Evaluation Of An Oil Property In Egypt

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Evaluation Of An Oil Property In Egypt

  1. 1. Oil Property Evaluation (Egypt) Cyril Iyasele Natural Gas Engineering May 06, 2010
  2. 2. Outline Introduction Egypt, Upstream E&P Fiscal Regime Egypt, License Terms Egypt, Key Fiscal Terms Egypt, Fiscal Regime Economic Modeling Egypt, Fiscal Regime - Sample Economics Egypt, Fiscal Regime - Sample Asset Valuation Summary
  3. 3. Egypt, Introduction A middle eastern country in northeast Africa The Arab Republic of Egypt is at the center of the Arab world The petroleum industry plays a key role in the Egyptian economy Egyptian oil production comes from four main areas: - Gulf of Suez - Western Desert - Eastern Desert - Sinai Peninsula
  4. 4. Egypt, Upstream E&P Fiscal RegimeEgypt, Petroleum Fiscal Environment Governing law - The provisions of Law No. 86 of 1956 concerning mines and quarries Licensing authority - Arab Republic of Egypt National Oil Company - EGPC (Egyptian General Petroleum Corporation)
  5. 5. Egypt, License TermsConcession agreement for petroleum exploration and exploitation Exploration - Initial exploration period of 3 years - One extension to the exploration period, of 3 years - Termination of agreement if no discovery after 6th year Production - Commercial oil discovery - Area capable of production to be converted to a ‘development lease’
  6. 6. Egypt, Key Fiscal Terms Type of contract - PSA (Production Sharing Agreement) Bonuses - Signature bonus - Bonus per development block - Production bonus Royalty - EGPC shall bear the entitled royalty Income Tax - EGPC shall bear the entitled income tax Deduction and depreciation - Cost recovery
  7. 7. Egypt, Key Fiscal Terms
  8. 8. Egypt, Key Fiscal TermsProduction Sharing (Crude Oil) EGPCs Share (%) Brent Price less Brent Price more Crude Oil produced (BOPD) than US$60 - US$80 US$80 – US$100 than (quarterly average) US$60/barrel /barrel /barrel US$100/barrel < 10,000 77 78 79 81 10,000 - 25,000 78 79 80 82 > 25,000 79 80 81 83 CONTRACTORs Share (%) Brent Price less Brent Price more Crude Oil produced (BOPD) than US$60 - US$80 US$80 - US$100 than (quarterly average) US$60/barrel /barrel /barrel US$100/barrel < 10,000 23 22 21 19 10,000 - 25,000 22 21 20 18 > 25,000 21 20 19 17
  9. 9. Egypt, Key Fiscal Terms Production Sharing (Gas and LPG) Gas and LPG produced (SCFD) EGPC’s CONTRACTOR’s (quarterly average) SHARE SHARE < 50,000,000 SCFD 80% 20% 50,000,000 - 100,000,000 SCFD 82% 18% > 100,000,000 SCFD 85% 15%
  10. 10. Egypt, Fiscal Regime Economic ModelingAssumptions: Production rate, qi = 2,500 BOPD @ June 1, 2010 Well follows an exponential decline (a = 0.10/year) Oil price = $80 / Bbl Working interest = 100% Economic limit production rate, calculated = 78.32 BOPD Time to reach economic limit, calculated = 34.63 years Estimated reserves = 8,883,132 Bbl
  11. 11. Egypt, Fiscal Regime Economic ModelingAsset Cash Flow Cum Production Production Gross Revenue Year q (BOPD) (Bbl) (Bbl) ($) 0 2,500 - - - 1 2,262 868,359 868,359 69,468,684.83 2 2,047 785,723 1,654,082 62,857,865.42 3 1,852 710,952 2,365,034 56,876,148.65 4 1,676 643,296 3,008,330 51,463,667.49 --- --- --- --- --- 31 113 43,233 8,713,926 3,458,642.16 32 102 39,119 8,753,045 3,129,508.84 33 92 35,396 8,788,441 2,831.696.70 34 83 32,028 8,820,469 2,562,225.13 34.63 78.32 18,663 8,839,132 1,493,04707
  12. 12. Egypt, Fiscal Regime - Sample EconomicsAsset Valuation with Government / Contractor Take Gross Revenue Production Gross Revenue Gross Revenue ($) ($) Year (Bbl) ($) (Government) (Contractor) 0 - - - - 1 868,359 69,468,684.83 54,880,261.02 14,588,423.82 2 785,723 62,857,865.42 49,657,713.68 13,200,151.74 3 710,952 56,876,148.65 44,932,157.43 11,943,991.22 4 643,296 51,463,667.49 40,656,297.32 10,807,370.17 --- --- --- --- --- 31 43,233 3,458,642.16 2,732,327.31 726,314.85 32 39,119 3,129,508.84 2,472,311.99 657,196.86 33 35,396 2,831.696.70 2,237,040.39 594,656.31 34 32,028 2,562,225.13 2,024,157.85 538,067.28 34.63 18,663 1,493,04707 1,179,507.19 313,539.88
  13. 13. Egypt, Fiscal Regime - Sample Asset ValuationAsset Net Present Value Gross Revenue New DNCF Year n ($) OPEX ($) NCF ($) DNCF @15% ($) New NCF ($) @15% ($) 0 0 - - - - (42,273,182.94) (42,273,182.94 1 0.5 14,588,423.82 480,000.00 14,108,423.82 13,156,173.04 14,108,423.82 13,156,173.04 2 1.5 13,200,151.74 480,000.00 12,720,151.74 10,314,437.09 12,720,151.74 10,314,437.09 3 2.5 11,943,991.22 480,000.00 11,463,991.22 8,083,347.40 11,463,991.22 8,083,347.40 4 3.5 10,807,370.17 480,000.00 10,327,370.17 6,332,093.26 10,327,370.17 6,332,093.26 --- --- --- --- --- --- --- --- 33 32.5 594,656.31 480,000.00 114,656.31 1,221.01 114,656.31 1,221.01 34 33.5 538,067.28 480,000.00 58,067.28 537.72 58,067.28 537.72 34.63 33.8 313,539.88 480,000.00 (166,460.12) (1,474,.04) (166,460.12) (1,474,.04) 60,390,261.34 18,117,078.40
  14. 14. Egypt, Fiscal Regime - Sample Asset Valuation Measures of Profitability FNR $60,390,261.34 FMV $42,273,182.94 Net Present Value Undiscounted $89,424,234.66 Discounted @15% $18,117,078.40 Pay Out Time Undiscounted 3.39 years Discounted @15% 4.88 years Profit to Investment Ratio Undiscounted 2.12 Discounted @15% 0.43 DCFROR 23%
  15. 15. Egypt, Fiscal Regime - Sample Asset Valuation
  16. 16. Egypt, Fiscal Regime - Sample Asset Valuation
  17. 17. Summary Upstream E&P Fiscal Regime License Terms Key Fiscal Terms Sample Economics Sample Asset Valuation

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