Exploration is an inherently risky business – you don’t know for sure what is in the ground and can drill a dry hole even if a prospect looks beautiful. However, dry holes are only part of the risk, and there are also many things that could turn out better than expected. In this module, we’ll discuss key risks and opportunities. Most projects have a range of potential outcomes (rather than just succeed or fail) so we’ll take a painless look at how decision trees are used to calculate a statistical “expected value” of a project based on its range of possibilities. We discuss common ways that oil and gas companies mitigate their risks. We finish by discussing all of the factors that have to be considered in choosing an exploration area and you’ll come to realize that it is VERY DIFFICULT for an oil and gas company to secure good exploration opportunities!

Duration: Approximately 27 minutes, depending on user pace.

Learning Objectives: Upon successful completion of this module, you will be able to:

• Describe key risks and opportunities involved in exploration and production
• Explain stages of cost commitment that progressively increase the amount of money at risk in an exploration project
• Sketch out a decision-tree diagram explaining how companies incorporate probabilities of various outcomes into investment decisions
• Summarize ways that companies mitigate their risk and leverage their opportunities by working with partners and taking other actions
• Relate how attractive and viable investment opportunities can be difficult to find after considering all of the risks and obstacles

Prerequisites: Module 1-9

Advance Preparation: None

Program Level: Non-technical

Format: Prerecorded narrator with supporting visuals. User controls course pace.