The purpose of this paper is to review the ideas presented at the October 1995 Hedberg Conference concerning decision and risk analysis (DRA) with respect to petroleum exploration in both domestic and international arenas. Many types of analyses were discussed. All methods are applicable in some circumstances, and many are applicable in most circumstances. What was particularly surprising was how frequently most presenters addressed risk management in terms of the same basic elements: the geologic probability of success; the commercial probability of success; the uncertainty of the size of the hydrocarbon resource, if discovered; and the value of the hydrocarbon resource. Most methods seemed to focus on the petroleum system components to define geologic chance, a probabil stic volumetric reserve calculation to define the resource size uncertainty, and expected net present value to define value. New valuation methods included option pricing models applied to petroleum ventures and risk aversion techniques that define the utility function in terms of exponential, hyperbolic, and user-defined curves.

Several presenters defined the risk management process in terms of (1) considering alternative opportunities, (2) predicting variables, (3) evaluating the sensitivities, (4) calculating the value of additional information, (5) deciding on investments relative to other opportunities in the portfolio, and (6) looking back on the results using project reviews and annual performance assessments. Creative presentation techniques were used by different groups to display biases in the actual analyses and overall performance relative to reasonable expectations.

Portfolio management discussions brought out the most diverse approaches to decision and risk analysis. There was also considerable discussion on the topic of risk aversion and its application to estimating value and appropriate working interest in projects. Other topics of interest included "efficient frontier" methods of balancing risk and reward, portfolio optimization, and the appropriate level in the organization to make project selection decisions.

New research directions appear to be focused on improving consistency, assessing less quantifiable risks, option-pricing applications as a substitute for conventional discounted cash flow analysis, balancing multiattribute decisions, portfolio optimization methods, and incorporating corporate risk attitudes in the decision analysis.