During the course, participants will:
- Discuss the background industry economics and fiscal structures.
- Learn how to model individual oil and gas assets, and how asset models consolidate into corporate accounts.
- Understand the accounting issues that are specific to the industry relating to reserves, exploration, treatment of inventory and proportionate consolidation of joint ventures.
- Understand the accounting treatment of hedging activities and the interplay between use of hedging and the company’s cost of capital.
- Learn techniques for building political risk into the cost of capital.
- Apply oil and gas industry performance and valuation metrics to screen a universe of companies.
- Learn how to adapt a standard going concern DCF routine to the valuation of exploration and production or integrated oil companies.
- Discuss the drivers to and the techniques for assessing the potential success of industry consolidation and M&A activity.
Who should attend
The course will be of value to professionals in the following areas:
- Energy investment bankers.
- Oil and gas company corporate planners and strategists.
- Oil and gas equity analysts.
- Oil and gas M & A accountants and lawyers.
- Credit analysts
A basic understanding of Excel.
Issues are introduced and discussed using slides and company information – reports and accounts, Bloomberg data and consensus forecasts – and then for each topic Excel spreadsheets are built and used to analyse the relevant problem. Simple models are used to illustrate the underlying points, but the larger case studies are based on real companies and the more substantial models used should form a solid basis for participants to apply to real investment decisions after the course.
Basic financial accounting information provides a very poor view of performance in the oil and gas sector, because of the timing differences between value addition through discoveries and the resulting uplift to profitability. This presents challenges both when conducting comparative and intrinsic valuations of companies.
The course will explain application of upstream performance measurement and adjusted return on capital analysis to provide delegates with the ability to detect underlying value addition and to reflect it in their valuations.
The course provides the industry knowledge to enable participants to produce and interpret useable models of assets and companies in the oil and gas sector. It shows how to model the often complex tax regimes, under which as much as 80 percent of the value of assets may accrue to the host government, rather than the private contractor. And it explains the techniques required to value commercial reserves, uncommercial reserves and exploration opportunities.
Oil and gas corporate valuations, whether produced for investment purposes or for acquisition targets, may take the form of liquidation models or of going concern models. Participants will thoroughly review both approaches, and their strengths and weaknesses. Throughout the course, techniques such as discounted cash flow, probability trees and real options analysis are explained and applied to case studies from the oil and gas industry.