Petroleum reserves

How to Make Better Investment Decisions in Unconventional Projects

During the past decade, hundreds of unconventional oil and gas projects have failed to deliver the value sought by shareholders.

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During the past decade, hundreds of unconventional oil and gas projects have failed to deliver the value sought by shareholders. Two common mistakes have been focusing on production attainment instead of value creation, and incorrectly thinking that enough was understood about a given reservoir to proceed with development. Companies must implement a staged approach that exposes capital incrementally in a responsible fashion and an assurance process that provides a framework for conducting and reviewing work so that mistakes may be analyzed to influence future decisions. The complete paper provides a work flow for making better decisions about investing in unconventional projects.

Introduction

In 2019, an analysis of 16,000 unconventional wells operated by 29 of the largest producers in Texas and North ­Dakota revealed that these companies spent $112 billion more in cash over the past 10 years than they generated from operations.

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