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The AAPG/Datapages Combined Publications Database

GCAGS Transactions


Gulf Coast Association of Geological Societies Transactions Vol. 58 (2008), Pages 373-378

EXTENDED ABSTRACT: Of P99's and Other Risk Management Urban Legends

Dean R. Hennings, Thomas W. Griffith, and Kevin W. Martindale

Anadarko Petroleum Corporation, 1201 Lake Robbins Dr., The Woodlands, Texas 77380


Risk Management Overview at Anadarko

The management team at Anadarko Petroleum Corporation recognizes the critical need for a consistent, reliable, and predictive global exploration portfolio. They have provided clear direction to achieve this goal by calling for the establishment of the Risk Consistency Team (RCT) in 2004 whose mission is to ensure that the risks and resources of all significant prospects and plays are assessed probabilistically in an objective and unbiased manner. This approach has benefited Anadarko by improving our accuracy in predicting geological success and the range of hydrocarbon resources we are likely to find, given success. The team is made up of senior geoscience and engineering professionals. We, the authors, joined the RCT in 2006 and 2007.

In this presentation, we offer some practical insights from the vantage point of active practitioners of probabilistic estimating methodologies. We use a legacy dataset from one of our predecessor companies that employed a similar probabilistic approach in addition to recent Anadarko data.

Risk Management Urban Legends

One of the advantages of having a dedicated team such as ours is that we get to see a large number of exploration projects at all stages of maturity and have the opportunity to interact with virtually all of our geoscientists. From this vantage point, we can detect trends and themes in how our prospectors ply their trade. We put together an internal talk with the same title as this presentation as a means of provoking conversations around some important issues.

Merriam-Webster Dictionary Online (2008) defines an urban legend as β€œan often lurid story or anecdote that is based on hearsay and widely circulated as true.” We identified these urban legends in the course of our peer assists, prospect reviews, and informal discussions:

(1) Our adherence to the probabilistic methodology makes it difficult for our company to capture acreage in competitive situations. (2) We usually estimate a smaller mean resource than other companies. (3) Everything is log-normally distributed. (4) We have to share our internal estimates with partners. (5) For exploration prospects, P99’s must not be larger than 1 million barrels. (6) It would be helpful if we would establish a maximum P99.

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