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:
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 -
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)