Abstract: Portfolio Analysis: A Strategic Tool for Managing Investments and Growth in the International Petroleum Arena
John I. Howell, G. M. Larberg, Paul D. Ching
Managing an international E&P investment portfolio is a complex and challenging task. Portfolio managers must balance short term and long term results with technical, political, and commercial risks. Simultaneously they must deal with many uncertainties including prospect size, recovery parameters, and oil price, to name a few.
Pecten International has set up a portfolio modeling technique that combines Linear programming with Monte Carlo analysis to define portfolios that are optimal portfolios given the full range of risks and uncertainties of each project or field in the portfolio. We will describe this modeling technique.
We will present results from numerous models which illustrate how the tool adds insight into many decisions we routinely deal with when managing an oil and gas portfolio. Examples will illustrate how to select new investment options, identify sale candidates, balance short term and long term performance, define which performance factors limit you company's growth, and define the probability of achieving financial targets given optimal portfolios.
We believe companies should use portfolio analysis to guide decision makers. This tool cannot provide "The answer." It will not replace the decision maker nor the prospect generator. However, used in conjunction with the knowledge of the prospect generator and the perspectives of the decision maker, this tool gives decision makers considerable insight into the risk-reward tradeoffs they deal with on a daily basis.
AAPG Search and Discovery Article #90951©1996 AAPG International Conference and Exhibition, Caracas, Venezuela