Decision-Making and Uncertainty Analysis for Oil & Gas Applications using @RISK and PrecisionTree: Two Day Course

This intensive two-day course aims to provide participants with hands-on experience and the analytic tools to conduct risk analysis using @RISK and PrecisionTree, demonstrated across a range of applications, both for general financial assessments, and for those which are specific to the oil and gas sector.

Day 1 covers the fundamentals of @RISK, including learning to operate the software to build models, to interpret the results of the analysis, and to work with simulation data and graphs. Hands-on examples used include cost estimation and contingency planning, event risk modelling, reserves estimation, and variations of these models, such as profit share agreements.

Day 2 is focussed on extending participants’ @RISK modelling techniques and providing an introduction to the use of PrecisionTree. Topics covered include the use and selection of distributions and the capturing of dependency relationships. Hands-on examples include an extension of cost budgeting, cash flow modelling, and time series modelling, including production decline curves.  The last session of Day 2 is spent covering the core aspects of PrecisionTree, in particular the use of cumulative payoff trees and the use of key sensitivity analysis features within PrecisionTree.  The main class exercise consists of the modelling of a seismic test decision.  According to time availability and interest, further features of @RISK or PrecisionTree can be explored.
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Detailed Agenda

Day 1: Fundamentals of @RISK

AM

  • Introduction to risk analysis and simulation techniques
  • Defining uncertainty through distributions: Overview
  • Overview of @RISK menu items
  • Introduction to distributions and key terminology (mean, percentiles)
  • Hands-on exercise: cost estimation and contingency planning using Triangular distributions
  • Running a simulation and the interpretation of results 1 (density and cumulative curves)
  • Repeating a simulation (incl. random number methods, no. of iterations etc)
  • Use of @RISK Statistics functions

PM

  • Hands-on exercise: Profit share agreement
  • Hands-on exercise: Reserves estimation
  • Distribution fitting with BestFit
  • Hands-on exercise: Use of multiple simulations for risk mitigation decision
  • The Discrete, DUniform, Binomial and Poisson distributions (incl. RiskCompound)
  • Hands-on exercise: event risk modelling and scenario modelling
  • Hands-on exercise: Use of multiple simulations for parameter dependency comparison
  • RiskStatic and @RISK function swap
  • Utilities and Application Settings
  • Working with @RISK graphs
  • Working with simulation data

Day 2: Building Robust Models with @RISK and an Introduction to PrecisionTree

AM

  • Measures of distributions: further topics (standard deviation, skew, kurtosis)
  • The RiskTheo statistics functions
  • The PERT distribution
  • Alternate parameter methods
  • The Normal and Lognormal distributions
  • Overview of selected other distributions (e.g. Geometric, Exponential, Weibull)
  • Hands-on exercise: Production decline modelling
  • Report generation
  • Model auditing tools
  • Other examples: extensions of cost budgeting, modelling time series, cash flow modelling, modelling time-to-occurrence and the number of occurrences of events, and other properties of functions of random variables

PM (Session 1)

  • Parameter dependency and correlated sampling
  • Hands-on exercise: Implementation of correlation in cost budget and time-series models
  • Interpretation of simulation results 2: tornado graphs and scatter plots
  • Other @RISK functionality and functions (e.g. further sensitivity analysis and reporting features, use of macros, Library, Help features)
  • Examples: measuring correlations and rank correlations, comparing dependency and correlation, dependency modelling in cost budgeting, in event modelling and in time series (growth, mean-reverting and crash processes)

PM (Session 2) Introduction to Precision Tree

  • Introduction to modelling with PrecisionTree (cumulative pay-off trees)
  • Exercise: Seismic test decision
  • Further topics (as relevant) e.g.
    • Trees with other payoff formulae
    • Introduction to Bayesian analysis
    • Introduction to the use of PrecisionTree with @RISK
  • Open Session: Further discussion and modelling of participants’ applications


Credits available:
» 16 CPEy

» Palisade Corporation
» Seminar Schedule