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This series of blog entries is extracted from a presentation developed for The Center for American and International Law’s 65th Annual Oil and Gas Law Conference held in Houston, TX February 19-20, 2014.  The paper was presented by Kevin Ewing of & Giuliani LLP and by D. Nathan Meehan of Baker Hughes Incorporated. In parts […]

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Analyzing Waterflood Communication: In this month’s blog, Baker Hughes reservoir engineering consultants Shelia Marsh and Atul Kshirsagar contribute to the blog. I also appreciate Neil Meldrum and Edwin Jong’s input. One key to optimizing oil recovery and determining production potential of waterflooded fields is through reservoir surveillance. Geological studies alone cannot quantify potential increases in […]

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I recently had the opportunity to address a large group of materials scientists and engineers who work for Baker Hughes. I attended a few of their talks during the two-day conference and I was impressed with how complex and sophisticated the technologies involved are. While this blog is dedicated to reservoir issues I decided to […]

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I collect knives. Custom made knives, hand crafted out of exotic materials by some amazing artists. One of my knives has a bolster made of superconducting[1] materials including such unusual elements as yttrium, bismuth, thallium and strontium. Young professionals may not remember the buzz in the industry when scientists discovered superconducting properties in materials at […]

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Present Value Ratio (PVR) While NPV fails to deliver a measure of capital efficiency, the Present Value Ratio (PVR) index calculates a measure of investment efficiency that is very useful in ranking projects with significant capital investment. It is the ratio of the discounted (after tax) net cash generated by a project to the discounted […]

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Production Sharing Contracts The first production sharing contracts (PSC) were signed in 1967 with Indonesia. The two parties to the PSC are the NOC and the IOCs, referred to as the “Contractor”.  Unlike tax/royalty systems, PSCs (in some countries also known as Production Sharing Agreements (PSA) generally transfer title to the produced hydrocarbons at the […]

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Present Value (PV) is particularly useful in ranking comparably sized projects with similar investment requirements. Net Present Value (NPV) refers to the total of all cash flows to (and from) a given party.  It can be a pre-tax or after-tax number. The terms PV and NPV are often used interchangeably with some companies using NPV […]

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Discounting Monthly Cash Flows One method of discounting monthly cash flows is to use the number of years (a non-integer) corresponding to those months and use the annual discount factor[1]. Another alternative is to use a monthly discount rate and to use the integer months for the calculation. In this latter example, there are two […]

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Discounting of future cash flows, time value of money It is commonly said that money has a time value. This is self-evident. Would you prefer to have $1,000 paid to you annually for the next thirty years or to receive $30,000 today?  While there may be certain circumstances where the delayed payments are preferable,[1] it […]

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NTIR or Number of Times Investment Returned is similar to the Profit-to-Investment ratio. The PI ratio is often called ROI; however, this is discouraged because of inevitable confusion with DCFROI.  It is a simple, undiscounted measure of the total net cash flows other than the “investment.” In the payout example the cumulative undiscounted cash flow […]

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