Chapter 9: Other Financial Measures Available to Purchase

Net present value isn’t the only measure oil companies use to indicate the financial attractiveness of new opportunities. There are others, several others in fact, and I’m going to talk about some of them in this chapter. I say some of them because although they all have merits to a greater or lesser extent, a few are more commonly used than others, which are unit costs, payback, internal rate of return , and the present value index. I’ll describe these four measures first and then summarize their relative advantages and disadvantages later on, and I’ll include net present value in that as well.