International exploration portfolio valuation

Overview

RISC was commissioned by the shareholder of an Australian listed company to conduct a valuation of the company’s international exploration asset portfolio from public domain information.

Approach

Our valuation assessed the remaining prospectivity of its exploration assets and the viability of developing its contingent resources in the prevailing low oil price environment. RISC assessed a range of low, mid and high valuations for each asset in the portfolio using the following methods:

• For the contingent resources, RISC first generated low, mid and high resource estimates for the discoveries within the portfolio. It then determined the minimum economic field size for each discovery using a discounted cashflow analysis at a range of oil price sensitivities. A risk (discount) factor was applied to the value that was determined for the low, mid and high resource estimate to account for uncertainties in implementing a successful development of each discovery
• For prospective resources in early stage exploration assets with some assessment of prospectivity, discounted cashflow analysis was used to determine a minimum economic discovery field size. The economic value of various field sizes was applied to the company’s reported low, mid and resource estimates for identified prospects. This value was then risked (discounted) for geological risk, project implementation risks and to avoid winner’s curse.
• For permits with recent failed exploration or early stage exploration with no substantial identification of prospectivity, value was ascribed based on remaining work program activity.

Outcome

Our client was able to make decisions with confidence on how to manage its shareholding in the company.