Lecture 16 - Prospects

Courtesy of ExxonMobil FWS 07 L 16 - Prospects

A Prospect
• A prospect is a location and depth that has been
identified as a good place to drill for oil and/or gas

• For us to find oil or gas, certain conditions must be meet

– There needs to be a source for the oil or gas
– The source rocks need to be ‘cooked’ to the right degree
– There needs to be a porous rock to hold the oil or gas
– There needs to be a subsurface trapping geometry
– There need to be a seal
– There needs to be ‘plumbing’ connecting source and reservoir

Courtesy of ExxonMobil FWS 07 L 16 - Prospects

Prospect Analysis

• Our geological and geophysical analysis helps us identify

and characterize prospects in terms of these critical
elements

• Geoscientists will work a prospect such that:

– The volume of oil or gas that is most likely to be
present and recovered is determined,
– The range of possible volumes is estimated (maximum
and minimum cases), and
– The chance of success is estimated

All this information is presented to management

Courtesy of ExxonMobil FWS 07 L 16 - Prospects

Now for Some Fun – The Prospect Game

INTRODUCTION
You are part of an exploration management team with 20
prospects that your staff has worked up for your
approval to drill. Your prospect portfolio is rather
diverse ranging from low risk, low reward prospects to
high risk, high reward opportunities. All 20 prospects
are possible oil fields.

YOUR CHALLENGE
• You have a drilling budget of $400 million.
• Headquarters has set a goal for you to discover 500
million barrels of oil.
• You want to keep the cost per barrel as low as possible
(< $1.00/barrel).
Courtesy of ExxonMobil FWS 07 L 16 - Prospects
The Prospect Game
Starting Point
Your staff has been hard at work 'maturing' each prospect.
Their work for each prospect is summarized by:
• An estimated drilling cost
• A prediction of the most-likely amount of oil (in millions
of barrels, MBO)
• The likely range of possible oil volumes (high-side and
low-side cases)
• An estimate of the chance of success for the
prospect.
These data are provided on tables. If you only drill the low
risk prospects, the probability of your reaching your goal
is extremely low - but not zero.
Courtesy of ExxonMobil FWS 07 L 16 - Prospects
The Prospect Game

USING YOUR BUDGET

Your team can spend some of your budget on improving
the seismic data to get better predictions of the amount
of oil and its range of values, and the chance of success.

 You can reprocess the existing seismic data over a

prospect at a cost of 10% of the well cost.
 Alternatively, you can acquire better seismic data at a
cost for acquisition and processing of 25% of the well
cost.
 OR you can spend all your money on drilling wells.

Courtesy of ExxonMobil FWS 07 L 16 - Prospects

The Prospect Game

GAME PLAN
1. We will divide you up into 3 or 4 teams
2. We will go over the instructions
3. Your team will have 5 minutes to develop a strategy.
4. We will rotate through each team allowing them to:
• Drill one prospect without additional data, OR
• Ask for reprocessing on a prospect, see the new estimates, and
then either drill the same prospect or pass, OR
• Ask for a new survey, see the new estimates, and then either
drill the same prospect or pass

NOTE: No clear decision after 30 seconds is an automatic pass.

The first team to discover 500 million barrels of oil WINS

Courtesy of ExxonMobil FWS 07 L 16 - Prospects

Drilling a Well
Drilling a well is a three-step process:

1. Drill based on the data at hand or spend some money to

either re-process or re-acquire & re-process the seismic
2. Roll 2 dice to determine the success of the well (function
of the well’s risk and the total on the dice)
3. If the well is an oil discovery, roll 2 dice a second time to
determine the volume of oil discovered.

Courtesy of ExxonMobil FWS 07 L 16 - Prospects

 TABLE 1: Prospects with key assessment parameters

Drilling with the Data on Hand

Most-Likely
Volume Discovery if
Prospect Drilling Cost (Unrisked) Low-Side High-Side Chance of Total on 2
Number Prospect Name ($M) (MBO) Case Case Success Dice

1 Mouse 1 0.2 0.1 0.4 97% 3 - 12

2 Canary 2 0.4 0.2 0.8 97% 3 - 12

3 Kitten 4 0.6 0.3 1.2 92% 4 - 12

4 Terrier 6 0.9 0.45 1.8 92% 4 - 12

5 Goat 10 1.8 0.9 3.6 72% 5 - 12

6 Ram 15 2.3 1.15 4.6 72% 5 - 12

7 Kangaroo 18 4.4 2.2 8.8 58% 6 - 12

8 Bull 20 9 4.5 18 58% 6 - 12

9 Stallion 27 17 8.5 34 58% 6 - 12

10 Zebra 32 21 10.5 42 42% 7 - 12

11 Lion 38 50 25 100 42% 7 - 12

12 Bear 42 90 45 180 42% 8 - 12

13 Elk 49 125 62.5 250 28% 8 - 12

14 Moose 55 290 145 580 28% 9 - 12

15 Hippo 80 450 225 900 17% 10 - 12

16 Gorilla 100 600 300 1200 17% 10 - 12

17 Elephant 120 840 420 1680 8% 11 - 12

18 Whale 130 1180 590 2360 8% 11 - 12

19 T-Rex 140 1900 950 3800 3% 12

20 Brontosaurus 160 4500 2250 9000 3% 12

Courtesy of ExxonMobil FWS 07 L 16 - Prospects

Determining the Volume of a Discovery

If the well is a discovery, a team member rolls 2 dice a

second time to see how much oil is present. This chart
indicates a multiplier for the most-likely amount (range
is from 1/2 to double).

e.g., for the Bull prospect (#8), the most-likely volume is 9

MBO and if the second roll has a total of 10, the
volume = 9 * 1.25 = 11.25 MBO

Courtesy of ExxonMobil FWS 07 L 16 - Prospects

Data Re-Acquisition or Re-Processing
If your team decides to re-acquire or re-process the data
for one prospect, what happens?
1. Money will be subtracted from your total
2. You will get a revised set of numbers (privately) for the
prospect
3. Given the updated most-likely volume of oil (could be
higher or lower) and a new chance of success (always
higher), your team can drill the prospect or pass.
4. If you make a discovery, a revised set of multipliers will
be used

Keep the revised numbers confidential; you paid for more

accurate numbers and you do not want another team to
benefit at your expense!
Courtesy of ExxonMobil FWS 07 L 16 - Prospects
End of the Game

We will keep a running total of the money spent and the

volumes of oil discovered for each team. We will
continue drilling if we do not run out of time. If time
runs out, we will use the finding cost (MBO/Dollars
spent) as a measure of success.

HINT
You do not want to spend money on better seismic for the small
prospects where the chance of success is high and the range of
MBO is low, even though the cost is small. It is difficult to decide on
spending money on better seismic data for the large prospects - the
cost is high but it could save you a dry hole.

Courtesy of ExxonMobil FWS 07 L 16 - Prospects