VALUING PUD RESERVES: A PRACTICAL APPLICATION OF REAL OPTION TECHNIQUES

John McCormack and Gordon Sick

Journal of Applied Corporate Finance, 2001, vol. 13, issue 4, pages 110-115

Abstract: Discounted Cash Flow (DCF) tools are fundamental to engineering and financial analysis in the oil industry, are well understood by managers, and generally provide accurate valuations of developed hydrocarbon reserves. Unfortunately, DCF techniques systematically undervalue proven undeveloped reserves (PUDs), may encourage premature development of certain reserves, and fail to identify important risk management opportunities. Real option valuation models overcome these shortcomings by providing a more complete picture of not only reserve values, but also of the drivers of that value. 2001 Morgan Stanley.

Date: 2001
References: Add references at CitEc
Citations Track citations by RSS feed

Downloads: (external link)
http://www.blackwell-synergy.com/doi/abs/10.1111/j.1745-6622.2001.tb00431.x link to full text (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:bla:jacrfn:v:13:y:2001:i:4:p:110-115

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1078-1196

Access Statistics for this article

Journal of Applied Corporate Finance is edited by Donald H. Chew

More articles in Journal of Applied Corporate Finance from Morgan Stanley
Series data maintained by Wiley-Blackwell Digital Licensing ().