Background

In recent years, exploration activity has increased significantly on the Norwegian Continental Shelf (NCS). The number of small E&P companies with exploration focus establishing themselves on the NCS has also increased strongly. Along with the exploration success one has been able to see increasing activity in the transaction market for exploration license interests. Sell side companies are focusing on exploration but not wanting to participate in the development of discoveries. Buy side companies are driven by production, reserve replacement targets, and portfolio balance considerations.

Approach

Rystad Energy assists industrial players in establishing a value for new discoveries – both the bottom-up value and the expected market value. Attaining a value of a discovery is essential for clients to establish their future strategies. Rystad Energy generates production profiles for discoveries using a wide set of analogs. Capital and operating expenditure profiles are estimated thereafter based on characteristics of the field and our database of actual costs in the region. These input data series are subsequently added to our proprietary valuation models. Different scenarios are then evaluated depending on possible appraisal results and additional exploration success in the area. The impact of different oil price scenarios is also included in the analysis.

Result

The bottom-up valuation results provide a starting point for clients to establish a solid basis for their asset management of a discovery – value growth over time, capital requirement profiles, and possible market value if divestment is considered. The derived, implied value is benchmarked against previous transactions on the NCS as well as against transactions of similar fields globally. Such discovery valuations leverage Rystad Energy’s solid field-by-field data sets and global transaction database and take full advantage of our thorough analytical approach and broad experience in valuation of exploration assets and portfolios.

Valuation of Grosbeak Discovery - Noreco's 20% Sold to Talisman in July 2010 for MUSD 215 (100% basis); Rystad Energy Estimates Implied Oil Price of USD 80/bbl