Petroleum Economics: Understanding Internal Rate of Return and Net Present Value

Link To PowerPoint

What is IRR or the Internal Rate of Return?

IRR is the interest rate at which the net present value of a project’s cash flow equals zero.

IRR is used to evaluate the attractiveness of a project or investment.

The Pros & Cons Of IRR

IRR makes it easy to rank projects by their overall rates of return rather than their net present value.

IRR only works for investments that have an initial cash outflow (investment) followed by one or more cash inflows.

IRR does not measure the absolute size of the investment return. (IRR can favor investments with high rates of return even if the dollar amount is small).

IRR can’t be used if the investment generates interim cash flows.

What Is Net Present Value (NPV)?

Net present value is the value of projected (future) cash flows, discounted to the present.

NPV = cash flow/ (1+ discount rate)^number of time periods.

NPV can be used to compare profitability of different projects or investments.

Net present value translates the amount of money you expect to make from a project or
investment into today’s dollars.

It takes into account the time value of money.

$1 million per year for 20 years is not worth $20 million today (NPV is less than $20 million).

What Do Petroleum Engineers Actually Do?

Today we will be discussing the specifics of a petroleum engineer and analyze what they do in their careers. This video is aimed at students and beginners who wish to begin learning more, since I know there is a lot more to cover within the field.

Main Areas Of Petroleum Engineering:




Elements Of Drilling Engineering

-Well Design

-Well Planning

-Cost Estimation

-Completion Design

-Drilling Optimization

-Rig Design


-Casing Design

-Fracture Design


-Field Supervisor


Elements Of Production Engineering

-Production Optimization

-Artificial Lift Design

-Workover Design

-Re-completion Design

-Well Flow Modeling

-Well Intervention

-Chemical Treatments

-Facilities Design


-Tubing Design

-Production Log Interpretation

-Field Supervision


Elements Of Reservoir Engineering:

-Drilling Proposals

-Project Economics

-Reserve Estimates

-Acquisition Evaluations

-Reservoir Simulation

-Well Test Design

-Log Analysis

-Waterflood & EOR Design

-Data Analytics

-Development Planning


-Expert Witness

-Gas Storage


So Who Will Hire Me If I Become A Petroleum Engineer?

-Major Oil Companies

-National Oil Companies

-International Oil Companies

-Service Companies

-Consulting Firms

-Government Agencies


Top 5 Mistakes To Avoid When Investing In A Oil And Gas Project, Royalties, Or Ownership Deals

Today we’re covering the top 3 mistakes you must avoid when making an investment in an oil & gas property.

This does not cover any investment tips for investing in a publicly traded petroleum company, oil & gas stocks, or any form of financial securities.

The tips are for individuals looking to invest in any properties, mineral or royalty rights, or any form of investment that involves oil & gas ownership.

Advice To Increase Your Chances Of Succeeding In A Oil & Gas Investment

1. Never invest money in an oil & gas project that you can’t afford to lose

Oil & gas projects can be extremely risky, always keep your investment strategy in line with the possibility that you may lose your capital. No matter how good things can look on paper, the reality of the payout will always be different.

2. Never invest in a project where you have a start up operator

Don’t place your faith in an operator that has no experience, make sure they have good and up to date references to back up their performance record. An investment with an oil & gas operator that has never done a project before adds an incredible amount of risk on your capital.

3. Never invest in a deal where the owner or operator has none of their own money at risk within the project

Make sure the oil & gas owners or operators are putting up their own share within the investment. Your chances of getting a good return go up significantly when their money is at risk in the same way yours is.

4. Do not risk your money without getting a technical evaluation done or at the very least an expert opinion

Investment drilling deals can be extremely complicated, you are increasing your chances of losing all your money if you do not have the entire deal analyzed by an oil & gas evaluation expert.

5. Ask the operator lots of questions to ensure they have the logistical aspects worked out

This will probably require some third party expert help in gathering the right questions, but it will validate the experience and knowledge of the operator and reduce your overall risk.

I hope you found this video helpful and remember to call me, Kurt Mire, if you need any help in evaluating your next oil & gas investment.


How Fracking Empowers Minority Communities Around The World

May 12, 2020

By Carissa Lamkahouan

Ban Fracking? For some on the left, that’s a fight best left only when the time is right.

Many on the political left, and especially those who consider themselves progressives, oppose fracking for environmental reasons, arguing the process contributes to global warming. However, the cause of banning all fracking is not as unifying for those on the left as one might think, particularly for people of color, poor people and others around the world. 

African-American And Latino Communities In The US Depend On Fracking For Lower Prices

The truth is, fracking, especially in the United States, has uncovered and made accessible so much natural gas that, naturally, consumers have benefitted from lower prices. This is an important financial factor when it comes to heating homes in the winter.

It’s on this point – consumer costs – that left-wing activists Revs. Al Sharpton and Jesse Jackson, as well Marc Morial, president of the National Urban League, are willing to take a softer-than-expected stance on the use of natural gas, at least temporarily, if it may benefit those for whom they advocate. 

In a March 30, 2020, article in AXIOS, Sharpton was quoted as saying, “I think people are concerned about affordability, and they are concerned about being left in the cold. I think natural gas is temporary — I don’t think we ought to make it the end-all, be-all — solution, but in the interim, people in communities of color should not pay the brunt of suffering through cold winters.”

Jackson and Morial expressed similar sentiments.

In February, Jackson said he supported a “proper transition” away from fracking and the consumption of natural gas in the interim as a means of keeping heating costs low.

Morial said, no matter what decision is made, black people and others who would be negatively impacted by higher gas costs, should have a seat at the table when decisions are made.

The Pipeline In Europe That Carries Natural Gas …And Freedom

Across the pond, other issues are influencing the push for more natural gas consumption, namely freedom from reliance on unfriendly producers.

Poland is set to begin construction of a gas pipeline to bring natural gas from Norway into the country. The project is aimed at moving Poland away from its dependency on Russia to supply its energy needs.

The Baltic Pipeline is slated to be up and running in late 2022, bringing with it 10 billion cubic meters of gas each year into Poland. Additionally, the pipeline will transport gas to other countries in the region, particularly Ukraine, which also is eager to move away from Russian energy dependence.

The Least Harmful Fossil Fuel To The Environment?

As for the environmental issue, it’s true that natural gas, a fossil fuel, emits methane. That’s often a sticking point for environmentally minded progressives. However, when it’s burned, gas emits a great deal less carbon dioxide than coal. That may make its use, even temporarily, easier to swallow for the likes of Sharpton, Jackson and Morial. As for our European friends across the Atlantic, the prospect of pulling away from the grip of Russian energy dominance may trump all else.


Oil and Gas Vet Launches Social Media Movement Against Climate “Fascists”

April 7, 2020

How The Climate Change Narrative Follows Politics And Not Science

To say Gilles Bourgeois is a man on a mission might be a cliché; it would also be the truth.

Bourgeois, a 57-year-old semi-retired petrophysicist and self-described “doctor of wells and reservoirs” for the oil and gas industry, uses the power of social media – particularly LinkedIn and Twitter – to argue against what he considers widespread “lies” about climate change. 

“Climate change science violates the laws of thermodynamics. The premise of a greenhouse effect, it doesn’t exist, at least not the way it’s programmed into (climate) models,” claimed Bourgeois, a Canadian-born oil industry veteran who’s lived in Italy for the last four years following decades in the business, having worked for Shell, Maersk and OMV amongst others.

History Repeats Itself When Oppressing Thought

Since moving to Italy, he’s been unemployed. That’s meant more time on his hands and greater opportunities to study and learn about moments in history when fascist and Marxist philosophies as well as collectivism have negatively impacted human behavior, in particular, how German Nazis were able to influence popular opinion against Jews, resulting in the Holocaust. 

He argues the same thing is happening, at least in terms of collective thought, within the narrative of global warming. When referring to climate change, however, people aren’t killing one another, of course. Instead, he believes the movement’s aim is to “stop all (oil and gas production) to make everybody totally dependent on the government which has total control over everything.”

To Bourgeois’ mind, this is simply savagery of another kind.

“I’ve always had an interest in how these horrible things can take place in humans, and what we’re experiencing now, with the climate change narrative, is a repeat of history,” he said. 

Bourgeois said this historical repeat is happening not only in politics and the media, where he said global warming is largely accepted as fact with the blame being put squarely on humans’ shoulders, but in college classrooms, as well. He believes many university professors are “strongly left,” politically speaking, and oftentimes will punish students whose views don’t align with their own.

“If you don’t follow what they think, they will intellectually abuse their students,” he said. “In universities, the humanities majors are the most vulnerable to intellectual corruptions, but it’s moving into the sciences, too.”

He continued. “We are dealing with a horde of people who think that what they believe is right and what others are doing is wrong.”

This, Bourgeois said, is a major problem for students who believe in limited government, capitalism, and the innate rights of human beings – namely life, liberty, and the pursuit of happiness.

How To Use Social Media To Have Your Voice Heard And Fight Back

This is where his social media mission comes in. “We have the luxury of spreading the truth so we can defeat the lies. I want to make use of that luxury,” he said.

To that end, he often posts scientific counter information to what he believes is widespread and false climate change science, which he calls misleading at best.

As expected, he’s come up against detractors, but he said he’s not overly concerned.

“It’s a huge horde of mostly really awful, dumb people. I’m meeting the die-hard communists head on, and it’s pretty clear what the agenda is,” he said, referencing governmental control over individuals and the destruction of the free market.

Nevertheless, he persists, racking up approximately 5,500 Twitter followers. He said he’s making progress and said many people are receptive to what he has to say. Either way, he’ll push on.

“I’m making purpose in my life to try to defend those ideals of limited government and the protection of rights, which is the real purpose of government and relevant to every country in the world,” Bourgeois said. “I’m going to devote the rest of my life to it.”

Gilles Bourgeois is a 57-year-old semi-retired petrophysicist for the oil and gas industry who dedicates his time to fighting the myths and popular rhetoric surrounding climate change.

Follow him on Social Media

Female Oil and Gas Industry Vet Says Field is Great for Women, Encourages More to Take a Look

By Carissa D. Lamkahouan

June 2, 2020

Flipping Oil & Gas Gender Stereotypes Upside Down

As a woman working in the oil and gas industry, Rachel Kernion is accustomed to being amongst men. However, she was a bit surprised when, years ago at the start of her career, a male colleague made a joke at her expense when she and other oil industry professionals had gathered in the field to discuss a project.

“We were all there to talk about the plan to drill the well, and I remember walking into the trailer and a guy saying, ‘Oh good, I’m glad there’s a woman here to cook,’” she recalled.

Kernion, now a senior reservoir engineer at Trinity Operating with nearly 25 years experience to her credit, took the crack in stride. 

“At the time it was funny because he was old and that’s what old people do,” she said.  “He was harmless.”

However, she stressed she’d handle a similar situation differently if it happened today, although she doubts it would.

“With the younger men working now, those in their 20s and 30s, they would never say that to me. That comment was completely generational,” she said. “If it did, though, I’d probably have a talk with him, but that’s never going to happen. Everyone is so respectful.”

That seems fitting, considering Kernion’s path to petroleum began with a boy and his father. However, the hard work and accomplishments along the way have been all her own.

As a student at Louisiana State University in the 1990s, Kernion had her sights set on medicine, hoping to become a doctor someday. However, she can admit her motivation to practice medicine didn’t spring from a deep-seated need to help and to heal her fellow man. 

“I just wanted to make money,” she said.

Because she wasn’t married to the idea of becoming a physician, she was able to be persuaded to pursue petroleum engineering when her boss suggested it.

“I was put on this path because I was dating the son of the chairman of the petroleum engineering department at LSU,” Kernion said. “He offered me a job in his department as the receptionist. I was answering phones and doing work for the professors, but (my boyfriend’s father) kept telling me how smart and meticulous I was and that I should join his department.”

Eventually the advice stuck, Kernion enrolled in engineering classes, and her path was set – even though she didn’t know it at the time.

“I really liked it, but I said to myself, ‘I’ll just do this now, and then I’ll think about going to medical school,’” she recalled. 

In the end, however, it was the work that hooked her. During her first internship after graduating, Kernion worked offshore in the Gulf of Mexico with Taylor Engineering. It marked a turning point in her life.

“I loved it! It was so much fun, and that’s when I knew I wasn’t going to go to medical school,” she said.

Now, nearly a quarter century into an international career that’s spanned several large companies including Texaco, British Petroleum and Nextera Energy, Kernion still thrills to the job.

“I love the oil industry. It’s high risk, it’s high dollar; it’s exciting!” she said. “I really enjoy taking a project from exploration all the way to production.”

Petroleum Engineering Opportunities For Young Girls Exist, Now Is The Time To Take Advantage

Kernion’s enthusiasm for her vocation is one she’s shared with young girls. While working with W&T Offshore, she had the opportunity to mentor young, female high school students who were considering careers in the sciences. She called the experience fulfilling, particularly as she was able to coach and encourage the girls, helping to build their confidence and develop and sharpen their skills.

She recalled the time the girls, as part of the program, were required to make a presentation about their work “in a big board room with a bunch of gray-haired men, including the billionaire CEO,” she said.

Kernion worked with her group, practicing with them, coaching them and encouraging them to just relax and do their best. “They ended up doing great. That was one of the coolest things I’ve done, to see how I could really influence these young women to believe in themselves.”

Though she said the industry is still dominated by men, Kernion said there’s no reason why women can’t become a larger part. She said programs like the one she was involved with are an effective way to make it happen, saying young girls’ early introduction to the field is crucial to piquing their interest. 

What’s more, in her experience, Kernion’s female coworkers have demonstrated they are more than competent in their roles and should face “no barriers at all” to working in the energy industry.

“Women tend to take care of things and get it done right the first time without egos getting in the way. They also tend to work a little bit harder,” she said. “Every woman I’ve worked with has been very competent.”

Carissa Lamkahouan is a freelance copywriter and magazine/newspaper journalist based in Houston, Texas. She has 23 years of experience covering business, oil & gas, government, the arts, fitness, and religion for publications in the U.S. and abroad. Additionally, she creates marketing content for companies in the finance, wellness, and oil & gas sectors. She also spent a year living in and blogging about Marrakech, Morocco.

Find her at or contact her at

Texas Gulf Coast Oil And Gas Reserves Analysis Case Study

This is an in depth case study looking back on the reserves analysis of an area within the Texas Gulf Coast for Corum Production Company, produced by the lead petroleum engineer at Mire Petroleum Consultants, Kurt Mire.

Link to Google Slides / PowerPoint

Analyzing The Reserve Estimation To Determine The Project Economic Accuracy

The primary goal of this case study, when it was produced in 2013, was to evaluate the reserves and values of Corum’s producing and non producing assets.

The project began in April 2013 and was located in Appling North Field, Calhoun County, Texas, about 90 miles from Houston.

Mr Mire began the project by analyzing the key performing indicator data that Corum provided regarding the technical and economic metrics that they had collected from the wells so far.

How Can We Calculate The Reserves For The Corum State 209 #1 Producing In The 7400’ Frio Sand?

Volumetrics (Map & Log)

Decline Analysis (Producing For 1 Year)

P/Z Analysis (Material Balance)

Other (FTP Trend, Analogy, Etc.)

Next, Mr Mire checks the map scale and estimated areas in order to analyze the volumetrics

Estimated average net pay, BHP & BHT, gas gravity, recovery factor.

Volumetrics indicated ~ 954 MMCF EUR (1021 MCF/ACFT)

Decline analysis (Ec. Limit) ~ 911 MMCF EUR (975 MCF/ACFT)

187-acre geo/reservoir map looks good

Recovery factor of 975 MCF/ACFT looks good

EUR is 1,117 MMCF

Looking Back And Analyzing Reserve Performance (2013 VS 2020)

Reserve Analysis Conclusions:

FTP analysis was selected for EUR

Volumetrics was too uncertain

2013 EUR 1,700 MMCF & 19 MBO

2020 EUR 2,176 MMCF & 16.2 MBO

2013 Reserves 1,375 MMCF & 14.9 MBO

(2020) Reserves 1,851 MMCF & 12.1 MBO

Underpredicted gas reserves by 35%

Overpredicted oil reserves by 20%

3 Brief, Yet Crucial Oil And Gas Investment Tips You Need To Know Before Starting Your Next Project

This Two Minute Video Could Be The Difference Between The Success And Failure Of Your Next Oil And Gas Project

Principle Engineer at Mire Petroleum Consultants (Kurt Mire) uses his 35+ years of experience in various international oil & gas projects to give us 3 brief, yet important oil & gas investment tips for anyone looking to finance their next prospect.

What Are The 3 Quickest And Most Useful Oil And Gas Investment Tips

1. Project Must Be Technically Sound:

All of the projects technical specifications must make financial sense when looking at the reserve estimate and size of the discovery.

Will the project be profitable when analyzing the petroleum engineering data?

2. Good Deal Terms:

The negotiations of the contract deal must be proportionate to the percentage of the investment that you are receiving.

If you are financing 10% of the project, will you get 10% of the profits or is it something lower?

Is there a large fee for entry into the project?

Does the operator keep a large overriding royalty interest on the lease?

Every deal is different, so really examine the contract to make sure it makes sense with the right numbers.

3. Honest & Competent:

Take big precautions and do your research to make sure the operator and/or promoter are honest and competent.

Do they have a good record of delivering their project as they’re presenting it?

Talk to other industry professionals that are familiar with their operations and get a reference.

If you need a reliable and precise reserves report or a prospect drilling evaluation, make sure to check out the engineering team at

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