[First Hit]

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Abstract: Risk Previous HitAnalysisNext Hit of Prospects Versus Plays: The Previous HitPlay'sNext Hit the Thing!

Peter R. Rose

The most difficult and crucial decision in petroleum exploration is not which prospect to drill, but rather, which new Previous HitplayNext Hit to enter. Such a decision, whether ultimately profitable or not, commits the organization to years of involvement, expenditures of millions of dollars, and hundreds of man-years of effort. Even though uncertainties and risks are high, organizations commonly make the new-Previous HitplayNext Hit decision in a disjointed, non-analytic, even superficial way. The economic consequences of a bad Previous HitplayNext Hit choice can be disastrous.

Using established principles of prospect risk Previous HitanalysisNext Hit, modern petroleum exploration organizations routinely assign economic value to individual prospects, but they actually operate via exploration programs in plays and trends. Accordingly, the prospect is the economic unit of exploration, whereas the Previous HitplayNext Hit is the operational unit.

Plays can be successfully analyzed as full-cycle economic risk ventures, however, using many principles of prospect risk Previous HitanalysisNext Hit. Economic measures such as Expected Present Value, Discounted Cash Flow Rate of Return (DCFROR), etc. apply equally to plays or prospects. The predicted field-size distribution of the Previous HitplayNext Hit is analogous to the forecast prospect reserves distribution. Economic truncation applies to both. Variance of Previous HitplayNext Hit reserves is usually much greater than for prospect reserves. Geologic chance factors such as Preservoir, Pgeneration, etc., must be distinguished as independent or shared among prospects in the Previous HitplayNext Hit, so they should be defined so as to apply as well to the Previous HitplayNext Hit as to its constituent prospects. They are analogous to multi le objectives on a prospect, and are handled differently in performing the risk Previous HitanalysisTop.

AAPG Search and Discovery Article #90950©1996 AAPG GCAGS 46th Annual Meeting, San Antonio, Texas