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Factors Determining the Market Value of Upstream Properties Chris Moore, Chris Moyes and Dee Patterson, Moyes & Co., Inc, Dallas, Texas, USA Financing upstream projects or acquisitions frequently involves the estimation of a market value for the assets involved. Third party petroleum engineering consultants are frequently employed to evaluate properties. The techniques for doing so vary in detail, but the result is generally based on discounted cash flow analysis adjusted for technical risk. The risk adjustments recognize the uncertainty inherent in reserves estimation, and the technical risk of failure for exploration opportunities. Moyes & Co., Inc. maintains an extensive global database of international transactions involving energy projects. We have calculated a variety of valuation metrics for these transactions, recognizing the impact of different public reporting requirements for different corporate jurisdictions. An analysis of the transactions illustrates that there is a difference between the technical risk-appraised value and the market value, usually ranging from a modest premium to a substantial discount. This paper examines the factors affecting market values an offers some suggestions for methods to quantify these factors on a consistent basis. Factors discussed, and illustrated with examples where available, include The circumstances of the buyer and seller The location of the market Price scenarios Commercial, political, logistical and bureaucratic delays (collectively country risk) Risk aversion Portfolio effects Tax (or cost recovery) consolidation and the value of tax shelter Operatorship Business Unit effects Working Interest involved

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