Browsing by Subject "Valuation"

Now showing 1 - 6 of 6

A decision analysis for valuation of natural gas resources with high CO₂ in East Natuna Basin, Indonesia
(2023-04-26) Mirsha, Addian; Bickel, J. Eric; Chuchla, Richard; Hovorka, Susan
The natural gas industry is experiencing greenhouse gas emissions-related challenges. The naturally occurring CO₂ in natural gas reservoirs is one of the major anthropogenic sources of atmospheric CO₂ when it is produced. Unfortunately, a significant portion of the world's natural gas resources are contaminated with CO₂, at varying concentrations. Decarbonization targets of oil and gas companies increase the difficulty in developing these challenging resources. The conventional practice of releasing the separated CO₂ gas into the atmosphere is unlikely to be favorable to the recent oil and gas companies’ (OGCs) attitude towards decarbonization. A synergy between natural gas resources with high CO₂ concentrations and oil fields with CO₂-EOR applications can effectively address the two most important issues: the environment and the economy. However, economic issues arise when opportunities for the utilization of CO₂ produced are unavailable, making saline aquifer the only realistic storage option for developing these resources in an environmentally responsible manner with carbon capture and storage (CCS) deployment. This obviously will increase resource development costs without increasing expected revenue, and lessen their financial viability. A valuation model based on decision analysis was built to assess the impact of additional costs from CCS deployment. The model focuses on the valuation of a natural gas exploration venture opportunity that potentially contains high CO₂ concentrations. The case of the Paus Prospect in East Natuna Basin, Indonesia, was selected for implementing the model due to basinal and local indications that its target reservoirs have significant CO₂ concentrations. An Indonesian PSC cashflow model was used to estimate the potential outcomes of developing this prospect. The results indicate negative expected monetary values (EMVs) for this investment opportunity by considering that aside from its incremental cost, the CCS deployment would cause a delay in development schedule. The fiscal terms improvement of the PSC and the adaptation of a tax credit for CCS were evaluated to provide recommendations for attracting investment to develop this challenging natural gas resources.
Decision impact of stochastic price models in the petroleum industry
(2011-08) Hammond, Robert Kincaid; Bickel, J. Eric; Dyer, James S.; Smith, James E.
Stochastic price models have proven material to decision making in the oil industry when accurate valuations are important, but little consideration is given to their impact on decisions based on relative project rankings. Traditional industry economic analysis methods do not usually consider uncertainty in oil price, although the real options literature has shown that this practice underestimates the value of projects that have flexibility. Monetary budget constraints are not always the limiting constraints in decision making; there may be other constraints that limit the number of projects a company can undertake. We consider building a portfolio of upstream petroleum development projects to determine the relevance of stochastic price models to a decision for which accurate valuations may not be important. The results provide guidelines to determine when a stochastic price model should be used in economic analysis of petroleum projects.
Financial Valuation of Distributed Solar Resources in Texas using Electrified Transportation Hubs as a Case Study
(2021) Corcoran, James Sean; Matos, Christopher; Beck, Ariane; Rai, Varun
This paper introduces a solar calculator adapted from the National Renewable Energy Laboratory’s Cost of Renewable Energy Spreadsheet Tool (CREST) [1] and UT LBJ’s community solar financial model [2] to assess the economic viability of co-located solar and storage projects at electrified (E-) transportation hubs in the Austin, Texas region. This model was developed as part of a multidisciplinary Austin-based pilot study that investigated a novel E-hub concept to integrate heterogeneous E-modes (buses, shared scooters/bikes, private vehicles) that could benefit regional infrastructure and affect socioeconomic growth. While the use-case selected for this paper is very application- and regional- specific, its construction is generalizable enough to adapt to a wider set of distributed-energy generation (DEG) and commercial-scale projects in various markets around Texas and the U.S.
Overpriced mergers and acquisitions in the chemical industry
(2009-12) Momin, Farid L.; Lewis, Kyle, 1961-; Duvic, Robert Conrad, 1947-
Mergers and acquisitions within the chemical industry is a common practice to increase market presence and customer base. Common justifications for M&A include synergy, business growth and competitive advantages, and management reasoning. Synergies are benefits a combined firm is able to receive through cost reductions, market expansion, and efficiencies in processes. As a result, firms are able to grow and position themselves competitively. To prevent an overpriced acquisition, numerous valuation techniques exist. The discount cash flow examines the value of a firm based on future cash flow. The market multiple compares target firms to similar firms in the industry. Lastly, the asset valuation determines the value of a firm based on the liquidation of the firm. To maximize the return on an acquisition, proper due diligence should be conducted based on the needs and goals of the purchaser, and the value added by the target firm. The premium paid for an acquisition should be based on the valued added through the synergies identified. Current business cycles and future outlook should also factor into the pricing of the acquisition. Having a thorough analysis of a target firm can help the acquirer to clearly understand what is being purchased and hence, determine an appropriate price for the acquisition.
Prospective effort and choice
(2014-12) Malecek, Nicholas John; Poldrack, Russell A.; Huk, Alexander C.; Beer, Jennifer; Maddox, Todd; Lewis-Peacock, Jarrod
We constantly face the challenge of selecting among actions in pursuit of our goals. Behavioral theories suggest the ubiquity of these choices necessitate a valuation process that integrates expected costs and outcomes. Increased sensitivity to costs in value-based choices, such as reduced willingness to tolerate risk, wait or work for rewards, features prominently in the symptomatology of mental illness. Contrary to classical theories of choice that do not distinguish among cost type, the recent unification of experimental economics, psychology and neuroscience describes the influence of specific costs upon behavioral and neural correlates of subjective value. Despite substantial progress in the understanding of the basis of subjective valuation under delay and risk, the specific influence of effort, the energetic cost of an action, remains largely unknown. Limited existing accounts hypothesize that cost sensitivity during subjective valuation results from separable neural systems related to risk, delay and effort. This dissertation evaluates evidence for distinct neural representation of effort and presents a set of experiments designed to refine normative accounts of effort-based choice. First, I review the neural basis of economic choice under risk and delay. Second, I review limited accounts economic choice under effort. I describe a novel prospective effort task designed and validated to examine effort-based valuation and address potential confounds present in previous studies. In the first experiment, I report novel evidence for discounting of neural activity related to value by prospective effort and conjoint sensitivity to effort costs and expected outcomes in brain regions related to selection and generation of actions. In a second experiment, I examined the influence of prospective effort costs upon delay discounting preferences. This experiment did not find modulation of individual preferences by prospective effort costs. Finally, I discuss our results in the context of existing accounts and potential extensions of the prospective effort paradigm. Overall, I show that prospective effort imposes a specific cost, reflected in behavioral and neural correlates of value, and presents a novel approach to further the understanding of motivated behavior.
Valuation of an advanced combined cycle power plant and its cost of new entry (CONE) into the ERCOT market
(2014-08) Zaborowski, Jeremy Ronald; Webber, Michael E., 1971-
The Texas ERCOT market is one of the most open, deregulated electricity markets in the world. This open market brought electricity costs down for Texas residents and businesses, creating a much more competitive economic climate. However, these low prices currently generate insufficient revenue for generators to finance construction of new or replacement generation assets. In the instance of combined cycle advanced natural gas, the Independent Market Monitor 2012 annual report estimated that a plant needed to generate 2.5 times as much as revenue it did in 2012 to incent new generation. This author argues that while the gap is still significant, the continuous changes to the ERCOT market since its inception make an historical examination like that used by the IMM less accurate. New market rules such as price caps or changes in fuel markets through new technologies like hydraulic fracturing create a very different valuation gap than a model based on historical activity alone. This analysis attempts to get a more accurate approximation of the gap through the use of publicly traded futures contracts for natural gas and electricity. Electricity futures reflect market expectations of revenue based on current and future market rules. Gas futures reflect price expectations in light of market changes like fracturing, potential LNG exports, and other changes. Financial positions can be maintained in both markets to give a fixed rate of return. Using this method, one can create a very conservative valuation model that still more accurately reflects market sentiment. This thesis starts with a brief history of ERCOT deregulation from the early 2000s to present in order to clarify for the reader the changes that have taken place in the market. It then demonstrates the futures-valuation model using an advanced combined cycle power plant as an example.