David Wood & DWA Energy Limited

TECHNICAL BRIEFS

The following clips are brief extracts of information addressing topical issues relevant to the oil & gas industry, backed up with an image taken from our research and training material.

1.Holistic Approaches to Risk Evaluation & Management

Many upstream oil and gas organizations concentrate their risk evaluation and management efforts on sub-surface issues (through detailed technical analysis), economic & market issues (mitigating price dips through hedging strategies), and project management issues.  Many pay little attention to understanding or accounting for the many other facets of risk illustrated in the wheel diagram.  On the other hand financial institutions and analysts often tend to focus their risk analysis primarily on economic, market and political issues, but fail to adequately consider or understand sub-surface and technological risks and their impact on overall risked value.  A strong case can be made for using quantitative risk analysis models based upon more holistic approaches... risk evaluation and management techniques in the oil and gas industry are evolving... you should keep pace with them....  The complete article from which this is drawn can be downloaded (along with several others) from the publications page

2. Feasible Envelopes & Optimization Algorithms Aid strategic Portfolio Management

Modern developments in portfolio theory, combined with techniques that include risk simulation at asset, portfolio and corporate levels, genetic and simplex optimizers, focused statistical analysis and displays of the feasible envelope that go beyond the efficient frontier, offer powerful strategic portfolio modeling and management tools. 

In the ideal world all portfolios would lie on the efficient frontier defined in terms of their corporate owner's strategy.  In the real world this is just a worthy aspiration and portfolios lie somewhere within their feasible envelopes.  Knowing the key drivers that define the scale and shape of feasible envelopes, based upon both cash flow and earnings related metrics, can help to determine strategies for relocating your portfolio to positions of more optimum performance.

Significant insight can be gained to strategic, operational, acquisition and divestment decisions by incorporating such tools into your portfolio and / or strategic management process.  Many are discouraged by mathematical complexity, high costs, significant resource requirements, long development time, or simply being faced with black-box solutions that fail to motivate staff to apply the tools available to them to their full potential.  It does not have to be like that.....but it does require a commitment to a systematic and analytical approach....  We run a popular in-house strategic portfolio management training course.

3. Company Performance and Benchmarking

The appearance in March of the annual reports and financial statements of most publicly quoted petroleum companies for the previous financial year is an opportunity to analyse in detail the performances of major and independent international petroleum companies.  Performance measures presented in David Wood's July 2004 article in Petroleum Review are based upon numbers extracted from their annual financial statements and reserve reports... we update the analysis each year as part of ongoing research...an example diagram from a previous year's analysis is shown below...

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e-mail: info@dwasolutions.com