Oil & Gas Operating Expense Analysis (OPEX) For Reserve Evaluation
An in-depth analysis of oil and gas project operating expenses for a reserve evaluation by our lead petroleum engineer, Kurt Mire, perfect for students and other industry professionals looking to expand their knowledge!
Operating Expense Analysis (OPEX) For Reserve Evaluation Table Of Contents
- Operating Expenses Explained:
- Why are operating expenses important?
- What are operating expenses?
- Determining Operating Expenses:
- Opex Analysis Example
Operating Expense Analysis (OPEX) For Reserve Evaluation Study Guide
1.) Operating Expenses Explained
Why Are Operating Expenses Important?
- Affect cashflow and reserves value (value is based on future discounted cashflow)
- Determine economic limit (no reserves after econ limit reached)
What Are Operating Expenses?
- Normal ongoing costs to operate a well or field
- Pumpers, supplies, water disposal, compression, chemicals, equip maintenance
- Includes normal ongoing well repairs (pump, tubing, rods)
- Does not include capital expenses: drilling, recompletions
- Does not include production or ad valorem taxes
- Can be modeled as fixed or variable (per well/month or per barrel)
2.) Determining Operating Expenses
- Analyze historical data
- Use published data from similar fields
- Estimate from experience with similar fields
- If possible, we want to estimate operating expenses on a per well basis ($/Month)
- If we model all expenses as fixed, we will get lower reserves and value (pessimistic)
- If we model all expenses as variable, we get higher reserves and value (optimistic)