The net present value (NPV) of the income stream from the well will be greater than the NPV of the income stream from an alternative investment that is available to the investor. (The NPVs of both investments should be adjusted for risk, taxes, and reinvestment of cash flows.)

NPV is the current value of cash flow that will be received in the future, minus the amount of the investment.  NPV is a standard financial yardstick used for comparing two investments because it accounts for the differences in timing of cash flows from two different types of investments.

Using the Petroleum Evaluator

Start by entering basic well data into the Input sheet . . .

Input sheet, click for detail

. . . which automatically generates four spreadsheets, showing10-year cash flows for the well for four possible rates of oil/gas production (scenarios),  . . .

Well cash flow sheet, click for detail

. . . and also generates a cash flow spreadsheet for an alternative investment (for example, a mutual fund).

Alternative investment cash flow, click for detail

 
The spreadsheets adjust the net present value of the investment in the well for geologic risk and business risk . . .

(Risk Adjustment sheet available on purchase only)

. . . and the results from all of the spreadsheets are summarized in a comparison spreadsheet and in 6 graphs.

Graphs sheet, click for detail

The graph of NPV shows at a glance how the 4 production scenarios, with and without risk adjustment, compare to the alternative investment.

Net present value graph, click for detail

Note to oil and gas industry professionals:

The Petroleum Evaluator uses standard petroleum engineering, geology, and accounting methods, for example: 

• Risk-adjusted NPV ("expected value") is calculated in a payout table.
• Payout time is calculated in months by converting annual production rates to monthly rates, using the 12th root of the annual production rate.
• Intangible drilling costs are divided between dryhole and completion costs according to a user-entered percentage.
• Tangible drilling costs are straight-line depreciated over seven years.
• Internal rate-of-return is calculated using Excel's iterative IRR function which finds the discount rate that reduces NPV to zero.

A user is free to edit formulas and graphs and re-format the spreadsheets, as long as such a derivative work is not distributed with the formulas intact (please see the Terms and Conditions).

The end result is a set of spreadsheets and graphs that provides a side-by-side comparison of the projected investment performance of the well and the alternative investment.  The Petroleum Evaluator spreadsheet package enables the investor to make a confident decision about the risk and profit potential of the drilling deal, compared to the alternative investment. 

Calculations in the spreadsheets are based on well information the investor enters into a simple input sheet.  The investor enters basic information such as initial oil/gas production rate, interest in the well, the cost of drilling and completion, and the business background of the offeror of the drilling deal. The input sheet contains explanatory pop-up boxes and drop-down lists from which generic values can be selected for most entries, enabling the investor to evaluate a drilling deal in a matter of minutes.

The Petroleum Evaluator is designed so that it can be used by an investor who has minimal knowledge of oil and gas investments, and only basic computer skills.  You must already have Microsoft Excel (Version 5.0 or higher) on your computer, but you need only minimal Excel skills (for example: file open, save, click in a cell and type a number, print). 

Today, the goal is to avoid investing in a well that is a drilling success, but is an economic failure (more)

Frequently Asked Questions

Why bother with spreadsheet analysis?
How difficult are the spreadsheets to use?
What well information will I need for using the spreadsheets?
Who created the spreadsheets?
How accurate are the cash flow projections?
How can the spreadsheets be used for evaluating companies drilling
 the Marcellus Shale,  Barnett Shale, Cotton Valley Sandstone, Bakken Shale
 or other highly active oil and gas plays.?

Purchase of the Petroleum Evaluator
 spreadsheet package also includes:

     Investor's Due Diligence Questionnaire

Complete risk-adjusted cash flow projections for example
 wells in 70 different onshore U.S. oil and gas plays

Click for a list of wells

The price of the Petroleum Evaluator for a single-user license (use on one computer) is $129, payable by credit card below.  The Evaluator comes with a 30-day money-back guarantee and is subject to the Terms and Conditions.

Upon purchase, you will immediately be transferred to a download page where you download the files (as a backup, we also immediately email you a link to the download page).  All of the files are contained in a single 40 megabyte compressed folder that takes about 12 minutes to download on a home DSL (56kbps) internet connection.   After downloading to your computer, the compressed folder self-extracts (expands) to a total size of 46 megabytes.  The spreadsheets are in Microsoft Excel version 5.0.  The Due Diligence Questionnaire is in Microsoft Word.  You may complete the download immediately after purchase or anytime within 10 days afterward. 

Petroleum Evaluator

8 linked spreadsheets and 6 graphs in a Microsoft Excel file, including:

• Input spreadsheet (that feeds data to the following linked spreadsheets and graphs)

• 4 oil/gas well discounted cash flow sheets (for 4 production scenarios)

• Risk adjustment spreadsheet (for geologic risk and business risk)

• Discounted cash flow spreadsheet for an alternative investment

• Summary spreadsheet (compares the results from the cash flow spreadsheets)

• Graph spreadsheet (6 graphs that display for various scenarios the production decline curves, average rate-of-return, internal rate- of-return, NPV, and payout time as calculated in the cash flow spreadsheets)

Also includes:

• Investor's Due Diligence Questionnaire in a Microsoft Word file for obtaining information from the offeror of a drilling deal 

• Screenshots of example spreadsheets filled-in for wells in 70 U.S. onshore plays, with graphs of wells sorted by play (280 Microsoft Excel files)

"The Petroleum Evaluator spreadsheet package is gaining wide use by industry and investors as a low-cost tool for quickly evaluating well economics."

2Checkout.com, Inc. is an
authorized retailer of 
goods and services
 on this website

To contact us, email to: customerservice@petroleumevaluator.com

A website owned and operated by

Coloretro
P.O. Box 990
Morrison, CO 80465

Our Privacy Policy