Solution 1: mod terms

n Calendar RPI Prices Production Revenue (£ million)

Oil Gas Oil Gas Oil Gas Total
000 bpd 10^3 scf

2002 94.26
2003 97.09
0 2004 100 14.00 2.50
1 2005 103.00 14.00 2.50
2 2006 106.09 14.00 2.50
3 2007 109.27 14.00 2.50
4 2008 112.55 14.00 2.50
5 2009 115.93 14.00 2.50 86 44 266.34 24.33 290.67
6 2010 119.41 14.00 2.50 170 86 526.48 47.56 574.05
7 2011 122.99 14.00 2.50 170 86 526.48 47.56 574.05
8 2012 126.68 14.00 2.50 170 86 526.48 47.56 574.05
9 2013 130.48 14.00 2.50 148 74 458.35 40.92 499.28
10 2014 134.39 14.00 2.50 104 54 322.08 29.86 351.95
11 2015 138.42 14.00 2.50 80 40 247.76 22.12 269.88
12 2016 142.58 14.00 2.50 58 30 179.62 16.59 196.22
13 2017 146.85 14.00 2.50 42 22 130.07 12.17 142.24
14 2018 151.26 14.00 2.50 32 16 99.10 8.85 107.95
15 2019 155.80 14.00 2.50 24 12 74.33 6.64 80.96
16 2020 160.47 14.00 2.50 8 4 24.78 2.21 26.99
17 2021 165.28 14.00 2.50

Solution 2: Real terms Note: The question explicitly asks for a mod cash flow matrix, so "Solution 1" is wh

n Calendar RPI Prices Production Revenue (£ million

Oil Gas Oil Gas Oil
mod £2004 mod £2004 000 bpd 10^3 scf

2002 94.26
2003 97.09
0 2004 100 14.00 14.00 2.50 2.50
1 2005 103.00 14.00 13.59 2.50 2.43
2 2006 106.09 14.00 13.20 2.50 2.36
3 2007 109.27 14.00 12.81 2.50 2.29
4 2008 112.55 14.00 12.44 2.50 2.22
5 2009 115.93 14.00 12.08 2.50 2.16 86 44 229.75
6 2010 119.41 14.00 11.72 2.50 2.09 170 86 440.92
7 2011 122.99 14.00 11.38 2.50 2.03 170 86 428.08
 8 2012 126.68 14.00 11.05 2.50 1.97 170 86 415.61
9 2013 130.48 14.00 10.73 2.50 1.92 148 74 351.29
10 2014 134.39 14.00 10.42 2.50 1.86 104 54 239.66
11 2015 138.42 14.00 10.11 2.50 1.81 80 40 178.99
12 2016 142.58 14.00 9.82 2.50 1.75 58 30 125.98
13 2017 146.85 14.00 9.53 2.50 1.70 42 22 88.57
14 2018 151.26 14.00 9.26 2.50 1.65 32 16 65.52
15 2019 155.80 14.00 8.99 2.50 1.60 24 12 47.71
16 2020 160.47 14.00 8.72 2.50 1.56 8 4 15.44
17 2021 165.28 14.00 8.47 2.50 1.51
 Tariff rates Tariff charges (£ million) Opex (£ million) Capex (£ million)
Oil Gas Oil Gas Total £2004 mod £2004

5.00
10.00
0.60 0.40 1.00
0.62 0.41 28.00
0.64 0.42 227.00
0.66 0.44 356.00
0.68 0.45 54.00
0.70 0.46 21.83 7.45 29.28 45.00 52.17 57.00
0.72 0.48 44.45 14.99 59.45 45.00 53.73 16.00
0.74 0.49 45.79 15.44 61.23 45.00 55.34 0.00
0.76 0.51 47.16 15.91 63.07 45.00 57.00 0.00
0.78 0.52 42.29 14.10 56.39 45.00 58.71 0.00
0.81 0.54 30.61 10.60 41.20 45.00 60.48 0.00
0.83 0.55 24.25 8.08 32.34 45.00 62.29 0.00
0.86 0.57 18.11 6.24 24.35 45.00 64.16 0.00
0.88 0.59 13.51 4.72 18.22 45.00 66.08 0.00
0.91 0.61 10.60 3.53 14.13 45.00 68.07 0.00
0.93 0.62 8.19 2.73 10.92 45.00 70.11 0.00
0.96 0.64 2.81 0.94 3.75 45.00 72.21 110.00
0.99 0.66
754.00

rix, so "Solution 1" is what is expected. Solution 2 is included only to facilitate learning.

Revenue (£ million) Tariff rates Tariff charges (£ million) Opex (£ million)

Gas Total Oil Gas Oil Gas Total

0.60 0.40
0.60 0.40
0.60 0.40
0.60 0.40
0.60 0.40
20.99 250.74 0.60 0.40 18.83 6.42 25.26 45.00
39.83 480.75 0.60 0.40 37.23 12.56 49.79 45.00
38.67 466.75 0.60 0.40 37.23 12.56 49.79 45.00
37.54 453.16 0.60 0.40 37.23 12.56 49.79 45.00
31.37 382.65 0.60 0.40 32.41 10.80 43.22 45.00
22.22 261.88 0.60 0.40 22.78 7.88 30.66 45.00
15.98 194.97 0.60 0.40 17.52 5.84 23.36 45.00
11.64 137.62 0.60 0.40 12.70 4.38 17.08 45.00
8.28 96.86 0.60 0.40 9.20 3.21 12.41 45.00
5.85 71.37 0.60 0.40 7.01 2.34 9.34 45.00
4.26 51.97 0.60 0.40 5.26 1.75 7.01 45.00
1.38 16.82 0.60 0.40 1.75 0.58 2.34 45.00
0.60 0.40
Capex (£ million) Tax NCF (£ million) Cum NCF
mod mod £2004 mod £2004

4.71
9.71
1.00 -1.00 -1.00 -1.00
28.84 -28.00 -28.84 -29.00
240.82 -227.00 -240.82 -256.00 Julian Fennema:
Maximum Capital
389.01 -356.00 -389.01 -612.00 Outlay
60.78 -54.00 -60.78 -666.00
66.08 123.48 143.15 -542.52
19.10 3.90 366.70 437.86 -175.82
0.00 95.67 294.18 361.80 118.36
0.00 106.42 274.36 347.55 392.72 Julian Fennema:
Payback period
0.00 114.18 206.93 269.99 599.65
0.00 99.18 112.42 151.09 712.07
0.00 62.65 81.35 112.60 793.42
0.00 43.13 45.29 64.57 838.71
0.00 24.99 22.43 32.94 861.14
0.00 11.66 9.32 14.09 870.45
0.00 3.26 -2.13 -3.32 868.32
Julian Fennema:
176.52 -3.56 -138.30 -221.93 730.02 Terminal Cash
-80.53 48.72 80.53 778.74 Surplus

PIR 1.169283476

Linear Interpolations
0.18
0.18

Capex (£ million) Tax NCF (£ million) Cum NCF

mod £2004 £2004 mod £2004

5.00
10.00
1.00 -1.00 -1.00 -1.00
28.00 -28.00 -28.84 -29.00
227.00 -227.00 -240.82 -256.00 Erkal Ersoy:
356.00 -356.00 -389.01 -612.00 Maximum Capital Outlay
54.00 -54.00 -60.78 -666.00
57.00 123.48 143.15 -542.52
16.00 3.90 3.27 366.70 437.86 -175.82 Erkal Ersoy:
0.00 95.67 77.79 294.18 361.80 118.36 Payback period
 Erkal Ersoy:
Payback period
0.00 106.42 84.01 274.36 347.55 392.72
0.00 114.18 87.51 206.93 269.99 599.65
0.00 99.18 73.80 112.42 151.09 712.07
0.00 62.65 45.26 81.35 112.60 793.42
0.00 43.13 30.25 45.29 64.57 838.71
0.00 24.99 17.02 22.43 32.94 861.14
0.00 11.66 7.71 9.32 14.09 870.45
0.00 3.26 2.09 -2.13 -3.32 868.32
110.00 -3.56 -2.22 -138.30 -221.93 730.02 Erkal Ersoy:
Terminal Cash Surplus
-80.53 -48.72 48.72 80.53 778.74

754.00
PIR 1.169283476
 NPV (£ million)
0.12 0.13 0.14 0.15 0.16 0.17 0.18 0.185 0.19 0.2

-1.00 -1.00 -1.00 -1.00 -1.00 -1.00 -1.00 -1.00 -1.00 -1.00
-25.00 -24.78 -24.56 -24.35 -24.14 -23.93 -23.73 -23.63 -23.53 -23.33
-180.96 -177.77 -174.67 -171.64 -168.70 -165.83 -163.03 -161.66 -160.30 -157.64
-253.39 -246.73 -240.29 -234.08 -228.07 -222.28 -216.67 -213.94 -211.26 -206.02
-34.32 -33.12 -31.97 -30.87 -29.82 -28.82 -27.85 -27.39 -26.93 -26.04
70.07 67.02 64.13 61.39 58.79 56.32 53.97 52.84 51.74 49.62
185.78 176.13 167.06 158.54 150.51 142.95 135.84 132.44 129.13 122.81
133.07 125.04 117.56 110.59 104.09 98.02 92.35 89.66 87.05 82.10
110.81 103.20 96.18 89.69 83.69 78.13 72.99 70.56 68.23 63.81
74.62 68.88 63.63 58.82 54.41 50.37 46.65 44.91 43.24 40.10
36.20 33.12 30.33 27.79 25.48 23.39 21.48 20.59 19.74 18.16
23.39 21.21 19.25 17.48 15.90 14.46 13.17 12.57 12.00 10.95
11.62 10.45 9.40 8.46 7.63 6.88 6.21 5.91 5.62 5.08
5.14 4.58 4.08 3.65 3.26 2.91 2.61 2.47 2.34 2.10
1.91 1.68 1.49 1.32 1.17 1.03 0.92 0.87 0.82 0.73
-0.39 -0.34 -0.30 -0.26 -0.23 -0.20 -0.18 -0.17 -0.16 -0.14
-22.56 -19.57 -17.00 -14.78 -12.87 -11.22 -9.79 -9.15 -8.55 -7.48
7.10 6.10 5.25 4.53 3.91 3.38 2.92 2.72 2.53 2.20

142.07 114.11 88.58 65.27 44.00 24.58 6.87 -1.39 -9.28 -24.01

IRR 0.18414
Linear Interpolations
0.185 0.184158
0.19 0.184254
 Sinking

NCF Fund Normalised NCF

0.21 0.22 0.184 0.18414 £2004 £2004 £2004 £2004
0.0000 0.1000

-1.00 -1.00 -1.00 -1.00 -1.00 -1.00

-23.14 -22.95 -23.65 -23.65 -28.00 -28.00
-155.04 -152.51 -161.93 -161.89 -227.00 -227.00
-200.95 -196.05 -214.48 -214.41 -356.00 -356.00
-25.19 -24.38 -27.48 -27.47 -54.00 -54.00
47.61 45.69 53.07 53.04 123.48 123.48
116.84 111.21 133.11 133.01 366.70 366.70
77.47 73.13 90.19 90.11 294.18 294.18
59.71 55.90 71.04 70.97 274.36 274.36
37.22 34.56 45.25 45.21 206.93 206.93
16.71 15.39 20.77 20.74 112.42 112.42
9.99 9.13 12.69 12.67 81.35 17.95 17.95 60.73
4.60 4.17 5.97 5.96 45.29 -63.40 0.00 -22.68
1.88 1.69 2.50 2.49 22.43 -108.69 0.00 -74.77
0.65 0.58 0.88 0.87 9.32 -131.12 0.00 -106.92
-0.12 -0.11 -0.17 -0.17 -2.13 -140.43 0.00 -127.86
-6.55 -5.74 -9.27 -9.25 -138.30 0.00
1.91 1.66 2.76 2.75 48.72 48.72

-37.42 -49.64 0.23 0.00 0.17807

Normalised NCF NCF
£2004 £2004 £2004
0.1000 0.1840 0.1840

-1.00 -1.00
-28.00 -28.00
-227.00 -227.00
-356.00 -356.00
-54.00 -54.00
123.48 123.48
366.70 366.70
294.18 294.18
274.36 274.36
206.93 206.93
112.42 112.42
60.73 80.69 80.69
0.00 -0.78 0.00
0.00 -54.55 0.00
0.00 -91.14 0.00
0.00 -118.94 0.00
0.00 0.00
48.72 48.72

0.18224 0.18414
 Pentland Cum NCF (£2004)

1000

800

600

400

200
£

0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

-200

-400

-600

-800
Project years
 Pentland IRR

200.00

150.00

100.00
NPV

50.00

0.00
0.12 0.13 0.14 0.15 0.16 0.17 0.18 0.185 0.19 0.2 0.21 0.22

-50.00

-100.00
IRR
 Production
E&A Dev. Wells Platform Export Abandonment Total Oil
000bpd
2002 5 5
2003 10 10
2004 1 1
2005 8 20 28
2006 16 200 11 227
2007 0 255 101 356
2008 8 30 16 54
2009 34 23 57 86
2010 16 16 170
2011 0 170
2012 0 170
2013 0 148
2014 0 104
2015 0 80
2016 0 58
2017 0 42
2018 0 32
2019 0 24
2020 110 110 8
Production Taxation
Gas
10^6 scf

44
86 3.90
86 95.67
86 106.42
74 114.18
54 99.18
40 62.65
30 43.13
22 24.99
16 11.66
12 3.26
4 -3.56
-80.53