Effective Financial Modeling in the Oil and Gas Industry

Develop the knowledge and skills to create and analyse financial models on a consistent and focused basis

This highly practical and interactive three-day programme will enable you to:

  • Examine structuring and best practice in financial modelling in the Oil and Gas sector
  • Learn how to build  models to accommodate change
  • Evaluate funding structures and cash flow waterfalls that fit your commercial model
  • Develop an integrated modelling approach with balance sheets and P&L statements
  • Analyse using the outputs of the model – ratios, sensitivity analysis, scenarios to make effective decisions
  • Access the skills to use the model to assess and manage your risks effectively
  • Apply knowledge in interactive case studies and group exercises that illustrate the learning under the expert guidance of the trainer

 


 

What is the programme about?

This intensive 3-day programme has been specifically developed to address the modeling issues that are specific to developing a project in the Oil and Gas sector. It will enable you to create, use and analyse a project finance model. These skills can be used to support credit approvals and reviews by lenders and to support organisations which run or sponsor projects. This will be done by reviewing best practice in model structures and logic, developing a fully-integrated model in stages, and using tools to assess the model outputs, particularly in sensitivity analysis.

Unique Oil and Gas Case Study
The continuous learning in this programme is built around a unique case study based on the development of a financial model for a new Oil and Gas project. Each section will be covered briefly as a module in a traditional class style, but the real learning experience will be found in the practical exercises within each module. Suggested solutions to each exercise based on real-life scenarios will be provided and discussed. The course is very practical, as practice of newly-learned techniques enables a deeper and more effective building of skills.

 

The course is designed to support analysts within an organisation’s Finance, Investment or Treasury divisions to create and analyse financial models on a consistent and focussed basis.

  • Project finance analysts

  • Capital spend analysts and controllers

  • Financial analysts in power sector companies

  • Analysts working for national regulators in the Oil and Gas sector

  • Bidders for New projects for the Department of Energy

  • Managers responsible for budgeting and forecasting in the Oil and Gas sector


 

DAY 1


INTRODUCTION AND OVERVIEW

Introduction

  • Overview of the course

  • Common modelling errors

  • Systematic Design Method

  • Model design and structure – key steps

  • Case study outline


Practical: reviewing model examples

Setting up the Model

  • Starting position & overall objective(s)

  • Input sheets, calculation areas and output sheets

  • Key Excel features and techniques

  • Setting up multiple currencies


Practical: producing a model framework using best practice

Production Forecast

  • Production sales and volume

  • Feedstock input volumes, prices and gross costs

  • Building in efficiency and availability factors


Practical: adding production assumptions into the model

Fixed Assets

  • Depreciation of fixed assets

  • Schedules and workings


Practical: CAPEX and depreciation schedules
 

DAY 2


Project Financing and Cash

Financing and Loans

  • Loan drawdowns

  • Rate, terms and repayment

  • Dealing with any circular references

  • Debt amortisation schedules


Practical: Loans schedule with balance sheet, cash flow and income statement inputs

Income Statement and Balance Sheet

  • Adding income statements and balance sheets

  • Model checks on consistency

  • Minority shareholders


Practical: completing and checking the initial statements

Tax and Dividends

  • Overview of modelling techniques for tax

  • Capital allowances

  • Tax loss carry-forwards

  • Disallowed expenditure

  • Payment of taxes by instalments

  • Tax shield of interest

  • Calculating dividends, cash and distributable earnings


Practical: adding tax and dividend sheets

Cash Flow

  • Direct and indirect cash flow methods
  • Cash flow waterfalls
  • Cash flow to equity and debt providers
  • Error checking
  • Practical: creating cash flow and returns


Day 3


Deriving Results

Ratios

  • Loan life / project life ratio

  • Residual cover

  • Annual debt service ratio

  • Principal and debt cover

  • Interest cover

  • Accounting ratios - profitability, liquidity, efficiency, structure

  • Practical: ratios sheet
     

Cost of Capital

  • Review of cost of capital theory
  • Capital Asset Pricing Model constituents
  • Discussion and agreement on Weighted Average Cost of Capital (WACC) inputs
  • Betas and risk
  • Mathematical derivation of WACC


Practical: adding WACC to case

Discounted Cash Flow

  • Methods of adding terminal value
  • Producing an equity valuation
  • Practical: adding equity valuation to the template


Practical: adding equity valuation to the template

Risk and Sensitivity

  • Scenarios
  • Sensitivity
  • Goal seek method
  • What-if analysis
  • Dynamic changes


Practical: Adding sensitivity and scenarios

Management Summary

  • Producing management summary
  • Returns analysis
  • Required model documentation
  • Tracking changes


Wrap-Up

  • Questions and answers

 

Course Categories

Testimonials for our Courses

“The course trainer was willing to discuss my problems and questions in a detailed level. “
“I liked the small group very much!”.
 

Delivered by

Alan Brooke has over 20 years’ experience in a wide range of roles in finance.

Dates & Locations



This course is only available as a custom course tailored for your business, contact us to discuss your requirements.