Decision Analysis for Petroleum Exploration

The 3.0 Edition is now available and is a major upgrade.
Now designed as handbook for quick topic access.
List price US$79.95. ISBN 978-0-9664401-4-0

by Paul Newendorp and John Schuyler
3.0(.5) Edition, Dec. 2014, ~570 pages, softcover, US$79.95 List
Planning Press, Aurora, Colorado USA
ISBN 0-9664401-4-5 EIN 978-0-9664401-4-0

This is a major rework of Paul Newendorp's 1975 best-seller, which became the standard reference in the field. This book is now structured as a handbook of important concepts useful in risk and economic decision analysis. As the title suggests, well over half the examples apply to petroleum exploration investment decisions.

Topics in the book represent a composite of evaluation practices and problem-solving approaches now commonly used in oil & gas and other capital-intensive industries. Several important and practical techniques were first published in the first edition.

Decision analysis methods apply to any type of decision. The emphasis here is on quantitative methods useful in capital investment decisions and decisions to acquire additional information. This will be of special interest to anyone involved in the evaluation of property acquisitions, geophysical surveys, prospect drilling, and field development decisions. This book is intended for petroleum geologists, engineers, geophysicists, evaluation and planning analysts, and managers. No special background in mathematics or statistics is required. We do presume a general familiarity with management, economics, and knowledge of the industry.

As a handbook we are focusing on what is most important and practical. Major topic area include the decision analysis process, key concepts in probability and statistics (including Bayes' rule and easy equivalents), decision policy (including risk policy expressed as a utility function), popular economic metrics and concepts, project and enterprise modeling, decision tree analysis, Monte Carlo simulation, and various special topics. Value of information problems receive special attention.

The expected value (EV) concept is central throughout. Most often we assume a decision policy that maximizes EV. Most of the discussion presumes the business context and measuring outcome as net present value (NPV). We also describe approaches for multi-criteria decision making including HSE.

Expected monetary value (EMV = EV NPV) is the principal decision criterion used in most examples. The EV calculation incorporates judgments about risks and uncertainties expressed as probabilities and probability distributions. EV is the cornerstone of formal, quantitative analysis for decisions under uncertainty. The key calculation methods are decision trees and Monte Carlo simulation. Small decision trees can be solved with a hand calculator, while larger trees and Monte Carlo simulation usually require a computer. Software supporting these methods is now widely available as Microsoft® Excel spreadsheet add-ins and for other platforms.
The material is organized into seven sections: Decision Analysis Process, Probability and Statistics, Decision Policy, Economic Matters, Modeling, Decision Tree Analysis, and Monte Carlo Simulation. Throughout, real-world exploration examples are presented to illustrate the risk and decision analysis methods.

This revised 3.0 edition features a larger page format, an updated and expanded bibliography, and an extensive glossary. We also offer additional material online, including extended discussions, software resources, and example Excel spreadsheets. This version has a larger, 8.5x11" soft-cover format.

Prior course participants can order this from Amazon with a code for 25% off, plus postage and handling. Write to john@maxvalue.com for the discount code.

Corrections and Extensions
Errata in the present and earlier editions

Sections

Paul Newendorp (first author)

Dr. Paul Newendorp began his career in 1959 as a petroleum engineer for Pan American Petroleum Corporation (now Amoco Production Company). During two later educational leaves of absence he completed his MS and Doctorate degrees in Petroleum Engineering from the University of Oklahoma. In 1968 he developed a two-week short course on petroleum exploration economics and risk analysis. The course was based, in part, on his Doctoral research on decision theory and earlier industry work experience.

For the next 21 years Paul traveled throughout the world teaching his short course. Entitled "Decision Analysis for Petroleum Exploration," the course introduced many new concepts into the lexicon and accepted practice for analyzing drilling prospects. Included was his pioneering work on the use of Monte Carlo simulation for the quantification of exploration risks and uncertainties. His course, research, and numerous publications also brought into focus how established decision theory methods such as the expected value concept, decision tree analysis, and utility theory can be used to advantage in evaluating drilling prospects. This book was written in 1975 for use as a text for his 2-week course with the same title.

During his career Paul was an active member of the Society of Petroleum Engineers. He served in various leadership roles and received numerous awards, including the SPE Section Service Award. In 1987-1988 he was appointed an SPE Distinguished Lecturer. He was also an associate member of the American Association of Petroleum Geologists.

Dr. Newendorp retired in 1989 and now lives in Colorado. His retirement activities include work as a volunteer for the U.S. Forest Service.

Timothy Nieman

Has also contributed to our course materials and, thus, portions of this book. Tim will be listed as co-author on the next edition.

John Schuyler (revisions author)

Upon nearing retirement in 1988, Paul Newendorp encouraged John Schuyler, one of his former students and a longtime colleague, to design a successor course. John developed what has become his primary course, "Petroleum Risks and Decision Analysis," and variants which have been presented more than 200 times in 34 countries since 1990. This one-week course includes and extends the concepts in Dr. Newendorp's book.

John holds BS and MS degrees in Mineral-Engineering Physics from Colorado School of Mines and an MBA from University of Colorado at Boulder. He was formerly VP and Petroleum Evaluation Engineer with Security Pacific Bank, Planning and Evaluation Analyst and Manager-Business Systems for Cities Service Company, and a Senior Management Consultant with a national accounting firm. He is a CAM, CCP, CMA, CMC, DRMP, PE (CO) and PMP. He is a member of AACE, IMA, IMC, INFORMS, PMI, RMAG, SPE and SPEE. Project Management Institute published, Risk and Decision Analysis in Projects (1997 and 2001 editions).

John's petroleum industry training is sponsored by PetroSkills, LLC., the world leader in petroleum training. He is the course director. He and Tim Nieman teach the DA courses:

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Work on a 3.1 edition is planned for this year. Anticipated availability late 2020.

Decision Analysis for Petroleum Exploration, 3.0 Edition

by Paul Newendorp and John Schuyler 3.0(.5) Edition, Dec. 2014, ~570 pages, softcover, US$79.95 List Planning Press, Aurora, Colorado USA ISBN 0-9664401-4-5 EIN 978-0-9664401-4-0

Sections

Paul Newendorp (first author)

Timothy Nieman

John Schuyler (revisions author)

by Paul Newendorp and John Schuyler
3.0(.5) Edition, Dec. 2014, ~570 pages, softcover, US$79.95 List
Planning Press, Aurora, Colorado USA
ISBN 0-9664401-4-5 EIN 978-0-9664401-4-0