All Posts by Danie Prinsloo:

An introduction to checklists in modelling

Posted by Danie Prinsloo

iStock_000027768297Small

I have been reading Atul Gawande’s The Checklist Manifesto.

It is an entertaining and thought-provoking book. It really made me think about how better checklists in F1F9 can help us create better models and deliver an improved process for our clients.

Gawande highlights the similarities between the surgical profession and two other complex, high-skill undertakings: the construction of large buildings and flying airplanes.

While people working in construction and aviation depend on adherence to checklists to get things right, many doctors and nurses have not yet embraced this practice.

Gawande makes a compelling case for the use of checklists in other professional fields, including business, investment decisions and the law.

In the oil and gas industry, management rely on economic and financial analysis to make multibillion dollar investment decisions. Producing this analysis is not a trivial task. Analysts must consolidate and incorporate months or years of work by cross-functional teams.

There are more factors involved than any one person can keep in their head. The analysis has to take account of issues such as:

  • Business Structure (Shareholding, type of venture - SPV)
  • Development and Operating Timeline
  • Capital Cost (Exploration, Facility Design, Expenditure Profiles, Renewal)
  • Production and Sales Volumes (Reserves, Material and Energy Balance, Plant Availability)
  • Revenue (Prices Feedstock and Sales)
  • Operating and Maintenance Cost (fixed vs. variable, cyclic, incremental, once off)
  • Working Capital
  • Fiscal (Tax and Tax Allowances)

Years of knowledge, experience and organisational memory may be captured by a good checklist.

All too often, our checklist of attributes is a model from a colleague that has just been floating around in the office.

More and more companies are recognising the risks associated with modelling, and are realising that the cost of an inefficient, ad hoc approach is too great to bear.

Our latest ebook "The oil & gas modelling checklist" delivers a comprehensive checklist and supporting ebook which takes you through some of these risks.

   OIL & GAS CHECKLIST  
Comment on this post...

New ebook: S-curve modelling in oil and gas

Posted by Danie Prinsloo

oilgas

Oil and gas projects can require investment of many billions of dollars, and can have development times of a decade or more.

The amount and timing of the capex spend are critical model inputs and are therefore crucial to the decision making process. Capex modelling has a huge impact on value creation and the future profitability of the project.

As a project is developed and engineered, the accuracy and level of detail of the capex estimates and the schedule of spend evolve. S-curves are widely used for modelling project capex profiles.

In our latest ebook we explain the origin and application of the s-curve, and provide you with flexible worked example modules in excel, built to the FAST standard, that you can immediately apply in your own modelling.

Download the S-curve modelling in Oil & Gas ebook to find out more.Investment decision making in the Oil and Gas industry normally follows a defined process:

decision

The financial model evolves throughout each stage and modellers will find themselves having to update the capex estimates and profile throughout the process.

The excel files provided with the ebook demonstrate a flexible worked example S-curve calculation that allows for efficient updating of capex profiles.

Observation and experience gained since the inception of the O&G industry has established the relationship between capex and the S-curve. S-curves are widely used for planning, forecasting and control of cost, time and resources of a project.

s-curve_graph

Diagram above: S-curve (asymmetric)

The worked example excel files are based on the S-curve equation set out in the ebook. This is a powerful tool that modellers can use to manipulate the time variation of capex, prior to a full capex schedule being available.

As your project develops, the amount and schedule of the capex will change, and the Financial Modeller will be faced with numerous “what-if” questions.

These questions will come from decision makers and stakeholders such as management, the Executive Committee and the Board.

For those scenarios where the schedule estimate is altered, an existing S-curve, expressed in the format of percentage capex versus percentage of time, can be used as the basis to produce a revised capex profile for the new schedule.

S-Curve Modelling eBook
Comment on this post...
31-Days_Blue-1

Start your free course now

In around 10 minutes per day for 1 month, this FREE online financial modelling course will teach you the basics of the FAST modelling standard, and some practical and highly effective modelling skills.

Subscribe to the F1F9 Blog

Recent Posts