|Oil and gas production companies make money based on
on their skills in identifying a portfolio of properties and utilizing
technologies to discover, produce, and sell oil and gas produced from those
properties in an optimal manner. Portfolio management allows
a company to present the performance of all its producing properties and
exploration targets in a standardized way. Business metrics
such as earnings, production volumes, net cash flow, and reserves additions
can be balanced to obtain a maximum likelihood of successful execution
of the overall business plan of the company. Fluctuations in
the in the market can be evaluated statistically so that hedges, trades
and options can be evaluated in a quantitative sense. Cash flow can
be understood so that the true value of each property can be determined
from its INTERACTION with all other properties in the portfolio.
The efficient frontier (optimal risk/reward position for the business plan)
of the portfolio can then be determined and business strategies determined.
A property producing critical cash for exploration plays may be valued
considerably higher than the "book value" determined by an audit of its
remaining proven and probable reserves. Correspondingly, a property of
high audited value may be a tremendous burden to the overall portfolio,
and consequently may carry a substantially lower valuation.
Portfolio Management Software and Vizualization System:
CES has significant industry experience with the combination of portfolio
management and enhancements to production capabilities for the largest
international oil companies in the world. We founded and operate
the industry-leading, Lamont Portfolio Management consortium at Columbia
University. The consortium is led by the top-ranked portfolio planner
in the industry. The consortium team developed the Portfolio
Management Software and Visualization System. The Lamont/Howell
software evaluates the interdependence of all the company's production
properties, exploration opportunities, and merger/acquisition targets simultaneously
and provides a mechanism for evaluating possible performance outcomes 10
years into the future.