Capital allocation plans are being analyzed within the exploration and production group of an integrated oil and gas company utilizing information from a mathematical model which determines optimal allocations of single and multi-year capital outlays to exploration and development projects. The optimization processes focus on key performance drivers which better relate to enhancing shareholder value than more traditional accounting measurements such as net income, earnings per share, and return on assets. Key strategies for successful implementation of the model are discussed.

Keywords:
society of petroleum engineers, optimization problem, forecast, capital, optimization model, upstream oil & gas, project economics, lp model, spe 25823, selection
Subjects:
Asset and Portfolio Management, Risk Management and Decision-Making, Information Management and Systems, Project economics/valuation, Capital budgeting and project selection
Copyright 1993, Society of Petroleum Engineers
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