UNIT ONE
June 4 - 8, 2012
September 10 - 14, 2012
LECTURE
FINANCIAL MODELING FOR
THE OIL AND GAS INDUSTRY
Overview of the Petroleum Industry Today
Oil and gas measurements and units; value chains; market structures; worldwide oil and gas economics; major players; evolution of the integrated oil and gas business.
Introduction to Accounting and Financial Statements
Basic financial and accounting concepts and standard technology; depreciation, impairment and acquisition accounting; financial statements; accounting for investments; equity methods and consolidations.
Financial Statement Analysis
Background needed to understand and build models of the four key corporate financial statements; review and discussion of key measures of financial performance; consideration of the measures used by major companies and of participant’s companies; steps required to build proforma financial projections.
Overview of Oil and Gas Accounting
Definition of various industry terms; classification of reserves and resources; introduction of two major accounting options to account for oil and gas costs: successful efforts and full cost; GAAP filing and valuation methods to comply with SEC filing requirements, includes asset impairment and asset retirement obligations.
Project Financing: Commercial Debt Finance
Corporate and project financing; sources of debt and equity financing; public and private sources of capital; multilateral and bilateral sources of financing; risk assessment and mitigation; structuring of financing; preparing the financing plan; negotiating the term sheet; preparing the financing documents; closing. Case Studies – Examples of Project Financing: Qatar Gas Project; Colombia Power Project; U.S. Gas Storage Project.
Energy Project Economics and Measures of Performance
Project cash flow analysis, discounting cash flow to obtain present value and internal rate of return, the cost of capital and the effect of debt financing, other measures of project performance; sensitivity to changes in key variables.
The Business Model
Using the balanced scorecard framework, regression analysis, and flexible budgeting, how does the organization earn profits? What are the key strategic drivers of financial success?
Cost and Expenses
“True costs” of developing and delivering products and services; Using gross profit analysis, activity/based costing techniques, and cost variance schedules.
Financial Statements
Using the business model, volume, expense, and revenue data to construct and understand financial reports; Using balance sheets, income statements, cash flow statements, ratio analysis, and performance outcomes measurements.
WORKSHOP
ASIA ONSHORE BUSINESS
GAME: OCEANA
This “business game” is an integral part of the learning process. Participants, divided into teams, make real-life technical, financial, and market decisions that commonly confront managers today. Team performance is measured on a financial basis and is catalyzed by healthy competition.
Participants, working in teams, will evaluate an oil and gas business opportunity in the Republic of Oceana, near Indonesia. They build a financial model that will integrate various risks associated with the investment. This model will utilize a proposed Production Sharing Agreement and incorporate revenue, capital and operating costs, financing costs, and tax projections for the life of the project.
Throughout the program teams will add layers of complexity to the model by incorporating different types of risk analysis tools presented in the lectures. The teams will present their project analysis to a decision review board by outlining the risk profile and expected performance measures of the project. They then learn the outcome of those decisions. Emphasis will be placed on the practical implementation of the tools presented in lecture and on developing practical financial modeling skills.
WORKSHOP SESSIONS INCLUDE:
- Modeling the production sharing agreement
- Building the base case proforma financial statements
- Calculating standard measures of performance
- Sensitivity and scenario analysis
- Decision trees and expected monetary value
- Monte Carlo simulation
- Project selections, stakeholder and financial analysis
- Simulation of team investments in the economic environment
- Evaluation of performance and presentation of results