--> ABSTRACT: Risk Reduction in Deal Screening, by James C. Trimble; #91020 (1995).

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Risk Reduction in Deal Screening

James C. Trimble

All Companies, whether large or small, use a screening process to decide which prospects they will drill. Geologists screen the ideas they encounter to wind up with the most likely candidates. Risk is one of the biggest factors that every explorationist recognizes and strives to reduce. But Mother Nature is not always predictable. We all know of sure things that turned out dry or never paid out. We are all basically in the risk management business.

Perhaps risk analysis and risk management is what we are after, more so than risk reduction. But before we can do either we need to define the risk we are trying to reduce. Is it risk of drilling dry holes, of making less than a certain return on our investment? We must also recognize that this definition of risk is almost meaningless unless we know what assets we have at our disposal.

Available assets, that is, the size of our drilling budget, set the criteria for us all, major companies as well as smaller independents, but usually for opposite reasons. The method we use to allocate our drilling budget varies, depending on whether we are trying to make a living or if we must consider the attitude of a multitude of stock holders. Either way, proper risk analysis and management are essential to success.

AAPG Search and Discovery Article #91020©1995 AAPG Annual Convention, Houston, Texas, May 5-8, 1995