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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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There is a lot more to this subject than is covered here in one blog post. Essentially this is what I think the petroleum engineer as an analyst needs to know. It is far from the level of understanding needed to calculate WACC and many of its applications. Conceptual Framework Several concepts of financial theory […]

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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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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 […]

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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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