5 days EAM/EFEP
- Engineers and commercial staff who need to extend their understanding of the economic and financial aspects of the upstream sector.
- To allow the participants to get familiar with the use of decision-making tools in the field of E&P projects economics and financial analysis.
- Upon completion of the course, participants will be able to:
- explain the economic, technical and fiscal aspects of E&P activities,
- evaluate the economic profitability of a simplified E&P project and assess its key sensitivity parameters,
- analyze the main corporate financial statements (Profit/Loss and Balance Sheet) issued by oil companies.
- No prerequisites for this course.
Ways and means
- Case studies simulated on computers.
- Development of an oil field (under concession and production sharing agreements).
- Acceleration of production project with or without EOR (Enhanced Oil Recovery).
- Valuation of a decision to acquire information (seismic or drilling).
- Pricing of an exploration block.
- Analysis and construction of balance sheets, income statements and key financial statements of an Oil & Gas company.
UPSTREAM ECONOMIC ENVIRONMENT 0.5 day
- Economic development of the upstream sector.
- Various actors in Exploration-Production and their strategies. Oil markets and prices.
- Current Exploration and Production activities.
- Levels of investment.
- Examples of finding, development and production costs.
CONTRACTUAL & FISCAL ENVIRONMENT 0.5 day
- General principles of oil tax systems.
- Legal framework: concessions agreements, production sharing contracts, service contracts.
- Impact of various contractual and technical parameters.
- Sharing of the economic rent between the State and Oil Companies. Economic flexibility.
- Legal aspects of joint ventures.
- Main legal provisions in a Joint Operating Agreement (JOA).
ECONOMIC EVALUATION OF E&P PROJECTS 2 days
- Cost of capital and discount rate, value creation.
- Economic criteria for project evaluation: net present value (NPV), internal rate of return (IRR), payback period, etc.
- Global profitability analysis, the impact of taxation and inflation on economic indicators.
- Case studies: development of an oil field (under concession and production sharing agreements).
- Introduction to risk analysis and risk discount rate: sensitivity analysis, Spider and Tornado diagrams.
- Probability of success, economic risk analysis in oil exploration.
- Economic study of an exploration project using Min, Mode and Max scenarios.
- Case studies: valuation of a decision to acquire information (seismic or drilling) and pricing of an exploration block.
UPSTREAM ACCOUNTING & FINANCE 2 days
- Financing of Oil & Gas projects. Basic aspects of accounting and financial analysis.
- Special mandatory reporting for oil companies.
- Principles of consolidation.
- Accounting of exploration expenditures, full cost, successful efforts.
- Amortization and depreciation methods, special provisions (depletion allowance, …).
- Funds from operations, cash flows, financial equilibrium, working capital.
- Financial statement, return on capital employed, return on equity, financial leverage.
- Cost analysis and budgeting.
- Exploration costs, finding costs, development costs, replacement costs, production costs.
- Capital budgeting, authorizations for expenditure, planning and scheduling, budgeting exploration activities.
- Joint venture accounting, accounting procedures, cash calls, joint venture audit.
- Case study: construction of an E&P company financial statements (simplified).