The reason for the valuation will determine the method to be applied to carry it out. This manual provides the methods and procedures to calculate the present value of oil and gas properties using discounted future income. Kansas department of revenue property valuation oil. Manual for valuation and assessment of oil and gas. Value is lost by participants with ineffective strategies. The risk of paying too much for an acquired property. Overview manual for valuation and assessment of oil and gas. The same applies to reserves terminology and reserves categories. Smith department of finance southern methodist university dallas, tx 75275 june 2, 2003 i. It provides that the fair market value of an oil and gas property is the amount which. Ebitdax, proved reserves, daily production, the oil mix.
In order to effectively convert a geological opinion or idea into a number, it is helpful to have a functional understanding of the methodology and terminology of evaluating the monetary value of a producing oil and gas property. Physical properties of oil viscosity the viscosity of an oil is a measure of the oils resistance to shear. Royalty valuation produced the following examples to assist onrr stakeholders in correct valuation reporting. Startzman oil and gas auctions help transact billions of dollars in property sales in the us each year. Upon written application, the office of property valuation may grant an. This cd also includes selected papers from two out of print volumes spe reprint series no. Oil property evaluation, second edition by robert s. Capitalization rate since the valuation of oil and gas property is predicated on a three year production, the capitalization rate will be considered in a similar manner. Oil property evaluation hardcover january 1, 1985 by robert s. High viscosity implies a high resistance to flow while a low viscosity indicates a low resistance to flow. Chapter 26 valuing real estate the valuation models developed for financial assets are applicable for real assets as well. Brian is an active member of several accounting professional.
The director of property valuation is required to value the property of any person or company that is in the business of transporting or distributing to, from, through or in this state gas, oil or other commodities in pipes or pipelines. The appraisal of oilgas mineral interests completed or producing for ad. Definition and impact of petroleum property valuation the term petroleum property valuation refers to the analytical procedure by which the commercial value of oil and gas fields is assessed. Oil property evaluation thompson pdf as it is impossible to predict the price of oil in the future. Our purpose in this section is to provide a general overview of a few fundamental and universal concepts that materially impact any valuation.
There can be several interests in one property at the same time and each of these is capable of being valued. With the market currently in a state of flux, oil and gas property owners are faced with the choice to sell assets or hold out until market conditions improve. Oil gas valuation quick reference amazon web services. You could value the other business segments by using a segmentlevel dcf or other methods rather. Overview manual for valuation and assessment of oil and. Three standard valuation approaches the income approach, the market approach and the asset approach typically are applied in valuing companies in the oil and gas industry. Cash flows to be received immediately are given full weight, since pvi,0 1, but the weight assigned to a future receipt declines according to the amount of delay. H30702 economic evaluation of oil and gas properties handbook. As described in the referenced memo, lease operators. A valuation does not necessarily lead to a transaction sale or purchase that can support or contradict the valuation, thus the value of the property is not exact and is often adjusted according to the purpose for which it is used.
The seminar is designed to help you gain a better understanding of the various aspects of the evaluation of hydrocarbon reserves as. The difference between wellhead and in situ resource values is examined, as well as drawbacks inherent in the concept of oil and gas equivalents. The principles of real estate valuation are presented in the uniform appraisal standards for federal land acquisitions 1992 and in the. The 105effect of underground storage tanks on residential property values in cuyahoga county, ohio journal of real estate research contaminated waterways and property valuation the appraisal journal buried oil tanks can break home sale deals north property values, tanks, and contamination practical environmental solutions. These examples serve as guidance for determining value for royalties and are not an appealable decision or order under 30 cfr part 1290, subpart b. First, attain the production decline rate of a field from past operation and the current production for the year of the appraisal to calculate the total production over the economic life of the well or property. The first step in choosing the appropriate valuation approach is to understand the sector of the value chain in which the subject company operates.
Simple property valuation model showing the 3 primary methods for valuing property assets with an interactive visual. Property valuation oil and gas kansas department of. Scope this standard provides information and guidance concerning the effect of environmental contamination on the valuation of property for assessment purposes. We develop and analyze a model of an oil propertyeither a developed property or a proven but. It is important to know not only how to determine the value of oil and gas properties but the methods used in arriving at property values. Oil and gas lease agreements generally provide for the lessee to begin drilling for oil and gas on the property within one year after the granting of the lease. If drilling has not begun within this period of time, the lease agreement will either expire or provide for the payment of a sum of money in order for the lessee to retain the lease. In summary, the methodology for the valuation of producing gas and oil properties can be stated. For those owners considering a sale, an oil and gas properties valuation is required to help you make the. H30702 economic evaluation of oil and gas properties. The basic economic equation for evaluating a producing property is as follows. Standard on the valuation of properties affected by.
Operating costs estimates for fixed, variable, per well, and overhead costs are included in any oil and gas properties valuation. Jurisdictions will usually specify procedures somewhat differently than those contained in this chapter. Direct comparison is also quick and straightforward, and is the best method for valuing standardised units in housing estates. This paper will provide a quick look at property valuation to. Valuation is concerned with the value of an interest held in property.
To be successful, any valuation method must correctly account for uncertainty geologic as well as economic and the value of flexible management in pursuit of optimal development and use of the. Principles and practice of property valuation an active and wellpublicised property market, but if and only if the market works reasonably rationally. The petroleum industrys reliance on accurate and reliable valuation methods is apparent. Before continuing, it may be useful to briefly re view the nature of oil property appraisal and how oil property valuation is related to the thr ee standard methods of appraisal commonly used by real estate and business valuation appraisers.
Scholesmerton methods for valuing put and call options. This task represents a complex analytical problem that has challenged traditional valuation methods. Less attention has been given to those other influences which affect the value of the oil and gas, to the various valuation methods appropriate to. Standard on the valuation of properties affected by environmental contamination 1. The comptrollers office relies upon the manual for discounting oil and gas income pdf to conduct oil and gas property appraisals used in the pvs. A common application of valuation methods is to determine value for taxation. The standard includes definitions of types of environmen. The purchase of any oil and gas producing property is a complex business venture.
Refer to important disclosures at the end of this report. H30702 economic evaluation of oil and gas properties handbook table of contents page. A federal oil and gas property may be exchanged through the authority of the secretary of the interior under. Real estate investments comprise the most significant component of real asset investments. Manual for valuation and assessment of oil and gas producing property in new york state. Oil property valuation isbn 9781443726412 pdf epub paul. The use of guide policies, procedures, guidelines, and prescribed rendition forms are. An oil and gas properties valuation lets buyers know if your property ready for business or if its a bit more complicated. Viscosity is more commonly known as resistance to flow.
Property tax forms and instructions for public service. Division of property valuation pvd or as an addition to the lease by the county appraiser. The term petroleum property valuation refers to the analytical procedure by. Valorem tax purposes in texas according to the texas constitution, article viii. State of west virginia department of revenue state tax. Changes with temperature, decreasing temperature increases viscosity. A simple property valuation excel model showing the 3 primary methods for valuing property assets.
More examples are in production and will be made available as completed. Oil and gas appraisal borrows many concepts and procedures from real estate. Oil and gas property valuation and economics includes 30 papers on property and project valuation, risk analysis, international economics and fiscal regimes, and special focus topics. Mortgage sale purchase rent company reports probate. Jan 06, 2020 the energy sector comprises of oil and gas, utilities, nuclear, coal, and alternative energy companies. There are no longer locally assessed gas gathering lines valued on personal property schedule v per the pvd gas transportation memo dated march 6, 2006, noted in the oil and gas appraisal guide. Forest oil corporation, oil and gas valuation report gdge0484v published 10 2008. Before covering specific details related to the oil and gas industry and your royalty interest, it is important to understand basic concepts related to all valuation analyses. To meet the challenge, new and highly innovative techniques. For many years, analysts in real estate have used their own variants on valuation models to value real estate.
Jan 01, 2015 1 overview 2 time value of money 3 investment decision analysis 4 resources and reserves 5 decline curve analysis using arps equations 6 introduction to advanced decline curve analysis 7 oil and gas prices 8 mineral and surface ownership 9 capex and opex 10 severance and ad valorem taxes 11 u. It consists of defining data requirements, assembling the best available data, and applying an appropriate evaluation method. The term appraisal is avoided in connection with the valuation of oil and gas reserves. There is a place in oil and gas valuation work for the comparative sale method. Numerous methodologies in the valuation of mineral rights have evolved over a period of time that form the basis for acquisitiondisposal discussions. Upstream petroleum fiscal and valuation modeling in excel. The basis of economic evaluation of any proposed drilling venturea new field, pool, or just a single. As the owner of oil and gas properties, you are familiar with all of the decisions, fees, and hassles of managing your rights. But for most people, its the exploration and production, drilling, and refining of oil and. Valuing oil, gas, and alternative energy assets, second edition keeps business appraisers, analysts and owners current with the key trends, data, and valuation approaches in this constantly evolving space. However, the price for metallurgical coal was revised based upon information that was unavailable on june 30. Before you begin projecting an energy companys financial statements, you need to know something about the units used. The final valuation variables are being filed for inclusion in the state register. Download free printable property evaluation form samples in pdf, word and excel formats.
This barcode number lets you verify that youre getting exactly the right version or edition of a book. See all formats and editions hide other formats and editions. With extensive experience providing services to the manufacturing, retail, distribution, software, oil and gas, and professional services industries, brians diverse knowledge and technical skills allow him to provide comprehensive consulting services to his clients. Property evaluation form 4 free templates in pdf, word. Forest oil corporation, oil and gas valuation report gdge0484v published 10 2008 globaldata. This is an approximate price based on the current exchange. Our purpose in this section is to provide a general overview of a few fundamental and universal concepts that. Published accounts of the valuation of oil properties have been con cerned chiefly with the important element of the oil and gas contents of lands.
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