Read & Discuss (0 Comments)

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 […]

56
Likes
56 people like this post.
Read & Discuss (0 Comments)

After a long hiatus we are now returning to the series on oilfield economics. Discounted cash flow return on investment (DCFROI) also referred to as discounted cash flow rate-of-return (DCFROR) or Internal Rate of Return (IRR) is defined as the discount rate at which the NPV is zero. It is very attractive to decision makers […]

61
Likes
61 people like this post.
Read & Discuss (4 Comments)

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 […]

85
Likes
85 people like this post.
Read & Discuss (0 Comments)

I am on the SPE Committee for a 2-day workshop readers may wish to try and attend. It is focused on the liquids rich unconventional plays and will be held April 11–12, 2011 in that hotbed of oilfield technology, Palos Verdes, California. The SPE-sponsored workshop will be held at the Terranea resort hotel and details can […]

62
Likes
62 people like this post.
Read & Discuss (0 Comments)

Price Escalation and Constant Price Cases Changing product prices for oil and gas are a fact that is now ingrained in the thought processes of evaluators. Price forecasting can be based on many approaches ranging from fundamental supply and demand predictions through trend analysis. No method has a stellar track record over a significant time […]

82
Likes
82 people like this post.
Read & Discuss (3 Comments)

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 […]

85
Likes
85 people like this post.
Read & Discuss (4 Comments)

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 […]

86
Likes
86 people like this post.
Read & Discuss (0 Comments)

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 […]

90
Likes
90 people like this post.
this graph shows npv versus cos for the drill and farmout case
Read & Discuss (0 Comments)

Evaluation Criteria and cash flow analysis Payout In this and some following blog entries, many of the common measures of cash flow are defined and illustrated.  Perhaps the most common economic measure and one of the simplest is “payout.”  Also known as payback time, it is defined as the length of time required to recover invested capital […]

88
Likes
88 people like this post.
Read & Discuss (4 Comments)

In this example the reservoir engineer is called on to estimate the potentially recoverable resources in an exploration project that is located near a series of small discoveries. The engineer has a map generated (by geologists and geophysicists) from seismic, geological and petrophysical data and has estimated a “most likely” gas-in-place based on analysis of […]

90
Likes
90 people like this post.
We’re here to help
Nathan Meehan
+1.800.229.7447
© 2013 Copyright Baker Hughes Terms & Conditions Privacy Policy