About This Item
Share This Item
How to Evaluate Exploration Prospects: Abstract
Analytical evaluations raise petroleum exploration from the realm of educated guessing to a quantitative decision level that is compatible with modern business techniques. Management and explorationists can thus appraise the merits of an area and/or exploration program and expect to derive optimum results with minimum risk.
All petroleum exploration programs have one common goal: To find and exploit reserves of oil and gas at a profit. Today the economic factors are playing a dominant role in the highly competitive world petroleum situation. In order to justify his existence in the forecast 70-billion-dollar exploration effort set during the next ten years, the scientist must translate his thoughts into terms the nontechnical business man or executive can readily grasp. The obvious common language is dollars and cents in terms of anticipated profits. These economic terms transcend the semantics barrier that normally exists between the executive and the oil finder.
Various methods are discussed to show how geophysicists and geologists can convert exploration factors into anticipated profit-to-risk ratios. The authors include examples.
Significant factors contributing to a successful exploration program are: (1) The exploration and economic analysis must be compatible with, and integrated into, modern business techniques. That is, the analysis must enhance the executive's ability to make decisions. (2) The explorationist must recognize and avoid "marginal ventures," because 60 per cent of the wells completed in the United States are submarginal economically. (3) The laws of probability must be taken into consideration when establishing an exploration program. (4) To insure success, a company must hold risks to a minimum. This can be accomplished, in part, by participating in a large number of potentially profitable ventures, and/or by taking only a part of each drilling venture rather than the entire deal. (5) Anticipated profit-to-cost ratios can be estimated for many areas. Oil companies can use this information in evaluating and accepting wildcat prospects that have at least double the normal odds of developing into a profitable oil field.
The scientist who applies quantitative analyses skillfully will quickly achieve both recognition within his company and the status of a key decision-maker in his company's exploration program.
Acknowledgments and Associated Footnotes
1 Geodata Corp., Tulsa
2 Geodata Corp., Tulsa
Copyright © 2006 by the Tulsa Geological Society