, and joint
probability tables. Extract or calculate joint and marginal probabilities.
Explain expected value and its central role in a logical, consistent decision policy.
 Explain how decision trees, payoff tables, and Monte Carlo simulation work as
calculation alternatives.
Craft and solve decision models as the basis for evaluating alternatives. Evaluate
investment and design alternatives with decision tree analysis.
Understand and demonstrate good cashflow modeling practice. Aware of
accounting and finance fundamentals useful in cashflow modeling. Correctly
calculate escalated cashflow projections and present value.

Co urs e Co nt ent :
Decision T ree Analysis: decision models, project threats and opportunities; value of
information overview; advantages and limitations
Monte Carlo Simulation: conventional and Latin hypercube sampling, portfolio
problems, optimization overview, advantages and limitations
Decision Criteria and Policy: value measures, multiple objective decisions, HSE
considerations, capital constraint, risk aversion; credible analyses
Modeling the Decision: decision analysis process; problem framing; influence
diagrams, common petroleum risks; sensitivity analysis, modeling correlations,
elements of good evaluation practice; accounting concepts useful in modeling;
avoiding common mistakes in modeling cost and price escalations and in calculating
present value; simple portfolio models
Basic Probability and Statistics: three fundamental probability rules; Venn diagrams;
calibration and eliciting judgments; choosing distribution types; common
misconceptions about probability; judgments; avoiding biases in estimation;
stochastic variance
Expected Value Concept: foundation for decision policy, features and pitfalls to avoid
T eam Exercise: Evaluating an extension well location with probabilistic reserves
concepts
Implementing Decision Analysis: problem framing, guidelines for good analysis,
team analyses, computer tools (discussion and demonstrations), mitigating risks

Ins t ruct o rs :

MR. T IM NIEMAN has 30 years of experience as a risk and decision analyst, economist
and petroleum scientist. His professional experience includes 20 years in leading and
conducting projects of various sizes and scopes involving the application of decision
and risk analysis methodologies in the energy and environmental sectors, and 10 years
as a practicing petroleum geophysicist. His background includes work in decision
analysis, risk analysis, business modeling, financial forecasting, strategic planning, R&D
portfolio management, software development, geology, and geophysics. Mr. Nieman
has also taught numerous training seminars in decision analysis, economics and
quantitative modeling. He has a BS in geology and an MS in geophysics from Michigan
State University, and an MBA from Rice University.

MR. JOHN SCHUYLER, CAM, CCE, CMA, CMC, CPIM, PMP and PE, is a decision analyst,
evaluation engineer, and investor. He founded his consulting practice, Decision
Precision, in 1988. He has over 37 years of experience in analysis, consulting, training
and management, primarily in the energy industry. His focus has been in feasibility
analysis, appraisals, corporate planning, and evaluation software. He has presented
over 290 courses in 34 countries since 1989. He was vice president and petroleum
engineer with Security Pacific National Bank, planning and evaluation analyst at Cities
Service Oil Co., manager of business systems for Cities Service's Petrochemicals
Division, and senior management consultant with a national accounting firm. He is a
member of eight professional organizations and is an author and speaker on modern
analysis practices. He is the revision author of Decision Analysis for Petroleum
Exploration, 2nd Ed., author of Risk and Decision Analysis in Projects, 2nd Ed., and has
written over 40 articles, papers and handbook chapters. He received BS and MS
degrees in mineral-engineering physics from the Colorado School of Mines and an MBA
from the University of Colorado. His website is www.maxvalue.com.

In-Ho us e Co urs e P res ent at io ns

All courses are available for in-house presentation to individual organizations. In-house
courses may be structured the same as the public versions or tailored to meet your
requirements. Special courses on virtually any petroleum-related subject can be
arranged specifically for in-house presentation. For further information, contact our In-
House T raining Coordinator at one of the numbers listed below.
T elephone 1- 832 426 1234
Facsimile 1- 832 426 1244
E-Mail inhouse@petroskills.com

P ub lic Co urs e P res ent at io ns

How to contact PetroSkills:
1-800-821-5933 toll-free in North America or
T elephone 1-918-828-2500
Facsimile 1-918-828-2580
E-Mail registrations@petroskills.com
Internet www.petroskills.com
Address P.O. Box 35448, T ulsa, Oklahoma 74153-0448, U.S.A