Scenarios are used in PHDwin to evaluate cases under unique economic conditions within the same database and easily store that specific set of inputs. Some of the inputs are grouped into categories like pricing, expenses, projections – and are qualified, or named and saved, so that you can easily switch them out for a report run or use them for other scenarios.

Scenarios are also useful because multiple users can be working concurrently in the same database, but might need to use different scenarios to evaluate the cases under different conditions without impacting each other’s work. This eliminates the need to copy over cases or databases. You can also have as many scenarios as you need so you can easily change inputs and reproduce a report with the chosen inputs.

Additionally, if another user wants to create a scenario using the pricing assumptions or projections that you’ve already done, they simply select the Qualifier you’ve created for that category. Scenarios allow you to easily share everyone’s work while manipulating only the inputs that an individual user wants to.

Reasons to Use Scenarios and Qualifiers

Scenarios in PHDwin can be useful in a variety of situations, Examples include:

•Running economic sensitivities – You can now create conservative, realistic, and optimistic scenarios, by quickly and easily changing prices, expenses, investments, or most other inputs on a case or group of cases. These can be stored for future use or displayed in report runs. This eliminates the need to remember the exact inputs to reproduce results.

•Adjusting projection data –  A company might want to create several different projections for the same case in order to comprehensively account for the different possibilities of future production. Engineers now have the ability make their own sets of projections and save them without affecting their colleague’s forecasts. The forecasts can be easily shared with other users by selecting the qualifier that they created and saved the forecast under.

•Updating projections from year to year – At the end of every year, a company might want to create new projections based on the past year’s production data. By creating a new qualifier for each year end, you are able to constantly update projections without deleting the previous years’ projections. It would be useful to save previous years’ projections as a backup to guarantee that the cases will always generate numbers as you are making your updates.

•Planning new projects & modifying drilling schedules – Scenarios can be used to easily modify the timing of new projects, moving them around to see the effect on discounted cash flow, available capital, tax scenarios, etc., that may affect other company decisions, such as drilling schedules. The utilization of scenarios enable a user to compare the effects of changing the report and discounting dates to each other to produce the most beneficial timing that would fulfill the company’s current needs.

•Modeling different ownership interests in a well – If there are several partners who have ownership in a single case or well, you are now able to save different ownership interests for the same cases/projections. This allows several people to work in the same database and each individual to run their own report and see their cash flow based on their own scenario.

•Separating reserves from potential acquisitions – Since scenarios can include different sets of cases, they can be used to separate wells that are already part of a company’s database and the wells that may be a potential acquisition in the future into two different categories. Once they are purchased they can be moved to the appropriate scenario.

•Other uses: change discounting methods or rates, change incremental or recompletion links, the results of an extended contract, etc.

Scenario Inputs

Scenarios are very powerful tools that allow the user to evaluate data within a case under different conditions. Data that can be changed by adding a new scenario is called Scenario Specific Data. This data will be applied to the whole scenario and cannot be changed for specific forms. Qualified data can be changed for specific forms, such as prices and expenses. There are certain settings, however, that cannot be changed by creating a new scenario. These settings are called database settings and unqualified data. All three data types are described in further detail below

Database Settings and Unqualified Data

The settings in the database that remain the same for each scenario include: available Investment Categories, Conventions, Currency conversions, streams calculated for all cases, and Phase Configurations. The currency conversions will be set in PHDwin, but all other settings will be set up by the user.

There are also settings on the case that are always the same no matter which scenario you’re viewing. These settings are what is classified as unqualified data, because a scenario should be created to model the same case under different circumstances. Information like the Case Name or the historical volumes produced should not change.

The unqualified data includes:

•General Information for a case (name, operator, location, etc.)

•ID codes on that case (API number, DrillingInfo ID, etc.)

•Historical monthly and Daily Production volumes, and test rate data

•Unit Convention and Currency Units set for the case

Scenario-specific Data

There are some settings that can change from scenario to scenario. Out of these items, some are easier to share or link to other scenarios than others. Here are the items that can be different from scenario to scenario:

•Individual Cases – each scenario can have a different number and set of cases if you’d like.

•Discounting and Report Settings – the report and discount date, discount rate, discount method, and cash accrual timing. These items can be set for each scenario in case different methods need to be evaluated.

•Incremental and Recompletion Trees – In PHDwin, you can link cases in the incremental and recompletion trees. These links can be different from scenario to scenario depending on what the user chooses to link.

•Group Case definitions –  If you create any type of group/parent case (such as a summary plot case in one scenario), it can be used in another scenario with a completely different set of child cases (or cases that are members of the group). The settings of the group case may also differ between scenarios.

•Eco Options – the case start date, kill dates and other cutoffs

•Fiscal Models – you can change the type of tax model applied to the same case and projections to evaluate different tax opportunities

•Product precedence setting – this is used to determine what volumes take precedence for reporting if there is any overlap entered.

Of the scenario-specific data listed, some of the items can be linked, and therefore easily shared with other scenario. The settings that can be linked include scenario settings, incremental and recompletion trees, and group case definitions. The ability to link scenarios and share these settings will save you time in the scenario set up. For example, you might want to link Scenario A to Scenario B so that they could share the incremental tree that you’ve set up. This way, if you make a change to the incremental tree in either scenario, it’s shared and you don’t have to worry about managing it in two places.

Qualified Data

Scenarios also have certain data that is qualified – Qualifiers are simply a way to name and save the inputs applied to each case. For example, you could create two Qualifiers for prices – one set of prices will not be escalated while the other is escalated. When you are running a scenario, you get to choose which price qualifier to use. You can easily swap them out to rerun the cases while preserving both price forecasts, or just create two scenarios, one for each price forecast.

There are several inputs that can be qualified – Prices, Expenses, Projections, PRMS, Shrinkage, Investments, and Ownership. The unique combination of Qualifiers that is selected makes up a scenario. One of the benefits of Qualifiers is that you can share data very easily. If someone in finance wants to create their own Scenario, but use the Projection Qualifier from an engineer, it is easy to just choose that Qualifier when setting up the Scenario.

•Prices – Base Price, Escalations, Differentials, BTU factor

•Expenses – Operating Cost, Well Cost, Fixed Cost, Transportation Cost, Other Costs

•Investments – Drilling, Exploration, Completion, Workover, etc. Investments

•Ownership – Working Interest, Revenue Interest, Royalty Interest, Lease NRI

•Shrinkage – Shrinkage Percent

•Projections – Phase configuration, b factor, Dm

•PRMS – Reserve Class, Categories, and Subcategories

 

The Qualifier that is already in PHDwin is called “Default”. The Default Qualifier will always have a value associated with it, so it will always be used as an alternate when modifying the Qualifier hierarchy. You can also create your own Qualifier that can be assigned to one or all of the inputs as a primary or alternate Qualifier. Once you create a new Qualifier and assign it as the Primary Qualifier, all the data that you modify (projections, prices, etc.) will be saved under that Qualifier. As a result, once you keep adding a new Primary Qualifier, the previous Qualifier for that category will be saved as an alternate. You can save up to 10 alternates, but it is recommended not to exceed 5-7 alternates in an attempt to better organize your data.

The qualified data can also be set up in a hierarchy, which means you can have a Primary Qualifier as well as alternates for each Scenario if the primary is blank.

Some reasons you want to have a hierarchy include:

•Updating projections from year to year – If you create a new Qualifier for projections each year, you can go through and see which cases have been updated and which have not. This can be useful with large data sets, to keep track of when a case has been updated. However, if you forgot to update a certain case’s forecast for this year, the alternate Qualifier will be used as a backup, so you never have to worry about cases not running because they lacked any data.

•Updating inputs for a certain group of cases – Let’s say you have an entire Scenario created with the appropriate Qualifiers, but you want to update a certain area, for example changing expense amounts. You can create a new expense Qualifier, update the appropriate cases, and use the original expense Qualifier as an alternate. As a result, the cases that have been worked on in the new Qualifier will have updated expenses. You can run a report to see the output and guarantee that every case will have an expense but certain ones have been updated.

Summary

Each PHDwin case will have unqualified data that never changes (General Info, ID Codes, and Historical or Test Volumes). Otherwise, you can create Scenarios to change almost any input or combination of inputs that you would like. Some data are qualified (prices, expenses, projections, PRMS, shrinkage, ownership, investments) and easily shared between and within Scenarios. Other items can be linked to another Scenario if you’d like to copy the setup (Discounting Settings, Incremental, Recompletion, and Group Cases).

Benefits of Scenarios

•Flexibility – You can change almost any input on a case and store as many Scenarios as needed.

•Up to date and reliable data – Since all of the work can be done in one database, things like adding new cases or updating production data only has to be done once. These things will flow through to all users in the database, ensuring that they have the most up to date data for their evaluations. Also, it is important for every user to be working with the same data to ensure consistency.

•Sharing data – Scenarios allow you to use the data you need from other people or business units. If you are not an engineer, you may want to use their projection assumptions while managing the rest of the inputs yourself. This can be done with the use of Qualifiers. If you create a qualifier named “NYMEX Pricing”, and update all cases with the latest price strips, your colleague can easily grab that pricing to make it a part of their Scenario. It works the same way if you need to use “Engineer1’s” Projection Qualifier as a part of your Scenario.

•Not stepping on each other’s toes – Since you can create nearly an unlimited amount of scenarios, there is no need to worry about messing up your colleagues’ evaluations. The users just need to make sure they create and store their own data under their own Scenarios and Qualifiers.

•Managing large data sets with the hierarchy – Keep track of which cases have been worked from year to year with the use of the Qualifier hierarchy

•Planning projects –  Since projects can be moved around in time, you can make the best decisions on how to use resources after comparing the results of different project start times.