Strategic Play Analysis – Advantages of a Fully Stochastic Approach

P. Jeffrey Brown, Exploration Analysis, Incorporated, 4504 Amesbury Circle, Grapevine, TX 76051, phone: 817-488-6189, jbrown6@flash.net

Most oil firms utilize established methods for quantifying the chance of success, and uncertainty of success-case volume/value outcomes, for individual prospects. Many firms routinely assess the overall volumetric ‘running room’, or aggregated undiscovered potential, of geologically defined plays – traditional play analysis. A smaller, but growing body of oil firms has come to recognize the importance of strategic play analysis to their business process.

Strategic play analysis differs from traditional, geology-driven play analysis in that it assesses the impact of an individual company executing an exploration program in an area defined by both geology and strategy. Often, portions of geologic plays, or areas with stacked plays, are assessed, and generally over a 5-year activity window.

Results address volumes found, value generated, efficiency (to find, and to find and produce), risked capital exposure, and overall chance of program economic success. Using this straightforward and powerful method, a company can construct an inventory of plays from which to select a portfolio that best fits corporate strategy.

This paper will review the method and mathematics, and show recent advances afforded by applying a fully probabilistic approach, including:

• modeling partial dependence (e.g., between discovery size and unit NPV)
• flexibility with distributions used in analysis (e.g., triangular vs. lognormal)
• varying threshold volumes at different phases of exploration life (e.g., play-opening vs. commercial)
• data-fitting, sensitivity analysis, and reporting capabilities built into stochastic engines (Crystal Ball® and @RISK®)

Forum: Petroleum Asset Risk Management (AAPG)
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