Journal of Petroleum Technology, Vol.52, No.2, 56-61, 2000
Valuation of non-US oil and gas properties
Valuation of non-U.S. concessions, prospects, and producing fields varies greatly from country to country because of differences in fiscal and political regimes and therefore must include quantified adjustments for these differences in the light of comparative modes of sale of other non-U.S. properties. The market for acquisitions and divestitures works by also applying such adjustments to the values derived for U.S. analogs with comparable geological, engineering, and economic risks. This paper discusses the primary types of fiscal regimes found around the world, namely, licenses with royalties and taxes, association agreements, and production-sharing contracts (PSC's). We show that discounted-cash-flow (DCF) models are readily applicable to proved reserves and present a review of a recent market transaction to demonstrate these effects. Political risk in the non-U.S. market is shown to be additive.