Estimation of volatility of selected oil production projects

dc.creatorLima, GAC
dc.creatorSuslick, SB
dc.date2006
dc.dateDEC
dc.date2014-11-16T12:39:17Z
dc.date2015-11-26T16:22:46Z
dc.date2014-11-16T12:39:17Z
dc.date2015-11-26T16:22:46Z
dc.date.accessioned2018-03-28T23:04:13Z
dc.date.available2018-03-28T23:04:13Z
dc.identifierJournal Of Petroleum Science And Engineering. Elsevier Science Bv, v. 54, n. 41732, n. 129, n. 139, 2006.
dc.identifier0920-4105
dc.identifierWOS:000242822300003
dc.identifier10.1016/j.petrol.2006.07.005
dc.identifierhttp://www.repositorio.unicamp.br/jspui/handle/REPOSIP/65661
dc.identifierhttp://www.repositorio.unicamp.br/handle/REPOSIP/65661
dc.identifierhttp://repositorio.unicamp.br/jspui/handle/REPOSIP/65661
dc.identifier.urihttp://repositorioslatinoamericanos.uchile.cl/handle/2250/1268149
dc.descriptionIn oil project valuation and investment decision-making, volatility is a key parameter, but it is difficult to estimate. From a traditional investment viewpoint, volatility reduces project value because it increases its discount rate via a higher risk premium. Contrarily, according to the real-option pricing theory, volatility may aggregate value to the project, since the downside potential is limited whereas the upside is theoretically unbounded. However, the estimation of project volatility is very complicated since there is not a historical series of project values. In such cases, many analysts assume that oil price volatility is equal to that of project. In order to overcome such problems, in this paper an alternative numerical method based on present value of future cash flows and Monte Carlo simulation is proposed to estimate the volatility of projects. This method is applied to estimate the volatility of 12 deep-water offshore oil projects considering that oil price will evolve according to one of two stochastic processes: Geometric Brownian Motion and Mean-Reverting Motion. Results indicate that the volatility of commodity usually undervalue that of project. For the set of offshore projects analyzed in this paper, project volatility is at least 79% higher than that of oil prices and increases dramatically in those cases of high capital expenditures and low price. (c) 2006 Elsevier B.V. All rights reserved.
dc.description54
dc.description41732
dc.description129
dc.description139
dc.languageen
dc.publisherElsevier Science Bv
dc.publisherAmsterdam
dc.publisherHolanda
dc.relationJournal Of Petroleum Science And Engineering
dc.relationJ. Pet. Sci. Eng.
dc.rightsfechado
dc.rightshttp://www.elsevier.com/about/open-access/open-access-policies/article-posting-policy
dc.sourceWeb of Science
dc.subjectuncertainty
dc.subjectvolatility
dc.subjectreal options
dc.subjectoil projects
dc.subjecteconomic evaluation methods
dc.subjectOption Pricing Theory
dc.subjectReal Options
dc.subjectPrices
dc.subjectExploration
dc.subjectValuation
dc.subjectAssets
dc.subjectModels
dc.titleEstimation of volatility of selected oil production projects
dc.typeArtículos de revistas


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