Benchmarking and Beyond: Making Meaningful Comparisons in Oil and Gas

Authors:

James Veron, Executive Director, Business Strategy, S&P Global Commodity Insights

Ian Longley, Director, GIS-pax

Even with the most robust dataset, comparing one oil and gas prospect to another can feel like comparing apples to oranges. Each E&P evaluates opportunities in a slightly different way, often at different levels of technical resolution. These differences have a material impact, and the issue gets worse in areas with low data, as there are more degrees of freedom. In these situations, comparing prospects can feel like comparing apples to pumpkins.

Proprietary data, public data and licensed or purchased data are all used in every E&P company's prospect maturation workflow. Integrating this data with other economic and commercial datasets becomes even more complex with annual price deck changes and continuous changes to local/country fiscal regimes.

Without a standardized dataset, meaningful comparisons, price assessments and risk management are nearly impossible. Collecting, standardizing and compiling a global dataset at scale is thus prohibitively time-consuming and often impossible for most operators.

S&P Global Commodity Insights and GIS PAX have done the hard work by compiling data from 30,000 prospects and leads in Portfolio Opportunity Ranker. In addition, the tool is using machine learning driven by exploration history and complexity class to predict the missing prospects. The methodology is unique amongst YTF methods in that it predicts a specific number and the individual sizes of missing/future fields in a predicted future discovery population. No other method is so specific.

This standardized, spatial dataset of the value, volume, risk and rank of the entire world's oil and gas prospects unlocks new potential for oil and gas portfolio optimization.

Compare prospects, peers, operators and countries to transform the unknown to known.

Benchmarking and beyond

Standardized comparisons provide valuable insight into every factor that impacts portfolio value:

● Geological, commercial and economic hydrocarbon volumes
● Play and prospect values at every oil price between US $20-$200
● Risk estimates of known prospects
● Methodology to estimate the yet to be discovered prospects
● Ownership and partnership details at the block level

Peer-to-peer

With Portfolio Opportunity Ranker, companies can calculate the true value of their portfolio based on volume, risk and commodity prices. Benchmarking against peers provides additional insight into a portfolio's value.

If a company's peers are out-performing them, is it because of geology, economics or both? While an asset's geology can't be changed, each company's tolerance for risk can impact the asset's value. A company with a high risk tolerance may have greater value in lower-quality acreage.

Economic factors, like proximity to infrastructure and country-specific operating costs, also have a significant impact on portfolio value. Operators in frontier plays like Mozambique or Guyana have very different risks and economics compared to operators in well-established plays like the North Sea.

A better understanding of how a company's portfolio ranks compared to peers can influence investment strategy. Companies can decide to invest, divest or maintain their strategy to follow the path of the strongest companies in their peer group.

Operator-to-operator

POR's benchmarking tools can help inform M&A decisions. Companies who are considering an acquisition can view and analyze their target's entire oil and gas portfolio: ownership positions, partnerships, values and volumes. Ranking an M&A target's performance and value against their peers will show if they are a good buy or should be avoided.

Benchmarking tools also provide valuable insight into how a potential acquisition's portfolio might fit into a company's strategy in terms of risk and asset location. Companies with similar risk tolerances and basin experience will likely make a smooth transition. Conversely, underperforming, risky or low value assets should be avoided.

Country-to-country

Location matters when it comes to the cost of doing business. Operating costs, infrastructure availability, pipeline access and regulations vary by country. In an emerging region like offshore West Africa, oil and gas prospects span several borders.

With POR's benchmarking tools, companies can evaluate the commercial YTF in each country in the area.

Government and regulatory bodies can also use this information to evaluate their own policies. They can see how their fiscal and legal requirements impact YTF commercial volumes compared to neighboring countries and the rest of the world. If their country's policies are outdated or too restrictive, adopting new policies could attract valuable new foreign investment.

Compare with confidence

Make meaningful comparisons between operators, countries and oil and gas prospects with a standardized global dataset. Consistent methodologies eliminate the data biases and discrepancies that could lead to incorrect conclusions.

With the benchmarking tools in Portfolio Opportunity Ranker, it is easier than ever for operators to make informed decisions about their exploration assets.

New from S&P Global Commodity Insights and GIS PAX: Portfolio Opportunity Ranker

Portfolio Opportunity Ranker uses the world's best E&P data, spatial analytics and machine learning to predict and rank the remaining conventional exploration potential of the entire planet (outside of onshore north America). It risks, values and ranks 30,000 oil and gas prospects, and integrates this with an estimate of missing prospects. These estimates are commercially based and thus provide a meaningful basis on which to plan M&A acquisition and divestment decisions.

The tool is fully customizable, allowing users to incorporate their own data and local expertise. All calculations are editable and auditable.

Key features include:

● Polygons at the country, basin and block levels in a spatial platform
● YTF volumes values and rankings of the exploration potential in every proven charge area
● Risk, volume and value estimates of the world's known prospects
● Spatial predictions of volumes and values for global unidentified prospects
● Estimates of commercial yet to find volumes and values for all proven charge areas

Book your free demo today

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.