Economic Evaluation and Planning of Exploration Programs
Authors: Garner C.R. , Campbell T.J. 
Published: December 2007

This paper was prepared for presentation at the 47th Annual Fall Meeting of the Society of Petroleum Engineers held in San Antonio, Tex., Oct. 8–11, 1972. Permission to copy is restricted to an abstract of not more than 300 words. Illustrations may not be copied. The abstract should contain conspicuous acknowledgment of where and by who the paper is presented. Publication elsewhere after publication in the JOURNAL paper is presented. Publication elsewhere after publication in the JOURNAL OF PETROLEUM TECHNOLOGY or the SOCIETY OF PETROLEUM ENGINEERS JOURNAL is usually granted upon request to the Editor of the appropriate journal provided agreement to give proper credit is made. provided agreement to give proper credit is made. Discussion of this paper is invited. Three copies of any discussion should be sent to the Society of Petroleum Engineers office. Such discussion may be presented at the above meeting and, with the paper, may be considered for publication in one of the two SPE magazines.

Abstract
One of the more difficult economic evaluations to make is that for an exploration prospect. The economics can be calculated if it prospect. The economics can be calculated if it is assumed the prospect will be productive or if it is dry; but when the possibility exists for either alternative, the answers must be preceded by an "if" and tend to lose some of preceded by an "if" and tend to lose some of their meaning. This problem is more difficult when multiple prospects within a play are considered and is practically impossible for multiple plays within an exploration program.
The expected value concept has been recognized as a method that can help in providing economics of plays and programs for decision making. Through the use of probability, the "fractional economics" of individual prospects can be calculated and summed into expected value economics for a play. Several plays may then be summed to provide the essence of a plan for a program.
To remove the drudgery from making the economic analysis, exploration and development activities have been modeled on the time-share computer. The system accepts input values of costs, timing, production, and other economic factors on average prospects in a play. Probabilities of different events occurring are also Probabilities of different events occurring are also input and used to calculate expected value results on production and investments. This is done for any number of plays. The economics of each individual play are then computed, and the totals summed into economics for the total program. program. Capability is provided for summing any number of programs into an over-all program. Capital budget categories, exploration manpower requirements and expected reserves, as well as cash flow, net income, rate of return and payout-time information are available on request payout-time information are available on request at each stage of the summing process. These can be considered in relation to company objectives and resource availability.
It should be noted that, by strategic use of probabilities of 0 and 1.0 and by inputting estimates for an actual prospect rather than average prospects, the economics for that actual prospect may be computed. prospect may be computed. This paper discusses in detail the time-share computer expected value exploration system (EVES). Flow diagrams of the logic, the input assumptions, and the results are discussed. Plans for future additions to the system are presented.