Introduction

1
What is an Asset?
Something that has potential or actual value
to an organization.

 It can also be defined as a resource with

economic value that is owned by an
individual, corporation or country which has
a present value or with the expectation that it
will provide “future value”.

 But it should be remembered that the value

created shall be in good fit with the vision
and strategic objectives of organization.
2
 Assets are bought

 to increase the value of a firm

or
 To benefit the firm's operations.

 So, You can think that an asset is

something that can generate cash
flow.

3
Nature of Assets
 Human Assets: The behaviors, knowledge &
competence of the workforce (have a fundamental
influence on the performance of the organization).
 Financial Assets: Financial resources are required
for material & infrastructure investments, operation,
maintenance etc.
 Physical Assets : Plants, Machinery, Building,
vehicles, oil rigs, Pipelines, storage units,
process plant conveyors etc. (have distinct value.
 Intangible Assets: The organization’s Brand &
Reputation, Image, Goodwill, Customer’s relations
etc. are the supreme drivers of Co.’s future
success and can have a significant impact on
increasing the total market value of companies. 4
 In the context of accounting, assets are either

 Current : Those that will be consumed within

one year. (A current asset is cash or any asset
that can be converted to cash within one year).

Or,
 Fixed : Those that are expected to keep
providing benefit for more than one year, such
as equipment, buildings, real estate, Bonds,
Fixed Deposit etc.
5
What is an Asset in oil
& Gas Business?
 Oil and Gas Fields
 Wells
 Production Facilities
 Pipelines
 The Entire Infrastructure required to
produce, store & sell Hydrocarbons
produced from the field.
6
What is Asset Management?
Asset Management is a systematic process of
Deploying (Installing), Operating, Maintaining,
Upgrading, and Disposing of tangible and
intangible assets cost-effectively.

OR,
 British Standard Institute, 2015 defines “Asset
Management” as the systematic & coordinated
activities and practices through which an
organization optimally and sustainably
manages its assets, their associated
performance, risks and expenditures over their
life cycles for the purpose of achieving the
organization’s strategic plan. 7
What is Asset Management (cont……)

The Primary focus of asset management

is on the “long-term life cycle of the asset”
and its “sustained performance”, rather
than on short-term, day-to-day aspects of
the asset .

8
Evolution of Asset Management Discipline
 Asset Management is not new.

 People have been managing assets for

thousands of years.

 What has changed, however, “the

is
cumulative recognition that good Asset
Management involves optimizing the cost,
risk and performance over the whole
asset life”.

9
Evolution of Asset Management Discipline (Cont….)
 The PAS 55 2004 British Standard was originally
produced in 2004 by a number of organizations
under the leadership of the Institute of Asset
Management and is considered the first
internationally recognized specification for Asset
Management. (PAS : Publicly Available
Specification)
 The PAS 55 2008 was released in Dec.,2008
along with a toolkit for self assessment against
the specification. This 2008 update (Pas 55
2008) was developed by 50 organizations from
15 industry sectors in 10 countries (Argentina,
Australia, Brazil, Canada, China, UK, US, India etc).
10
Evolution of Asset Management Discipline
(Cont….)

 After the widespread adoption of PAS 55 in

Utilities, Transport, Mining, Process and
Manufacturing industries worldwide, then the
International Standards Organization (ISO)
accepted PAS 55 as the basis for the
development of the new ISO 55000 series of
International Standards.

 ISO 55000 published in 2014 defined Asset

Management as “Coordinated activity of an
organization to realize value from assets”.
11
Evolution of Asset Management Discipline (Cont….)
 After almost 10 years of development (2004-2014),
three international standards (55000/1/2) were
launched in London on 5 February 2014.
 Currently three standards have been published:

1. ISO 55000:2014 Asset management – provides an

overview of the subject of asset management and
the standard terms and definitions.
2. ISO 55001:2014 Asset management – Provides the
requirements specification for an Integrated,
Effective Management System for asset
management.
3. ISO 55002:2018 provides guidance for the
implementation of such a management system. 12
What are the Principles of Good Asset
management?

1. Holistic: Looking at the whole picture, i.e. the

combined implications of managing all
aspects.

2. Systematic: A methodical approach, promoting

consistent, and auditable decisions and
actions.

3. Risk Based : Focusing resources and

expenditure and setting priorities, appropriate
to the identified risks and the associated cost /
benefits. CONT….. 13
What are the Principles of Good Asset
management? (Cont……)
4. Optimal: Establishing the best value of the asset
over its life cycles considering its performance,
cost and risk.
5. Sustainable: Considering the long - term
consequences of activities to ensure that adequate
provision is made for future requirements and
obligations (such as economic & environmental
sustainability, societal responsibility etc.).

6. Integrated: Recognizing that interdependencies

and combined effects are vital to success. This
requires combination of all attributes (mentioned
above), coordinated to deliver a joined – up
approach and net value . 14
What is Asset Management System?
 The International standard ( ISO 55000, 55001 &
55002) enables an organization to achieve its
objectives through the effective and efficient
management of its asset.

 The application of an asset management

system provides assurance that the objectives
can be achieved consistently and sustainably
over time.
 Asset Management System is the process
which is used by a company or organization to
realize value from assets in the achievement of
its (organization) objectives. 15
 Thus, an Asset Management System is used by
the organization to direct, coordinate and
control asset management activities.

 It can provide improved risk control and gives

assurance that the asset management
objectives will be achieved on a consistent
basis.

16
 Asset Management system shall answer following
questions:
 Do you understand the risk profile associated with your
asset portfolio and how this will change over time?
 Do you understand the business consequences of reducing
your capital investment or maintenance budgets by 10%
over the next 5 years?
 Can you justify your planned asset expenditures to external
stakeholders?
 Can you easily identify which investment projects to defer
when there are funding constraints?
 Do you have the appropriate asset data and information to
support your asset management decision – making?
 Do you know if your people have the right competences and
capabilities to manage your assets?
 Do you know which Asset Management activities to
17
outsource?
Asset Management Software

1. Asset Panda
2. ServiceNow Asset Management
3. Keizen Asset Manager
4. Summit etc

18
Asset management software tracks every aspect
of an asset and is very useful to an organization
because, aside from keeping track of assets, it can
also provide additional functions like:

 Tracking vendor and Measuring vendor

performance
 Vendor audit and policy compliance
 Optimization of costs for licensing
 Streamlining of procurement processes
 Maximize utilization of assets
 Optimized allocation of assets for greater return
on investment
19
Why Asset Management is important?
Asset Management is important because
it can help organizations to:
1. Reduce the total costs of operating their assets.
2. Reduce the capital costs of investing in the
asset base.
3. Improve the operating performance of their
assets (reduce failure rates, increase availability
etc.).
4. Reduce the risks of operating the assets.
5. Reduce the potential health impacts of
operating the assets.
CONT….. 20
Why Asset Management is important? (Cont….)

6. Minimize the environmental impact of

operating the assets.

7. Maintain and improve the reputation of the

organization.

8. Improve the regulatory performance of the

organization.

9. Reduce legal risks associated with operating

assets.

21
Asset life cycle

The Figure captures a simple representation of Asset. The arrows don’t

represent the length of time spent in each phase. 22
Asset life cycle
1. Acquire
This covers:

 Planning

 Designing

&

 Procuring an asset.

23
Asset life cycle

2. Commission

 This covers the activities of

installing / creating or building the
asset and ensuring that it is fully
functional.

24
Asset life cycle
3. Operate
 This phase provides the function for
which it was designed.
 During this phase, the asset is
subjected to

 Monitoring,
 Maintenance,
 Restoration
and
 Upgrade
…………………….. to meet any
change in operational
requirement. 25
Asset life cycle
4. Dispose
This is a key period within an
asset’s life.

Key activities during this period

include:
 The removal of the asset from
operation
 The disposal or recycling of
the asset or its components

26
 So, Asset Management is the
Management of the Asset in all its aspect
and in all stages.

 Asset Management covers all Planning,

activities and decisions involved in the
full life – cycle of an asset .

27
Asset Management in O&G industry is the
management of the asset in all its aspect & stages
 License award
 Exploration and appraisal results
 Reserves Estimation (volumes) of hydrocarbons
and recoverable reserves
 Production profiles
 Development concept
 Timeline for major activities
 Cost
 Revenue
 Economic projections
 Criteria for making major decisions.
28
What is the scope of Asset Management?
1. Review government policies.
2. Review economics of typical investment
opportunities.
3. Prepare preliminary plans and estimate CAPEX,
OPEX and production profile of any product or
commodity.
4. List the risks and evaluate the uncertainties.
5. Prepare preliminary design of surface facilities.
6. Introduce changes in operations management
at later years.
7. Negotiate sales.
29
What is Asset Management Plan (AMP)?

 AMP is a document describing the plan

for managing an organization's assets
that combines multi-disciplinary
management techniques (including
technical & financial) over the life cycle
of the asset in the most cost effective
manner to provide a specific level of
service.

30
Asset Management Plan (Cont…..)
 An asset management plan is a living
document which is updated frequently
to reflect :

1. The changes in asset performance.

2. The impact of internal decisions.
and
3. The impact of external factors.

31
What is Asset Management Plan for Oil and Gas
industry?
 AMP describes the history of the asset from
the beginning with terms of :
 License award.
 Exploration and appraisal results.
 Estimates of volumes of HCs in place.
 Estimates of recoverable reserves.
 Production profiles.
 Development concept.
 Timeline of major activities.
 Cost, revenue, and economic projections.
 The criteria for making major decisions.
32
 Thus, ASSET MANAGEMENT PLAN PROVIDES:
• Details of the Asset.
• Documents depicting the assumptions &
Uncertainties.
• Summary of Growth & Development Plans for the
Asset.
• Summary of Results in Terms of Appraisal,
Production Forecasts, Budgets, Cash Flow,
CAPEX & OPEX Forecasts, Project Execution
Plan (Time Line of Key Decision).
• An Overview of opportunities.
• Benchmarking data to facilitate comparison with
similar assets in the company and in the industry.
33
WHAT IS THE ROLE OF ASSET
MANAGEMENT ?

34
 Role of Asset Management
“To maximize intrinsic (inherent)
value of the asset without
compromising Company or Host
Government policies or ignoring
stakeholder’s concerns”.
To achieve, we need to have :
Three Steps:
• Set Asset Management Objectives
• Develop an Asset Management Plan
• Ensure delivery of the Plan 35
Let Us know some common
terminology used in Asset
Management

36
Portfolio: A collection of all assets
owned by a company.

Reserves: The amount of mineral

deposit viz. oil and gas that can be
produced from field with the existing
facilities and with the existing
economic condition.

37
Life-Cycle:
Life of An Asset In Years From
Start to End of a Project.

Capex
• Stands for Capital Expenditure.
• It is incurred on the Initial
development of an industry.

38
Opex:

• Stands for Operating Expenditure.

• Incurred in Routine Administrative
and Maintenance Expenses of a
Business.

39
 Depreciation:
 It is the Loss in the Value of Capital
Goods Over a Period of Time due to
the Normal Wear & Tear of the
Capital Goods in the Process of
Production.

Gross Revenue:
 Annual Production × Product Price
40
 NCF:
Annual Net Cash Flow =
Gross Revenue – ( Royalty + Capex
+ Opex + Taxes)
What is the difference between Royalty and Tax??

Royalty is charged from the start of

production.

But Tax is only payable once there is a

positive taxable income.
41
Royalties
 Royalties to the government are payments in return for
the permission to engage in certain activities on
government lands.
 A common example is oil and natural gas projects. When
a company starts such a project on government lands, it
must lease the land and then pay a royalty fee on the
value produced by the land, since it is still technically
owned by the government.

Taxes
 Taxes are payments that must be made on revenue that
is generated from normal business activities. While taxes
are also based on rates, they do not depend on particular
land leases or activities.
 Anytime revenue is produced, including through typical
income or through investment, taxes must be taken out.
42
Royalty:
 A lessee is a person who is granted mineral concessions.
 The owner of the land is called lessor. The lessor has a
right to receive a royalty based on the production of
minerals.

 The lessor i.e. State/Central Governments collect royalty

irrespective of whether mineral is marketed or not
marketed.
 The lessee is required to pay a certain amount in respect of
the mineral extracted in proportion to the quantity
extracted.

 Such payment is called “Royalty”.

 Royalty is calculated on the quantity of minerals extracted

or removed.
43
 Time Value of Money (TVM)

• TVM is an important concept in

economic evaluation.

• It is based on the concept that a

dollar that you have today is worth
more than the promise or expectation
that you will receive from that dollar
in the future.
44
 Time Value of Money(TVM)
• e.g. You can invest your dollar for one
year at a 6% annual interest & you can
accumulate $ 1.06 at the end of the year.

• You can say that the future value of 1

dollar is $1.06 at 6% interest in one year
period.

• It also says that the Present Value of

$1.06 you expect to receive after one
year is $1.
CONT……. 45
NPV:

Net Present Value i.e. discounted

value of future cash flow from an
asset as of a certain date using a
pre- determined discount rate.

46
Net Present Value (NPV)

 Net Present Value (NPV), is

defined as the difference between the
sum of the “discounted cash flows”
expected from the investment and the
amount initially invested.

 NPV is the technique and uses the

concept of TVM

CONT……. 47
Net Present Value (NPV) …… Cont.
 The discount rate refers to the interest
rate used in discounted cash flow
(DCF) analysis to determine the
present value of future cash flows.


 The discount rate in DCF analysis

takes into account not just the time
value of money, but also the risk or
uncertainty of future cash flows; the
greater the uncertainty of future cash
flows, the higher the discount rate.

48
 Thus, NPV is the present value of future
net cash flows for a given discount rate.
 The Net Present Value (NPV) of a project
or investment is defined as the sum of
the present values of the annual cash
flows minus the initial investment.
 As an investment criteria, the
Companies look for investment
opportunities which yield the highest
NPV.
 The formula for NPV is
49
C1 …… Cn = Cash Inflow i.e. Return
C0 = Cash Outflow i.e. Amount Initially
Invested.
K = Discount Rate
The Net Present Value (NPV) Concept says :
• Accept all projects whose NPV is +ive or NPV > 0 .
• Drop all projects with NPV < 0
• If NPV = 0, we are indifferent between accepting or
dropping the project.
• The NPV method can be used to select between
projects. The one with the higher NPV should be
selected. 50
51
 NPV is one of the most robust financial
evaluation tools to estimate the value of an
investment.

52
Net Present Value (NPV) …… Cont.

 The discount rate refers to the interest rate

and is used to determine the present
value of future cash flows.

 The discount rate takes into account not

just the time value of money, but also the
risk or uncertainty of future cash flows;
the greater the uncertainty of future cash
flows, the higher the discount rate.

53
54
Profitability Index (PI)
 It is also known as :
 “Present Value Index”,
or
 “Discounted Profit – to - Investment
Ratio”
or
 Investment Efficiency.

 It can also be used as a criterion to

accept or reject an opportunity.
CONT……. 55
 • Calculated by dividing NPV by capital
expenditure or Investment

Investment efficiency will be:

Positive if NPV is positive
Negative if NPV is negative 56
PI or Investment Efficiency (cont….)
The profitability index rule states:

 If the profitability index or ratio is greater

than 1, the project is profitable and may
receive the green signal to proceed.
 Conversely, if the profitability ratio or
index is below, the optimum course of
action may be to reject or abandon the
project.

CONT……. 57
PI :
e.g. Case I Case II
Investment 200,000 100,000
NPV 500.000 400,000
PI = NPV / Investment
Hence, PI:
Case I = 500,000/200,00 = 2.5
Case II = 400,000/100,00 = 4 (CHOOSE)

58
EMV:
 Expected Monetary Value. it is also
known as risked NPV.
 It represents a weighted average of
possible NPV’s of all outcomes from an
event in which weights reflect
probabilities of outcomes.
 The EMV concept is a method for
combining probability of risk with NPV to
yield a risk-adjusted decision criterion.

59
 The EMV concept holds that when
choosing among several decision
alternatives, all other factors being
equal, the decision - maker should
accept the decision with maximum EMV.

 EMV is positive for opportunities and

negative for threats.

60
Limitations of EMV

 Some decision - makers have

rejected EMV since they believe it is
difficult to assign the probabilities
to the variables used in expected
value.

61
 EMV: Expected Monetary Value is the risk and
probability adjusted value of an Opportunity.
EMV = P X NPV
Where, P = Probability of an outcome
and NPV = Net Present Value of that outcome
Probability
of Success
B
27.5 (NPV) 1. 60% chances are there that we would get 27.5 NPV
.6 2. 40 % chances are there that we would not get 27.5
A Probability NPV
.4
of Failure
-4

Decision for leaving project

Decision for
Exploration

Thus, EMV = 0.6 × 27.5 + 0.4 × (-4)

= 16.5 + (- 1.6) = 14.9
 Calculation of EMV from decision tree

Q. Decision has to be taken for selection of

a project from two. The outcome from
project 1 is 300,000 if it is successful,
otherwise loss of 40000. The probability of
success is 0.2 for project 1. The p(success)
are 0.2, 0.1, 0.7 for project 2, and the
outcomes are 50,000, -10000, 150,000,
-20000, 60000 and -12,000.
Find out which project is to be accepted?
(All outcomes in $)
63
64
EMV of project 1 =
60000 – 32000 = 28000

EMV of project 2 =
10000 - 8000 + 15000 - 18000 + 42000 -
3600 = 37400

Since the EMV of project 2 is higher,

project 2 will be good to undertake.
65
Q. Probability of a successful well is 0.6.
Two decision alternatives:

Farm out: Producer’s return is worth

$50,000, a dry hole causes no
profit or loss.

Drilling the well: A dry hole costs

$200,000, a hit brings
(after all costs)
$600,000
66
 (Loss)

(Profit)

(3rd party to
be engaged
for drilling)

67
 DECISION ALTERNATIVES

DRILL FARM OUT

Outcome Probability Conditional Expected Probability of Conditional Expected
of Outcome Monetary Monetary Outcome Monetary Monetary
Value Value Value Value

Dry hole 0.4(F) - $200,000 - $80,000 0.4 0 0

Successfu 0.6 (s) +$600,000 +$360,000 0.6 +$50,000 +$30,000

l Hole

EMV EMV Farm

Drill=+$280,0 Out=$30,0
00 00

Since EMV is higher while drilling the well, company

should go for drilling rather than farm out. 68
Decision Tree Analysis
“Decision trees” are “graphical
representations of alternative
choices” (that can be made by a
business), which enable the decision
maker to identify the most suitable
option in a particular circumstance.
e.g. Decision Tree is used when O & G
exploration companies have to decide
whether to invest in a particular field, or in
choosing to allocate resources to
exploiting one field rather than another. 69
Decision Tree Analysis (Cont……)

 Decision trees are frequently used

to analyze management decisions
by “finding the decision with the
maximum EMV”.

70
EXAMPLE: An oil wildcatter has to make a
decision of whether to drill or not to drill on a
specific site.
Chance of hitting an oil deposit:
Oil : 40%,
No – oil : 60%
Cost of drilling : 70K,
Payoffs (Return) : Oil: 220K; No – oil : “0” K

71
How to Draw a Decision Tree?
• The decision is represented by a small square
towards the left.
• From this box, draw out lines towards the right
for each possible solution (option), and that
solution is written along the line.
• At the end of each solution line, results are
considered.
• If the result of taking that decision is uncertain,
a small circle is drawn.
• Squares represent decisions
decisions; circles represent uncertainty.

72
Advantages of Decision Tree
 Help us to make the best decisions
on the basis of our existing
information.

 Are simple to understand and

interpret.

73
Disadvantages of Decision Tree
 How accurate is the data used in the
construction of the tree.

 How reliable are the estimates of

the probabilities.

 Data may be historical – does this

data relate to real time
74
Pay Back Period
• While starting any business venture or
introducing any new product in the
market, it is important to determine its
payback period.
• Pay Back Period is the length of time in
which the initial cash outflow of an
investment is expected to be recovered
from the cash inflows generated by the
investment.
• It is one of the simplest investment
appraisal technique.
Pay Back Period (Cont…..)
• The payback period of a given
investment or project is an
important determinant of whether to
undertake the position or project, as
longer payback periods are typically
not desirable for investment
positions.
When cash inflows are uneven, we
need to calculate the cumulative net
cash flow for each period and then
use the following formula:
Q. Find the payback period for the cash flows given as
below:
year Cash flow ($)

0 -30,000
1 10,000
2 9,000
3 8,000
4 4,000
year Cash flow Cumulative cash flows
($)
0 -30,000 -30000
1 10,000 -30,000+10,000= -20,000
2 9000 -20,000+9,000= - 11,000
3 8000 -11000+8000= - 3,000
4 4000 - 3000+4000= 1,000
Payback period= 3 + (3000/4000)
= 3+ (3/4*12) to change into months multiply by 12
=3+9
=3 years 9 months
Decision Rule:

Accept the project only if its payback

period is LESS than the target
payback period.
Advantages:
1. Payback period is very simple to
calculate.
2. It can be a measure of risk inherent in a
project.

Disadvantages:

Payback period does not take into

account the time value of money which
is a serious drawback since it can lead
to wrong decisions.
Internal Rate of Return (IRR)

 The IRR of an investment is

the discount rate at which the net
present value of costs (negative cash
flows) of the investment equals the net
present value of the benefits (positive
cash flows) of the investment.
Internal Rate of Return (Cont…..)
 As the discount rate increases then the
NPV is reduced.

 At a specific discount rate, the NPV is

reduced to zero. This discount rate is
called the internal rate of return (1RR).
Internal Rate of Return (Cont……)
 It can also be defined as the discount rate at
which the present value of all future cash flow
is equal to the initial investment or in other
words, the rate at which an investment breaks
even.
 All independent projects with an IRR greater
than the cost of capital should be accepted.

 Thus, an investment is considered acceptable if

its internal rate of return is greater than an
established minimum acceptable rate of
return or cost of capital.
Internal Rate of Return
(Cont…..)
 One way of calculating the
IRR is to plot the NPV
against discount rate, and
to extrapolate/interpolate to
estimate the discount rate
at which the NPV becomes
zero.
Internal Rate of Return (Cont….)
To find the internal rate of return, the
discount rate that makes the following
equation zero has to be calculated.

Where NPV= 0 and IRR is the discount

rate that makes NPV=0.

Co = Initial Investment
Internal Rate of Return (IRR)
• Accept all project with IRR > discount
Factor
• Drop all project with IRR < discount
Factor
• If IRR = Discount Factor, We are
indifferent
Internal Rate of Return (IRR)

• Lets say that Co. A uses the IRR to evaluate

investment opportunities and make a decision
regarding the probability and viability of a
project.
(i) An initial investment of Rs $50,000
(ii) The cash inflows for four years will be
• Year 1 : $15,000
• Year 2 : $ 20,000
• Year 3 : $ 25,000
• Year 4 : $ 18,000
(iii) The cost of capital is 15%
 Time Cash Flow Discounted Discounted Discounted Discounted Cash
Cash Flows Cash Flows Cash Flows Flows (20%)
(10%) (15%) (19%)

Period 0 -50,000.00 -50,000.00 -50,000.00 -50,000.00 -50,000.00

Period 1 15,000.00 13,636.36 13,043.48 12,605.04 12,500.00

Period 2 20,000.00 16,528.93 15,122.87 14,123.30 13,888.89

Period 3 25,000.00 18,782.87 16,437.91 14,835.40 14,467.59

Period 4 18,000.00 12,294.24 10,291.56 8976.04 8,680.56

NPV 28.000.00 11,242.40 4895.82 539.77 - 462.96

Here, we can see that a discount rate of 19% gives around $500 NPV
whereas, a 20% discount rate gives a $ - 462 NPV.

We can therefore understand that the IRR is somewhere in the middle or

around 19.5%.
Time Cash Flow Discounted Cash Discounted Cash
Flows (10%) Flows (20%)
Period 0 -50,000.00 -50,000.00 -50,000.00
Period 1 15,000.00 13,636.36 12,500.00
Period 2 20,000.00 16,528.93 13,888.89
Period 3 25,000.00 18,782.87 14,467.59
Period 4 18,000.00 12,294.24 8,680.56
NPV 28.000.00 11,242.40 - 462.96
 𝑁𝑃𝑉𝑎
IRR = Ra +(𝑁𝑃𝑉𝑎−𝑁𝑃𝑉𝑏) × (Rb – Ra)
4895.82
= 15+ ×(20-15)
(4895.82 −(−462.96))
4895.82
= 15 + × 5
5358.78
= 15+ 0.9136 × 5
= 15+ 4.568 = 19.6
 As such, IRR can be used to rank
several prospective projects a firm
is considering.

 Assuming all other factors are equal

among the various projects, the
project with the highest IRR would
probably be considered the best
and undertaken first.
Spread:
It is the standard deviation of the
returns

Variance:
Square of the standard variation

MDT:
It stands for Multi – disciplinary
team.
93
Timeline:
Schedule of Major Activities over a
Spread of Timeframe In a Graphical
Form.

Examples :
Bar Diagrams
Histograms
Line Diagrams
Pie Diagrams etc.
94
 Development Concepts

Various Alternative Ways of

Developing an industry for:

 Production
 Processing
 Storage and
 Selling.

95
Vision:
• It is the “broad intentions” of an
organization.
• It defines the future growth and
roadmap of an organization.
Mission:
• It is the charter (written description of
organization’s functions) of an
organization.

• It defines the objectives, nature of

activities of the organization and the
target clients that it desires to serve.
96
Strategy:
 It is the art of employing all resources
(political, economic, psychological,
human etc.) to have maximum support
for the adopted policy of a Co.

Tactics:
 It is the ground level actions to
accomplish a goal.

97
 P90:
 Shows 90% chance that the actual result
will equal or exceed this value.

P50:
 Shows 50% chance that the actual result
will equal or exceed this value.

P10:
 Shows 10% chance that the actual
result will equal or exceed this value.
98
 Risk:
 It is the likelihood or Probability of
Failure or Loss.

Uncertainty:
 The range of possible outcomes for an
event.

Probability:
 The likelihood that a particular
outcome will occur.
99
 Fiscal Terms
Negotiation for Terms and Conditions
Resource
Co. Owner

It Includes:
• Revenue Sharing Terms.
• Bonus Incentive Terms.
• Royalty Terms.
• Payment of Taxes Terms.
100
Business Plan
 A Business Plan for a Co. is often
consolidation of its asset plans.

 Business Plan Defines Business Purpose,

Vision, Mission, Strategy and includes :
 Near Term objectives
 Long Term Plan
 Provides information on Production, Revenue,
Cash Flow, Reserve addition, OPEX, CAPEX,
NPV targets etc.

101
 Portfolio: A collection of all assets owned by a
company.
Portfolio Management:
A Co. cannot possibly allocate funds in all the
opportunities so, finds out a methodology which
allows the company to allocate the funds in the best
opportunities. This is done with Portfolio Management.
 Portfolio Management is the process of
allocating resources in the best opportunities to
achieve company’s financial goals in the short
& long term.
The main objectives of portfolio management may
be:
1. To maximize portfolio’s return.
2. To minimize portfolio risk.
102