The document discusses the evaluation of technology investments beyond traditional metrics like NPV and IRR, emphasizing the importance of intangible benefits and alternative indicators. It introduces various methods for assessing intangibles, such as market capitalization and brand valuation, and proposes a qualitative ranking system for technologies based on their contribution to corporate value. The conclusion highlights the complexity of accurately valuing R&D projects, suggesting a mix of methodologies for a comprehensive assessment.

1. Economic Evaluation of Upstream Technology Beyond NPV & IRR: touching on intangibles Paolo Boi Dean Cecil Bahr Lorenzo Dondi Andrea Mastropietro Edoardo Patriarca Budi Permana Kokok Prihandoko Ramin Soltani Yermek Zhakashev Massimo Antonelli Alberto F. Marsala Nicola De Blasio Giorgio Vicini Vincenzo Di Giulio

2. Beyond NPV & IRR Alternative indicators for tangibles Intangible benefits Conclusions

3. Beyond NPV & IRR Other indicators for tangibles Intangible benefits Conclusions

4. 1. Other indicators for tangibles COST SAVING incremental NPV / R&D costs average incremental NPV per application / average application costs potential cost saving per application / R&D costs potential cost saving per application / application costs PRODUCTION INCREASE value of average incremental production per application / R&D cost value of average incremental production per application / application costs EXPECTED LIFE OF THE TECHNOLOGY R&D costs / expected life of the technology expected life of the technology / years of R&D

5. Other indicators for tangibles

6. Beyond NPV & IRR: intangible assessment Other indicators for tangibles Intangible benefits Conclusions

7. How to Measure Intangibles Market Capitalization Return on Invested Capital Scorecards Direct Measure of Intellectual Capital Brand Valuation

8. How to Evaluate Intangibles Market Capitalization Return on Invested Capital Scorecards Direct Measure of Intellectual Capital Brand Valuation Measure of the difference between a company’s market capitalization and book value at Corporate level

9. How to Evaluate Intangibles Market Capitalization Return on Invested Capital Scorecards Direct Measure of Intellectual Capital Brand Valuation Comparison berween the ROIC of the firm and an industry reference index. The spread gives the value creation capabilities of Intangible assets of the firm at Corporate level

10. How to Evaluate Intangibles Market Capitalization Return on Invested Capital Direct Measure of Intellectual Capital Brand Valuation It allows to define a rating of Intangible assets on the basis of a set of key parameters (indicators) set for a specific asset Specific to S ingle Asset Scorecards

11. How to Evaluate Intangibles Market Capitalization Return on Invested Capital Brand Valuation Scorecards Direct Measure of Intellectual Capital Tries to identify the whole cash flows connected with a specific intangible asset Specific to Single Asset

12. How to Evaluate Intangibles Market Capitalization Return on Invested Capital Scorecards Direct Measure of Intellectual Capital Brand Valuation Focused on a single intangible asset: the Brand (Company image) at Company level

13. Beyond NPV & IRR: intangible assessment Other indicators for tangibles Intangible benefits Conclusions

14. 2. Intangible benefits Rating system for intangible benefits Intangible assessment A qualitative valuation of intangible benefits for different technologies based on an assessment methodology. This methodology allows us to rank technologies based on their relative contribution to total corporate intangible value.

15. Intangible assessment Strategic relevance of the technology (strategy) Visibility, reputation, partnership ( external ) Corporate know-how improvement (internal) Relevance in strategic plan Relevance in current business Relevance on potential business Synergy effects on overall portfolio Partnership Visibility HSE & Social Excellence level Level of technology innovation Information sharing Ownership - IP

16. Intangible assessment WEIGHTS GLOBAL EVALUATION

17. Intangible assessment Strategic relevance Know-how improvement Visibility, reputation, partnership

18. How to quantify intangibles After generating a ranking of the technology, we estimated the contribution of each technology to the total intangible value of the portfolio But… what is the whole intangible value of the technology portfolio? We assumed 3 different values for overall intangibles R&D expenses (100 mln € per year, structure costs included) 3 % of E&P revenues 5 % of E&P revenues

19. How to quantify intangibles By means of the rating obtained under the “Intangible Assessment” procedure, we can try to distribute intangible value of R&D over the three technologies considered Intangible Values (million €)

20. Putting it all together – total value of technology With intangibles IRR 735% NPV 101 mill € Crosswell Seismic - Scenario 1C Tangibles only IRR 460% NPV 58 mill €

21. Beyond NPV & IRR: intangible assessment Other indicators for tangibles Intangible benefits Conclusions

22. 3. Conclusions It is challenging to find a simple method to assess the value of an R&D project taking into account intangible and tangible values It is useful taking into account a combination of different assessment methodologies in order to estimate the overall value of a technology. NPV IRR INDICATORS INTANGIBLE ASSESSMENT

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