BOOKS ABOUT PLANNING AND EVALUATION TECHNOLOGY

John Schuyler

Errata

Decision Analysis for Petroleum Exploration, 2nd Edition

by Paul Newendorp and John Schuyler
2000, 618 pages, US$64.95
Planning Press, Aurora, Colorado USA
ISBN 0-9664401-1-0

This is an update of 1975 best-selling Decision Analysis for Petroleum Exploration. This widely-cited book remains the standard text and reference in the field. This book introduces the reader to ways of applying statistical decision analysis concepts to the analysis of risk and uncertainty in petroleum exploration investment decisions. Topics covered in the book represent a composite of attitudes and practices used throughout the world for analyzing drilling prospects. Several ideas and concepts were first published in this book.

click cover image for larger picture       

      Back Cover       Sample Page 134       Sample Page 447

Decision analysis can be applied to any type of business investment decision. The emphasis in this book is on the application of quantitative analysis methods to petroleum exploration. The book will be of special interest to anyone involved in the evaluation of drilling prospects: petroleum geologists, engineers, geophysicists, and managers. A mathematical or statistical background is not required to follow the practical, applications-oriented discussions.

The book first reviews the advantages and disadvantages of various profitability criteria used for selecting and comparing drilling prospects. The important expected value concept is next introduced in chapter 3. This is a decision criterion that derives from judgments about risks and uncertainties expressed as probabilities. Expected value is the cornerstone of any formal, quantitative analysis of decision making under uncertainty. Included in this discussion on expected value are chapters on the formulation and solution of decision trees, Monte Carlo simulation, and comments on the controversial subject of risk preference (utility) theory.

The remainder of the book is devoted to the complex subject of risk analysis—determining the probabilities of occurrence of the possible outcomes of a decision made under conditions of uncertainty. Throughout the book numerous real-world exploration examples are given to illustrate how the decision analysis methods can be applied.

A feature of the book is a Case Study entitled "The Blackduck Prospect." This three part series is a dialogue between various executives trying to decide whether to drill an exploratory well on newly leased acreage. The book contains references for further reading, a glossary of exploration and leasing terms, a conversion table from units used in the U.S. to the metric system, and nine appendix sections on special topics and tables of use in prospect analysis.

Contents

1. Decision Analysis—Why Bother?
2. Measures of Profitability
3. The Expected Value Concept
4. Decision Tree Analysis
5. Preference Theory Concepts
6. Basic Principles of Probability and Statistics
7. Petroleum Exploration Risk Analysis Methods
8. Risk Analysis Using (Monte Carlo) Simulation Techniques
9. Implementing Risk Analysis Methods
10. Decisions to Purchase Imperfect Information
11. Special Problems and Open Issues
    Glossary

Paul Newendorp (principal author)

Dr. Paul Newendorp began his career in 1959 as a petroleum engineer for Pan American Petroleum Corporation (now Amoco Production Company). During two later educational leaves of absence he completed his MS and Doctorate degrees in Petroleum Engineering from the University of Oklahoma. In 1968 he developed a two-week short course on petroleum exploration economics and risk analysis. The course was based, in part, on his Doctoral research on decision theory and earlier industry work experience.

For the next 21 years Paul traveled throughout the world teaching his short course. Entitled "Decision Analysis for Petroleum Exploration," the course introduced many new concepts into the lexicon and accepted practice for analyzing drilling prospects. Included was his pioneering work on the use of Monte Carlo simulation for the quantification of exploration risks and uncertainties. His course, research, and numerous publications also brought into focus how established decision theory methods such as the expected value concept, decision tree analysis, and utility theory can be used to advantage in evaluating drilling prospects. This book was written in 1975 for use as a text for his 2-week course with the same title.

During his career Paul was an active member of the Society of Petroleum Engineers. He served in various leadership roles and received numerous awards, including the SPE Section Service Award. In 1987-1988 he was appointed an SPE Distinguished Lecturer. He was also an associate member of the American Association of Petroleum Geologists.

Dr. Newendorp retired in 1989 and now lives in Colorado. His retirement activities include work as a volunteer for the U.S. Forest Service.

John Schuyler (revisions author)

Upon nearing retirement in 1988, Paul Newendorp encouraged John Schuyler, one of his former students and a longtime colleague, to design a successor course. John developed what has become his primary course, "Petroleum Risks and Decision Analysis," and variants which have been presented more than 200 times in 34 countries since 1990. This one-week course includes and extends the concepts in Dr. Newendorp's book.

John holds BS and MS degrees in Mineral-Engineering Physics from Colorado School of Mines and an MBA from University of Colorado at Boulder. He was formerly VP and Petroleum Evaluation Engineer with Security Pacific Bank, Planning and Evaluation Analyst and Manager-Business Systems for Cities Service Company, and a Senior Management Consultant with a national accounting firm. He is a CAM, CCE, CMA, CMC, CPIM, PE and PMP. He is a member of AACE, IMA, IMC, INFORMS, PMI, RMAG, SPE and SPEE. Project Management Institute published his book, Risk and Decision Analysis in Projects (1997, 2001).

John's petroleum industry training is sponsored by OGCI Training (Oil & Gas Consultants International, currently morphing into PetroSkills), the world leader in petroleum training. In addition to Petroleum Risks and Decision Analysis he now regularly presents two additional courses through OGCI:

• Applied Decision Analysis with Portfolio and Project Modeling
  (a sequel workshop with hands-on use of personal computer software) -and-
   
• Economic Evaluation of Prospects and Producing Properties
  (for in-house presentations, a broad-based course in evaluation practices as applied to reserves and petroleum resources).

Course schedules and descriptions see  Decision Precision

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Also available:  Risk and Analysis in Projects by John Schuyler

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