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ARIESTM Technical Committee Inside ARIES: Incremental Economics

$. What Is Economics?. Translates technical and business data into MONEYEnables meaningful comparisons among assets

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ARIESTM Technical Committee Inside ARIES: Incremental Economics

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    1. ARIESTM Technical Committee Inside ARIES: Incremental Economics

    2. What Is Economics? Translates technical and business data into MONEY Enables meaningful comparisons among assets & opportunities Methodology combines Resource volumes Production forecasts Prices, opex, and capex Ownership and taxes Computes values for Economic reserves Revenue and profit Net present value, ROI

    3. Why Run Economics? E&P is a business E&P companies compete with everyone for capital E&P companies compete with each other for opportunities Economics defines “Reserves” Answers “decision” questions How much is it worth? Is it profitable/more profitable? What if prices/costs change? How much can I spend? Does it improve my ROI?

    4. What Is Incremental Economics? A rigorous approach for comparing one project with another by subtracting their economic results How much better is doing one thing than doing another? Not needed for a stand alone project – comparing to zero A method to help you: Decide among mutually exclusive projects – where you can only do one of the set Justify incremental investments – is more better? Evaluate income acceleration projects – where you get the same reserves or revenue, but faster Calculate probable “wedge” reserves – where the answer only exists as the difference between two forecasts

    5. Typical Incremental Questions

    6. Incremental Economics – Fundamentals Always based on summary level subtraction, which means the results are based on time frames except MPROD for incremental production You could model each situation in separate properties, if it fits, if you want to manage them as different cases in the same property Your results can be temporary, as an economic summary report, for decisions semi-permanent, in a summary blob, for adding in elsewhere permanent, in a database entity Several methods: Weight, “Use Picklist”, SuperSum and EcoSum, Summary Group, Econ Group

    7. Incremental Economics – Methods Simple Weight and Sum Batch macro needs too much input for this SuperSum and EcoSum store and use blobs “Use Picklist” controls weights and scenarios Summary Group controls weights and scenarios and stores results in Oneline and Detail tables Econ Group enables ordered and/or repeated members (and keeps data with the Group)

    8. Incremental Economics – Weight and Sum Must be separate properties under a sigma Specify weights in Misc data line or on Picklist Scenario is based on toolbar Auto Summary produces the reports Does not store results

    9. Incremental Economics – SuperSum Separate properties under a sigma Specify weights in Misc data or on Picklist Convert sigma to SuperSum project Auto Summary uses toolbar scenario to produce reports Stores summary result as binary large object, if checked Can reuse results in summaries by pushing to an EcoSum

    10. Incremental Economics – “Use Picklist” Same or separate properties under a sigma Specify “Use Scenario”; applies to entire Picklist Weights and scenarios on Picklist rows Auto Summary produces reports Does not store results

    11. Incremental Economics – Summary Group Members must be separate properties Specify weights and scenarios (Use Picklist if mixed) Stores titles and top level investments Specifics are store with the Project Run Property (the group) produces reports Stores results in Oneline and Detail tables

    12. Incremental Economics – Econ Group Members can be same or separate properties; ordered Specify weights and scenarios on Picklist rows: hierarchy Stores titles and top level investments Specifics are stored in the Econ Group Run Property (the group) produces reports Stores results in Oneline and Detail tables

    13. Example 1: Incremental Frac Investments

    14. Example 1: Incremental Frac Investments

    15. Example 1: Incremental Frac Investments

    16. Example 2: Probable Wedge Economics

    17. Example 2: Probable Wedge Economics

    18. Example 2: Probable Wedge Economics

    19. Summary: Incremental Economics

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