--> --> Abstract: Calibration of Chance of Success Estimates for a Mid-Sized Independent E&P Company, by Michael Padgett; #90914(2000)

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Michael Padgett1
(1) EEX, formerly of PennzEnergy/Pennzoil E&P, Houston, TX

Abstract: Calibration of Chance of Success estimates for a mid-sized independent E&P company

Chance of Success estimates (COS) are an integral part of the exploratory process. If COS values are not collected in a rigorously consistent manner and not calibrated, the numbers are of little value from a quantitative point of view. The exploratory program of a mid-sized independent was examined for the years 1997 and 1998, comparing predicted COS and volume estimates with results. This was done for each of 3 business units, US Offshore, US Onshore and International, for 27 purely exploratory wells. A Monte Carlo study compared expected economic discoveries with actual, taking into account both dry hole probability and the minimum economic threshold for each prospect. Results indicate that the pre-drill COS values were too optimistic, requiring a divisor of 2 to 3 for US Offshore and a divisor of 4 to 6+ for International. The US Onshore did not need a correction factor to explain drilling results. For example, a 20% COS US Offshore well was more probably a 7% to 10% COS venture. A 20% International well reduced to a 3% to 5% COS exploration well. For the time period, 1997 through 1998, this reduction in actual COS coupled to the minimum economic thresholds helps to explain why only 2 economic discoveries were made when 5 would have been expected. COS estimates that cause exploratory volume forecasts to require large normalizations are unsuitable for corporate budget, planning and decision making.

The author very much appreciates the permission of Devon Energy to present this work.

AAPG Search and Discovery Article #90914©2000 AAPG Annual Convention, New Orleans, Louisiana