 # Economic Evaluation of Prospects and Producing Properties - EPP

Level: Foundation
Instructors who teach this course:
• Mr. Tim Nieman
• Mr. John Schuyler

• Designed For
• You will learn
• Course Content
Engineers, geologists, geophysicists, managers, planners, and persons new to analysis and evaluation responsibilities
How To:
• 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.
• Decision Tree 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
• Team 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