A comparison of discounted cashflow and modern asset pricing methods—project selection and policy implications

Emhjellen, Magne; Alaouze, Chris M.

doi:10.1016/s0301-4215(02)00181-7

Cited by 16 publications

(6 citation statements)

References 17 publications

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“…DCF can be used to show how the tax take is calculated (Nakhle 2004). Furthermore, DCF method has been mostly applied in previous studies and is currently used by IOCs (Emhjellen and Alaouze 2001). According to Siew (2001), it has been found that 99% of IOCs used this DCF technique.…”

Section: Non-discounted Cash Flow Methods (Ndcf) and Discounted Cash Fmentioning

confidence: 99%

Assessment of Upstream Petroleum Fiscal Regimes in Myanmar

Swe¹,

Emodi

2018

JRFM

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This study aims to assess Myanmar’s upstream petroleum fiscal regimes by applying comprehensive indicators to rank the level of attractiveness of Myanmar. The indicators include government take (GT), front loading index (FLI), and composite score (CS). The decision maker’s attitude for GT and FLI were considered in CS linear weighting method in ranking the fiscal terms attractiveness. The results showed that Myanmar’s upstream petroleum fiscal regime has low attraction compared to its competing countries from the investor’s point of view, both in terms of the risk to the investor in the earlier part of the project and in terms of evaluation with or without the time value of money. Also, royalty and cost recovery were identified to have an impact on the attractiveness rank of petroleum fiscal regime in Myanmar. Therefore, Myanmar should consider improving its fiscal regimes that are not neutral—particularly, royalty, tax, profit split, and cost recovery—for a favorable investment climate.

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Section: Non-discounted Cash Flow Methods (Ndcf) and Discounted Cash Fmentioning

confidence: 99%

Assessment of Upstream Petroleum Fiscal Regimes in Myanmar

Swe¹,

Emodi

2018

JRFM

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“…Emhjellen und Alaouze (2003) vergleichen anhand eines Nordsee-Ölprojektes die allgemeine Kapitalwertmethode mit einem verfeinerten Verfahren zur Berechnung von Kapitalwerten mittels individueller Diskontsätze. Sie finden große Unterschiede in den beiden Methoden und führen diese auf die Sensitivität der den jeweiligen Verfahren zugrundeliegenden angenommenen Parameterverteilungen zurück.…”

Section: Literaturüberblickunclassified

Bewertungsmethoden in der Projektfinanzierung Erneuerbarer Energien

Bannier

2016

Schmalenbachs Z betriebswirtsch Forsch

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Zusammenfassung Diese Studie vergleicht die etablierte Kapitalwertmethode mit der neueren Realoptionsanalyse zur Bewertung von Investitionsprojekten im Bereich Erneuerbarer Energien. Anhand eines fiktiven Windparkprojektes wird gezeigt, in welchem Umfang die Realoptionsanalyse in der Lage ist, den Wert aktiver Managemententscheidungen im Verlauf der Projektdurchführung (Fortführungsoption) zu quantifizieren. Es werden die Stärken und Schwächen beider Verfahren herausgearbeitet und gezeigt, dass insbesondere die Kombination aus Management-Flexibilität und politischen Unwägbarkeiten im Bereich Erneuerbarer Energien Vorteile zur Anwendung der Realoptionsanalyse darstellen. Fehlen im jeweiligen Sektor jedoch verlässliche Marktwerte, wird die Aussagekraft der Optionsprämie abhängig von der Güte der somit notwendigen Approximationen durch den individuellen Anwender.Schlüsselwörter Kapitalwertmethode · Realoptionsanalyse · Erneuerbare Energien · Windkraft · Windpark · Fortführungsoption JEL-Classification G32 · Q42 Abstract This study compares the traditional discounted cashflow approach with the newer real options approach for evaluating investments in renewable energy projects. Using the fictitious example of an onshore wind farm, the analysis illustrates in which way the real options method is suitable for quantifying the value of active management decisions in the project sequencing process. The analysis hence focuses K 76 Schmalenbachs Z betriebswirtsch Forsch (2016) 68:75-110 on the sequencing option. The strengths and weaknesses of both the real options method and the discounted cashflow approach are examined in depth. It is the unique combination of management flexibility and political uncertainty surrounding the sector of renewable energy that renders the real options analysis particularly attractive. The potential lack of reliable market assessments of asset values in this sector, however, reduce the validity of the real option approach. The real option premium then becomes a function of the consequent individual approximations made in the evaluation process.

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Section: Introductionmentioning

confidence: 99%

“…The discounted cash flow method is the most common method used by oil companies to value oil projects [7][8][9]. Magne Emhjellen [7] examined the differences in the net present values (NPVs) of North Sea oil projects by using the weighted average cost of capital and a modern asset pricing (MAP) method that involves the separate discounting of project cash flow components. Frenette et al [10] presented a study to maximize the NPV of a greenfield cyclic steam stimulation (CSS) project by incorporating a horizontal CSS analytical model with a new surface model and specifically developed an economic evaluation model.…”

Section: Introductionmentioning

confidence: 99%

“…However, the NPV method requires extensive data, such as the exploration and development investment, average production per well, development well numbers, etc., which are difficult to obtain in the exploration stage. Moreover, cash flow cannot be estimated precisely in uncertain decision-making environments [7], and the value of managerial flexibility in investment projects cannot be precisely revealed through DCF analysis.…”

Section: Introductionmentioning

confidence: 99%

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Integrated Evaluation Method-Based Technical and Economic Factors for International Oil Exploration Projects

et al. 2016

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Abstract:Optimizing international oil exploration projects is one of the main challenges for oil companies in obtaining investment benefits. This paper establishes an integrated evaluation model to maximize investment benefits within the constraints of technical and economic factors, including geological factors, resource quality, geographic conditions, the investment environment, and oil contracts. The paper also proposes a dynamic calculation method of indicators' weight associated with oil prices. The analysis describes the effects of contract terms and the investment environment on project value and quantifies the contractor income ratio for different types of contracts and the investment environment of the host country. Oil exploration projects in Africa are illustrated as examples in which the evaluation indicator Adjusted Concept Reserves (ACR) is calculated for each project. The results show that remaining recoverable reserves and contract terms exert tremendous influences on ACR, and remaining recoverable reserves is the essential factor. Simultaneously, changes in oil prices lead to various rates of change in the contractor income ratio, which is determined by different fiscal terms. This study is important in helping oil companies optimize international oil projects and design reasonable investment strategies.

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A comparison of discounted cashflow and modern asset pricing methods—project selection and policy implications

Cited by 16 publications

References 17 publications

Assessment of Upstream Petroleum Fiscal Regimes in Myanmar

Assessment of Upstream Petroleum Fiscal Regimes in Myanmar

Bewertungsmethoden in der Projektfinanzierung Erneuerbarer Energien

Integrated Evaluation Method-Based Technical and Economic Factors for International Oil Exploration Projects

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