Equity Research

Asset Research

The nub of our research is a full analysis of the likely production profile from a potential oil or gas accumulation. We believe minor changes to initial well rates and declines curves has a more fundamental effect on potential valuation more than any other factor such as costs and fiscal regime. In a typical analysis we will – IN PLAIN ENGLISH:

  • Summarise the geological environment and consider this against proposed productivity/reserves proposals.
  • Derive initial production rates on a well by well basis from technical information.
  • Match well rates to reserves by studying reservoir parameters such as drainage radius of wells.
  • Test company/third party predictions of oil and gas in place (STOIIP/GIIP) by comparison to other sources.
  • Also check and test proposed recovery factors that derive reserves.
  • Finally construct likely production profiles (low/med/high) for reserve cases. With our production profiles in place we can construct a relevant fiscal regime and project operating and capital costs to round of our cash flows for each asset. We run sensitivities for our clients on discount rates and commodity prices applied to the final cash flows from each project.

Corporate Research

Our asset evaluation provides the building blocks for corporate research that then looks a the cororate stategy that bind the asset together. We would typically analyse -

  • How does the portfolio look in regard to production versus exploration?
  • Does management have an established track record in running such assets?
  • Does management have the breadth and depth of expertise to make the strategy work?
  • Is the programme sufficiently funded.
  • How do the typical cost and revenue metrics compare to other peer group companies


The goal of the entire analysis is to derive a reasonable valuation for the company. We primarily focus on discounted cash flows and may ‘flex’ the valuation by using monte carlo techniques to vary the main input parameters. The cash flows also provide the basis for a set of projected accounts (profit and loss, balance sheet and cash flow) that we can assemble if required. Our final valuation, usually in $ or £, can be converted to share price values using diluted and undiluted share numbers as the sum of asset values and corporate effects (net debt, warrants and options and other material liabilities).

We also employ a number of specialized techniques for the valuation of exploration potential including EMV and farm-in analysis (our preferred method).

We test and compare our values to market M&A values, usually derived from proprietary sources such as IHS and the Petroleum Economist. We also utilize market multiples such as EV/EBITDA, EV/Reserves or any other benchmark required by our clients.

In our final presentation we believe in the use of diagrams and pictures to illustrate our analysis and find this of great benefit to our clients in truly understanding the value in a company in our final face to face presentations. (case study)

Case Studies