Facebook LinkedIn Instagram Twitter
Shop
Search
Begin New Search
Proceed to Checkout

Search Results for All:
(Showing results 1 to 10 of 11)

Next 10 >>


Effects of Taxes and Price Regulation on Offshore Gas

Henry D. Jacoby and James L. Smith

Year: 1985
Volume: Volume 6
Number: Special Issue
DOI: 10.5547/ISSN0195-6574-EJ-Vol6-NoSI-21
No Abstract





Book Review - Mineral Resources Appraisal

James L. Smith

Year: 1986
Volume: Volume 7
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol7-No1-12
No Abstract





Petroleum Property Valuation: A Binomial Lattice Implementation of Option Pricing Theory

Eric Pickles and James L. Smith

Year: 1993
Volume: Volume 14
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol14-No2-1
View Abstract

Abstract:
We take a simple tutorial approach to explain how option valuation can be applied in practice to the petroleum industry. We discuss a simple spreadsheet formulation, demonstrate how required input data can be extracted from market information, and give several exploration and development examples. Under the market and fiscal conditions described we derive the value of discovered, undeveloped reserves projected to result from offshore licensing in the United Kingdom, and we show how to determine the maximum amount that should be committed to an exploration work program to find those reserves. Lease-bidding and farm-out applications are briefly described. We recommend option valuation as an alternative to discounted cash flow analysis in situations where cash flows are uncertain and management has operating flexibility to adjust investment during the life of the project, and point to further work needed to fully value nested or embedded options.



On the Cost of Lost Production from Russian Oil Fields

James L. Smith

Year: 1995
Volume: Volume16
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol16-No2-2
View Abstract

Abstract:
Russia is now paying heavily for past mismanagement of its major oh, fields. Unconventional attempts to maximize short-run extraction, neglect of routine maintenance, and shortages of critical equipment have combined to cause a steep decline in production. This study examines the scope and size of resulting economic losses using an extension of the traditional exponential decline model. Estimates derived from the model indicate that as much as 40% of the potential value of Russian oil reserves has been lost through poor management.



Regulatory Remedies to the Common Pool: The Limits to Oil Field Unitization

Gary D. Libecap and James L. Smith

Year: 2001
Volume: Volume22
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol22-No1-1
View Abstract

Abstract:
We examine the potential inability of voluntary unitization to remedy common property losses associated with oil field development. Unlike the traditional literature, we show that if the field contains two (or more) substances that differ in kind (like oil and gas), then it is possible that non-unitized forms of ownership and operation (with conflicted production incentives) may dominate unitized development of the resource. More specifically, it may be impossible to identify any plan of unitized development that is not pareto-dominated by initial endowments or other non-unitized production arrangements which the parties might devise. These results cast the role of the regulatory agency in a new light. Whereas compulsory unitization has tended to be viewed as a uniformly helpful form of outside influence that succeeds by reducing or overcoming the deadweight cost of bargaining, from our perspective it could also be seen as forcing on the parties a "solution" that unavoidably harms one or more of them.



Inscrutable OPEC? Behavioral Tests of the Cartel Hypothesis

James L. Smith

Year: 2005
Volume: Volume 26
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol26-No1-3
View Abstract

Abstract:
Although OPEC is commonly viewed as a syndicate of producers engaged in cooperative efforts to restrict production and raise price, to date there is a surprising dearth of supporting statistical evidence to that effect. I show that standard statistical tests of OPEC behavior have very low power across a wide range of alternative hypotheses regarding market structure. Consequently, it is difficult, given the current availability and precision of data on demand and costs, to distinguish collusive from competitive behavior in the world oil market. I apply a new, production-based approach for examining alternative hypotheses and find strong evidence of cooperative behavior among OPEC members. My results also suggest that OPEC�s formal quota mechanism, introduced in 1982 to replace a system based on posted prices, increased transactions costs within the organization. Statistical evidence is mixed on the question of whether Saudi Arabia and other core producers have played a special role within the cartel.



Petroleum Prospect Valuation: The Option to Drill Again

James L. Smith

Year: 2005
Volume: Volume 26
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol26-No4-4
View Abstract

Abstract:
We examine the value of an exploration prospect that is to be exploited via a series of possibly dependent trials. Failure on any particular trial is assumed to convey bad news, but also provides an option to try again. The pattern and strength of dependence among trials determines the value of this option, and therefore also influences the value of the underlying prospect. We describe the solution to this valuation problem, examine the behavior of the option premium, and characterize potential errors that are inherent in two ad hoc procedures that are often used to estimate prospect value. We demonstrate that the impact of dependence among trials is monotonic: each increase in the degree of dependence results in a further reduction in expected value of the prospect. We also characterize the particular pattern of dependence that is implied by a plausible model of exploratory risk.



Managing a Portfolio of Real options: Sequential Exploration of Dependent Prospects

James L. Smith and Rex Thompson

Year: 2008
Volume: Volume 29
Number: Special Issue
DOI: 10.5547/ISSN0195-6574-EJ-Vol29-NoSI-4
View Abstract

Abstract:
We consider the impact of sequential investment and active management on the value of a portfolio of real options. The options are assumed to be interdependent, in that exercise of any one is assumed to produce, in addition to some intrinsic value based on an underlying asset, further information regarding the values of other options based on related assets. We couch the problem in terms of oil exploration, where a discrete number of related geological prospects are available for drilling, and management's objective is to maximize the expected value of the combined exploration campaign. Management's task is complex because the expected value of the investment sequence depends on the order in which options are exercised. A basic conclusion is that, although dependence increases the variance of potential outcomes, it also increases the expected value of the embedded portfolio of options and magnifies the value of optimal management. Stochastic dynamic programming techniques may be used to establish the optimal sequence of investment. Given plausible restrictions on the information structure, however, we demonstrate that the optimal dynamic program can be identified and implemented by policies that are relatively simple to execute. In other words, we provide sufficient conditions for the optimality of intuitive decision rules, like biggest first, most likely first, or greatest intrinsic value first. We also develop exact analytic expressions for the implied value of the portfolio, which permits the value of active management to be assessed directly.



Introduction: Is the Genie Back in the Bottle?

Carol A. Dahl, Michael C. Lynch, and James L. Smith

Year: 2015
Volume: Volume 36
Number: Adelman Special Issue
DOI: 10.5547/01956574.36.SI1.cdah
No Abstract



Valuing Barrels of Oil Equivalent

James L. Smith

Year: 2015
Volume: Volume 36
Number: Adelman Special Issue
DOI: 10.5547/01956574.36.SI1.jsmi
View Abstract

Abstract:
By convention, the petroleum industry relies on thermal equivalence to summarize the results of upstream oil and gas operations - measuring outputs in terms of barrels of "oil equivalent." This despite the fact that the two commodities trade at nothing like thermal parity. Drawing on a well-known exponential production model of petroleum reserves, we demonstrate the potential for thermal equivalence to substantially distort common measures of exploration and development success. Drawing on a recent survey of actual upstream results, and relative to a proposed measure based on economic equivalence, we show that the extent of bias in estimates of value, cost, and profitability is indeed large.




Next 10 >>

Begin New Search
Proceed to Checkout

 





function toggleAbstract(id) { alert(id); }