Ann: PEL 87 Project Update, page-107

This was originally posted by shin.ikiru 3 months ago. I found it important enough to share it again so I have C/P his original post for anyone who may not have seen it. Cheers

Oil Field Valuation - Estimates only - DYOR

1. Discovery Phase - Value per Barrel $0.10 to $2.00 per barrel (Contingent Resources) Explanation: In this phase, the value per barrel is quite low because the reserves are uncertain, and significant exploration and development risks remain. The valuation reflects the high geological and commercial risks, with a low probability of converting contingent resources into commercially viable reserves.

ref; The Valuation of Oil and Gas Discoveries" (Society of Petroleum Engineers papers).

2. Pre-Development Phase - Value per Barrel: $2.00 to $10.00 per barrel (2P Reserves) Explanation: At this stage, the reserves are more certain, but the field is not yet producing. The value per barrel increases because there’s greater confidence in the resource size, and development plans are in place. However, risks related to CAPEX, OPEX, oil prices, and the timeline to production still exist, affecting the valuation.

ref: Valuing Oil and Gas Companies" by Nick Antill and Robert Arnott.

3. Production Phase - Value per Barrel: $10.00 to $30.00+ per barrel (Proven Reserves)Explanation: Once in production, the oil field’s value per barrel is much higher because the risks are considerably lower, and the cash flows are more predictable. The exact value depends on factors like the current and future oil prices, production costs, remaining reserve life, and the decline rate of the field. In stable market conditions, producing barrels can fetch higher valuations, especially for fields with low production costs.

ref: Energy Finance: Analysis and Valuation, Risk Management, and the Future of Energy" by Betty Simkins and Russell Simkins.


Key Factors Influencing Value Per Barrel:


Oil Prices: Higher global oil prices generally increase the value per barrel at all stages.

Location: Fields in politically stable regions or near existing infrastructure are valued higher.

Reserves Quality: Higher-quality (light, sweet) oil reserves are worth more per barrel.

Operational Efficiency: Fields with lower operating costs per barrel have higher valuations.

Regulatory Environment: Favorable tax and regulatory conditions can boost the value.