EV2 delivers valuations of undrilled exploration acreage

Making judgments about the value of significant purchases is a tough task we face in our everyday lives. Whether it’s a new car or real estate investment, it can be difficult to make a clear, objective choice. Sometimes we don’t have the data we need to make an informed decision, sometimes we can’t consider all the scenarios that will impact value, and sometimes we just don’t have time to thoroughly analyze.

When it comes to making investment judgments on exploration acreage, this task becomes exponentially more difficult as we are constrained by the limited data that is available to us. The relationship between the volume of a prospect and its potential value is never straightforward, and in the current oil price environment, the need to understand and quantify geological risk and the complexities of petroleum economics is even more imperative.

EV2, the exploration valuation platform jointly developed by CGG and Wood Mackenzie, provides independent, transparent and consistent analysis of undrilled acreage at the block scale. The process draws on the unique geological knowledgebase and expertise of Robertson within CGG GeoConsulting and utilizes the latest economic data and commercial insight from Wood Mackenzie. EV2 is available for purchase and contains block-level geological risk, volume and value data for 100 prospective basins and a user-friendly modeling tool. Coverage will increase to over 180 basins by early 2017, providing a comprehensive global perspective.

Those that have proprietary information can edit the underlying geological assumptions to refine baseline volumetric assessments. This flexibility enables users to create custom scenarios in-house in a quick and confidential environment, maximizing competitive advantage. Block-scale benchmarking can guide Exploration teams in license round screening and farm-in evaluation. New Ventures teams can compare play and basin metrics to focus resources and global corporate acreage portfolios can also be evaluated in an objective and transparent way by petroleum economists and financial institutions.

To pick a timely example, let's consider blocks on offer in Mexico's Round One. EV2 allows quick assessment of volume and value potential for exploration blocks on offer, providing valuable insight to inform bidding strategies.

Upon deeper investigation of the EV2 data for the Sabinas-Rio Grande basin, eight geologic plays can be identified. This assessment is based on the interpretation of a number of data sources by Robertson's regional experts. Over 80% of yet-to-find (YTF) reserves are expected to be encountered in the Upper Oligocene, Lower Oligocene and Upper Paleocene to Lower Eocene plays. The most exciting play is the Upper Paleocene to Lower Eocene where EV2 estimates potential volumes of between 6 bnboe and 10 bnboe.

Volume does not always translate to value and EV2 allows pre-tax and post-tax NPV to be assessed at bespoke price scenarios to quickly evaluate economic attractiveness. A quick assessment of the Sabinas-Rio Grande basin tells us that the Upper Oligocene play actually has greater value potential than the Upper Paleocene to Lower Eocene play, as it is closer to shore and in shallower waters. The mapping in EV2 allows us to understand how these plays intersect with the blocks on offer, which can guide further efforts in analyzing the opportunity. As more work is done on the blocks on offer, proprietary data can be layered into EV2 using simple shapefiles to understand where additional insight equates to a competitive advantage.

This quick, yet rigorous, evaluation shows that EV2 can be used to analyze questions about exploration acreage and provide valuable insight to New Ventures teams. Do you have a different view of play risk or lead density? The EV2 platform allows you to change geologic assumptions, test scenarios, get answers, and focus budgets and resources faster than ever before.

Caption: Sabinas – Rio Grande Volumetric Heat Map. Blocks on offer are highlighted in bold red.