revenue risk of u.s. tight-oil firms
Clicks: 303
ID: 226434
2016
Article Quality & Performance Metrics
Overall Quality
Not rated
Combines reader engagement with the AI quality analysis. This
article has not been analysed, so there is no overall score —
reader engagement is measured and shown alongside.
Reader Engagement
Steady Performance
30.0
/100
303 views
29 readers
AI Quality Assessment
Not analyzed
Readership in this journal
SteadyRanked #61 of 526 articles by views in acs combinatorial science
Most read
Least read
Bar heights use a square-root scale. Only the 120 most-read articles are drawn; the journal has 526 in total.
Mint this article as an NFT
Not yet mintedCreate a permanent, verifiable on-chain record of this article on the Scimatic Network. The NFT is held in your Journament account, and you can withdraw it to your own wallet at any time.
5
SUSD
one-off · no wallet required
Abstract
American U.S. crude oil prices have dropped significantly of late down to a low of less than $30 a barrel in early 2016. At the same time price volatility has increased and crude in storage has reached record amounts in the U.S. America. Low oil prices in particular pose quite a challenge for the survival of U.S. America’s tight-oil industry. In this paper we assess the current profitability and future prospects of this industry. The question could be broadly stated as: should producers stop operation immediately or continue in the hope that prices will rise in the medium term? Our assessment is based on a stochastic volatility model with three risk factors, namely the oil spot price, the long-term oil price, and the spot price volatility; we allow for these sources of risk to be correlated and display mean reversion. We then use information from spot and futures West Texas Intermediate (WTI) oil prices to estimate this model. Our aim is to show how the development of the oil price in the future may affect the prospective revenues of firms and hence their operation decisions at present. With the numerical estimates of the model’s parameters we can compute the value of an operating tight-oil field over a certain time horizon. Thus, the present value (PV) of the prospective revenues up to ten years from now is $37.07/bbl in the base case. Consequently, provided that the cost of producing a barrel of oil is less than $37.07 production from an operating field would make economic sense. Obviously this is just a point estimate. We further perform a Monte Carlo (MC) simulation to derive the risk profile of this activity and calculate two standard measures of risk, namely the value at risk (VaR) and the expected shortfall (ES) (for a given confidence level). In this sense, the PV of the prospective revenues will fall below $22.22/bbl in the worst 5% of the cases; and the average value across these worst scenarios is $19.77/bbl. Last we undertake two sensitivity analyses with respect to the spot price and the long-term price. The former is shown to have a stronger impact on the field’s value than the latter. This bodes well with the usual time profile of tight oil production: intense depletion initially, followed by steep decline thereafter.
| Reference Key |
abadie2016energiesrevenue
Use this key to autocite in the manuscript while using
SciMatic Manuscript Manager or Thesis Manager
|
|---|---|
| Authors | ;Luis Mª Abadie;José M. Chamorro |
| Journal | acs combinatorial science |
| Year | 2016 |
| DOI |
10.3390/en9100848
|
| URL | |
| Keywords |
Citations
No citations found. To add a citation, contact the admin at info@scimatic.org
Comments
No comments yet. Be the first to comment on this article.