2. COURSE
CONTENT
ALL SESSIONS WILL BE
THEORY AND PRACTICAL BASED
Participants should bring their calculators to all 5 days of the course.
It is highly recommended that participants also bring laptops on
Days 2, 3 and 4 for the practical exercises.
DAY1 BUDGETING AND FORECASTING STRATEGIES
IN THE OIL AND GAS INDUSTRY
Session One: DAY2
Laying the foundation -- Global energy outlook, supply and demand
balance brought about by a rapidly changing world OPTIMIZING BUDGET MODELS
Setting the stage for finance and accounting strategies for oil & gas companies
Global energy outlook AND CAPITAL INVESTMENT
Energy supply and demand issues
Current views on energy price projects
ANALYSIS
Human capital shortages, unproven technology & unknown geology Session One:
Future trends of oil and gas Analysis of international oil companies financial
statements – Part 2
Session Two: Delegates will analyze the financial statements of
How oil and gas companies differ from other industries and key issues in oil leading international oil companies.
and gas accounting and finance - Case studies and Excel applications
To understand the financial prospects of an oil and gas company, one must - Bloomberg applications
understand how they differ from other industries and key issues related to reporting.
Session Two:
Special accounting treatment for Oil and Gas companies Competitive benchmarking
Analyzing the different accounting methods and financial statements This session will cover the critical topic of competitive
Determining the proper classification of oil and gas costs: capitalize, expense, benchmarking. What is this?
exploration costs, development costs, production costs
Revenue recognition: when is it revenue and when it is not? Competitive benchmarking – an understanding of
Fair value accounting issues how well a company is doing relative to other
Industry accounting issues companies. These are performed to identify
individual investment, institutional investment,
Session Three: employment, benchmarking, and Merger and
Acquisition potential.
Observing the role of International Accounting Standards (IAS) and future
issues as they apply to Oil and Gas companies When companies compare themselves to their peers,
Overview of critical issues related to international petroleum accounting they usually have a number of significant advantages
Observing the role of International Accounting Standards (IAS) in the future of over outsiders.
financial statements for oil and gas companies
- Where they came from Session Three:
- What does it mean to companies now and in the future Capital budgeting and risk analysis in the Oil and
Value chain and significant IAS accounting issues Gas industry
Upstream Oil and Gas specific differences between IAS and U.S. GAAP Valuation of Oil and Gas assets is a critical and
challenging process. The uncertainty of production,
Session Four: prices, capital costs and construction delays, among
Analysis of international oil companies financial statements – Part 1 other factors, makes it difficult to value projects. In
this session, leading analytical skills and techniques
This two-part session will continue with topics covered in the prior session on
used in Excel will be discussed and illustrated using
IAS by applying them to financial statement analysis. real case studies on financial forecasting and analysis.
Delegates will learn 10 important factors in reading and analyzing the financial Recap of traditional capital budgeting methods
statements of international oil companies. The main focus will be on learning - Net present value (NPV), internal rate of return (IRR),
how to analyze the company’s success in exploring and producing oil and gas modified IRR, payback period and discounted
reserves and understanding the concept of competitive benchmarking of the payback period
company against other energy companies.
Advanced analytical skills, techniques, and challenges
This session is helpful in gaining knowledge as a business professional working in oil and gas capital budgeting including:
in the energy industry, a potential investor or lender in the oil and gas industry - Oil and gas production, oil and gas prices, cost of
and an individual seeking employment in this industry. Delegates will analyze capital, construction costs, and startup delay
the financial statements of a leading international oil company.
Session Four:
Case study applications and open discussion of
Topics covered include: crucial issues
Energy ratios specific to oil and gas companies Participants will analyze case studies of actual
Reading oil and gas reserve disclosures international firms operating in the oil and gas
Analyzing production replacement and reserve replacement industry to further explore issues covered in the
Analyzing finding costs and reserve replacement costs sessions covered today. Attendees will also have the
Reserve life index opportunity to discuss crucial issues facing them with
Key profitability indicators delegates in attendance. Open discussion will follow
with suggestions and recommendations. This is an
excellent opportunity to interact in a stimulating
“Very beneficial course.” group setting with other participants.
- PTT Exploration & Production, Bangkok, Thailand
2
3. COURSE
CONTENT
ALL SESSIONS WILL BE
THEORY AND PRACTICAL BASED
DAY3 ADVANCED CAPITAL BUDGETING AND RISK
ANALYSIS IN THE OIL & GAS INDUSTRY
Session One:
Advanced capital budgeting and risk analysis in the Oil and Gas industry
Would you like to master financial forecasting and analysis? If so, this session is
a “must” in gaining the cutting-edge skills necessary for sophisticated financial
analysis and modeling of oil and gas projects. In this session, Monte Carlo DAY4
simulation will be used to model uncertainty for key value drivers of large oil
and gas projects. Monte Carlo simulation is a powerful tool that can help
evaluate what can happen to an investment’s future cash flows and summarize
ADVANCED TOPICS IN
the possibilities in a probability distribution. This is particularly helpful in oil VALUATION OF OIL AND GAS
and gas project analysis since the outcomes from large investment projects are
often the result of the interaction of a number of interrelated factors (or value
COMPANIES
drivers) that are highly uncertain. Session One:
Risk analysis of oil and gas projects using Excel Valuation of Oil and Gas companies using relative
- Sensitivity analysis, sensitivity charts, and scenario analysis valuation using market comparables – Part 1
Introduction to relative valuation for oil and gas
Advanced risk analysis using Monte Carlo simulation companies
- Distribution fitting and correlation assumptions Valuation of oil and gas companies using the Method
- 5 basic rules of thumb in choosing probability distributions of Comparables
- Three popular probability distributions for use in simulation models Valuing an IPO
- Displaying and understanding output -- Tornado Charts, etc Most commonly used valuation ratios (multiples) and
DCF valuation techniques for oil and gas companies
Modeling energy prices in capital budgeting risk analysis Enterprise valuation using EBITDA and EBITDX
- Techniques and challenges in modeling energy prices multiples
- Modeling energy prices using mean reverting processes incorporating Poisson EBITDA and firm free cash flow
jumps Why use EBITDA/EBITDX multiples rather than cash
flow multiples?
Case studies and Excel applications
Session Two:
Session Two: Valuation of Oil and Gas companies using relative
Case study applications and open discussion of crucial issues related to valuation using market comparables – Part 2
advanced capital budgeting and risk analysis Valuing a privately held firm
Delegates will analyze case studies of actual international and Middle Eastern firms The effect of risk and growth potential on valuation
operating in the oil and gas industry to further explore issues covered in the sessions multiples
covered today. Attendees will also have the opportunity to discuss crucial issues Adjusting the multiple valuation metric for the
facing them with delegates in attendance. Open discussion will follow with private oil and gas firm discount
suggestions and recommendations. This is an excellent opportunity to interact in a Equity valuation of an oil and gas firm using the
stimulating group setting with other participants. price-earnings (PE) multiple
Valuing a division using the PE method – example for
Session Three: Exxon Mobil’s Chemical Division
Current issues about derivatives and risk management in the Oil and Gas Case study applications
industry
Oil and gas companies are facing many financial risks currently and risk Session Three:
management is a critical issue for these firms. Risk management encompasses Case Study: Valuation of ExxonMobil’s Acquisition
the identification and assessment of the risks that materially affect company of XTO Energy using Relative Valuation
value and enterprise risk management addresses the implementation of a
company-wide strategy to manage those risks. Session Four:
Open discussion of crucial issues from Days 1
In this session, participants will learn about the following topics: through 4
- What do we mean by risk management and why do firms manage risks? In this final session of day 4, delegates will have the
- How hedging can increase firm value opportunity to further explore issues covered in the
- Introduction to terminology and instruments used in the energy derivatives course. Attendees can choose cases to analyze that
markets most closely match their areas of interest and will
- Energy price volatility, types of derivative markets have the opportunity to work in a stimulating group
- Lessons from hedging mistakes: Recent hedging disasters setting with other participants. Delegates can share
experiences, make suggestions, and query the group
for their insights on topics of high concern in the oil
Session Four: and gas industry. This is an excellent opportunity to
Advanced topics in hedging and risk management interact with other delegates in a stimulating group
Do you need more knowledge or want to learn more about derivatives and setting with other participants.
hedging in this complex industry? If the answer is yes, this session is a must for
you.
Topics covered include:
- Hedging, basis risk, and factors affecting basis
- Petroleum and natural gas price risks and risk management strategies “… her discussion, in-depth knowledge, and
- Options (calls, puts, collars, floors, caps) cases used were very effective. Great
- Energy swaps course!”
- Value-at-Risk (VAR) and Cashflow-at-Risk (CAR)
- The Greeks (delta, vega, theta, rho, and gamma) and what they mean - Reliance Industries Limited (Oil & Gas, India)
- Energy trading
3
4. COURSE
CONTENT
DAY5 ADVANCED TOPICS IN INTERNATIONAL
ACCOUNTING STANDARDS AND US GAAP
FOR OIL AND GAS COMPANIES
Session One: Accounting for Hedging Under IFRS – IAS 39 and US GAAP
Financial Accounting Standards (FAS) 133
What are the current accounting standards as they relate to risk management? WHY THIS EVENT
In this session, we will discuss these very issues as they relate to US GAAP and This workshop gives delegates crucial insights on
IAS. the oil & gas industry’s current and future
Topics included cover: prospects.
- How should a company account to its shareholders for the derivatives it Participants will develop key analytical skills &
holds? techniques in oil & gas capital budgeting, project
- Example of a speculating position and hedging position evaluation, risk analysis & strategic planning.
- FAS 133 and IAS 39 (fair value hedge, cash flow hedge, speculative This course will also review the critical issues
transaction) including definition of hedges, accounting of hedges, and related to IFRS and IAS and its application to the
criteria for hedging oil & gas industry. Vital knowledge of derivatives
- Measuring hedge effectiveness under FAS 133 and IAS 39. and hedging will also assist in risk management
- How should a company account to its shareholders for the derivatives it & mitigation.
holds?
The trainer, through years of experience in
Case study illustrations on risk management applications and mistakes in finance and the oil & gas industry, will conduct a
the Oil and Gas industry dynamic and resourceful training that you won’t
want to miss!
Session Two: Case study applications in hedging and risk management
for oil and gas and accounting applications The combination of interactive presentations,
hands-on exercises and open discussion groups
Session Three: Accounting for production costs and company evaluation along with real case studies, ensures you will
Production costs refer to the costs incurred in the production phase. Typically obtain maximum value from attending.
these costs include the cost of producing or lifting the oil and gas to the
surface, field treatment, field transportation, gathering, and storage. In this
session, accounting for production costs will be covered.
Topics covered include:
- Typical production costs
- Allocation of production costs
- Crude oil production
- Gas production
- Performance measurement and evaluation
- Revenue determination in joint operations
Case examples
Session Four: Accounting for future decommissioning and
environmental costs
Future decommissioning and environment costs refer to the future costs
associated with the dismantlement and abandonment of oil and gas wells and
other production facilities. Future decommissioning and environmental costs
also include the future costs of restoring and returning the environment to its
preexisting condition. In this session, the major issues relating to future
decommissioning and environmental costs will be discussed along with the
requirements of accounting standards. WHO SHOULD ATTEND
Finance Managers and Directors
Session Five: Course wrap-up Finance Controllers
In this final session, delegates will have the opportunity to further explore Accounting Managers
issues covered in the course. Public Accountants & Auditors
Financial & Business Analysts
Staff Accountants in a Leadership Role
Key personnel in the oil & gas industry
“That is what learning is. You suddenly understand
something you've understood all your life, but in a new way.” COURSE SCHEDULE
8.00 Registration & Coffee/Tea
- Doris Lessing 8.30 Workshop commences
10.30 - 11.00 Morning coffee/tea
12.30 - 13.30 Lunch
15.00 - 15.30 Afternoon coffee/tea
16.30 End of day
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