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Technologies and Portfolio Management in the Business Side of E&P

The Role of Portfolio Management in Today’s Business Climate:. Technologies and Portfolio Management in the Business Side of E&P. Dr. Roger N. Anderson Energy Research Center Lamont-Doherty Earth Observatory Columbia University. The Role of Portfolio Management in Today’s Business Climate:.

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Technologies and Portfolio Management in the Business Side of E&P

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  1. The Role of Portfolio Management in Today’s Business Climate: Technologies and Portfolio Management in the Business Side of E&P • Dr. Roger N. Anderson • Energy Research Center • Lamont-Doherty Earth Observatory • Columbia University

  2. The Role of Portfolio Management in Today’s Business Climate: Oil and Gas Business Performance consists of : • A Balance of short term profitability and long term growth, • in a near-chaotic, non-linear business environment, • with at least 12 measures of performance (3 NPV’s, ROCE, 2 Growth’s, 3 Cost’s, Market Cap, Profit, Profit/boe) -- regardless of your company’s selected metrics.

  3. The Role of Portfolio Management in Today’s Business Climate: Consider the Business Performance of 27 Publicly Traded Companies measured by just 3 metrics: • NPV, as measured by Reserves Volume, • ROCE, • Reserves Replacement.

  4. 3 Business Performance Metrics: NPV GROWTH ROCE NPV, Return-on-Capital and Growth are all over Map!

  5. Reserves Replacement Costs Reserves Replacement Production Costs Profit Production Volume Profit per BOE CAPEX Reserves Volume Newly Booked Reserves ROCE Market Capitalization R&D/E&P The Role of Portfolio Management in Today’s Business Climate: Now Consider Performance in 12 Dimensions:

  6. The Role of Portfolio Management in Today’s Business Climate: Chevron - Very Good, except for Profit/bbl. Shell -Excellent, except for ROCE! and Profit/bbl. 12 Performance Metrics Anadarko - Excellent ROCE, Profit/bbl, and Reserves Replacement. Oryx - Poor Performer, M/A Target, now part of Kerr-McGee .

  7. The Role of Portfolio Management in Today’s Business Climate: Exxon BP 12 Performance Metrics Amoco Mobil Merger Fits?

  8. The Role of Portfolio Management in Today’s Business Climate: Shell BIG!AXIS Exxon R&D/E&P PROFIT RESERVES PRODUCTION BP Amoco Chevron Mobil Texaco EFFICIENCY AXIS % Total Apache Unocal Anadarko LOW COST AXIS Burlington Elf Pennzoil Oil Company Business Performance Immersed in 12 Dimensions: Principal Components!

  9. New Technologies have Unquestionably: SHORTENED Cycle Times! INCREASED Production from Existing Fields! INTEGRATED Engineering, Geological, and Geophysical Technologies! PRODUCED Hostile Environment Discoveries! The Role of Portfolio Management in Today’s Business Climate: But? Are Technologies being Utilized to improve the Manufacturing Process?

  10. The Role of Portfolio Management in Today’s Business Climate: Does Technological Proficiency Correlate with Business Performance? Exxon/Mobil Shell BP/Amoco Are the Bigger getting Better?

  11. The Role of Portfolio Management in Today’s Business Climate: Profit = Function of Production Performance 16 14 12 Texaco Earnings Growth (%) BP/A Shell Arco 10 Agip Hydro Chevron Exxon Mobil 8 Elf Phillips 6 0 2 4 6 8 10 Production Growth (%)

  12. Technological Excellence Clearly Impacts Business Performance? R&D/E&P Market Cap ROCE Yet, R&D has been Unevenly applied in the Upstream? Why?

  13. Improving Utilization of Technologies? R&D/E&P (%) ROCE Net Profit In the Manufacture of Oil and Gas is what really improves Business Performance!

  14. Exploration Performance: New Reserves Replacement Costs (Boe/$) Replacement % Balances Finding %, Costs, Reserves Growth

  15. Production Performance: Production Production Costs ($/Boe) Profit/boe Balances Growth, Costs, Profit per Barrel

  16. Generic E&P Portfolio

  17. The Role of Portfolio Management in Today’s Business Climate: Some Companies have produced a 10% Increase in Recovery in the last 15 years! 4D 3D 2D

  18. The Role of Portfolio Management in Today’s Business Climate: Improvement has come from the Utilization of a combination of Technologies. What is used Where, When -- The Portfolio! Injected Gas Breakthrough Secondary Gas Cap Hydrocarbon Indicator Bypassed Oil Water “Fingers Bounding Water Water Injection 3DSeismic 4D Seismic Differences New Multilaterals!

  19. How does a Company improve its E&P Manufacturing Process? Immersion in its Global Communications, Enterprise Software, & Portfolio!

  20. Vision of Enterprise-Wide Future

  21. The Role of Portfolio Management in Today’s Business Climate: Business Drivers: • Shortens Cycle Time, • Allows the application of Only those Technologies that Improve the business process, • Allows New Perspectives on Existing Manufacturing Problems, • Truly Integrates Reservoir Management with the Business Case!

  22. The Role of Portfolio Management in Today’s Business Climate: However: • New technologies must be managed in a rigorous Portfolio Sense. • Powerful new Far-Field technologies are being introduced not only to visualize portfolios, but to improve the manufacturing process itself. • Growth and Profitability of Oil Industry is being profoundly changed. • There will be No return to Business-as-Usual, no matter what the price does.

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