Decision Economics · Module E2
From STOIIP to Cash Flow
The six-step bridge from in-place volume to NPV: recovery factor, EUR, the production profile, revenue, costs and the discounted cash flow, with P10, P50 and P90 cases carried through. It covers why recovery factor is so often under-ranged and why percentiles of a product are not products of percentiles.
- Level
- Intermediate
- Position
- Module 2 of 8
- Video
- About 18 minutes, narrated
- Format
- Narrated video lesson and slide reading view; with the certified option, a quiz whose pass unlocks the next module.
What the module covers
- Six steps from STOIIP to NPV
- Recovery factor as a ranged input
- EUR uncertainty when STOIIP and recovery factor combine
- Building a production profile and annual cash flow
- P10, P50 and P90 NPV cases
- Which cost or volume input drives the result
Learning outcomes
After the module you should be able to:
- Connect petrophysical uncertainty directly to NPV spread and viability.
- Build a cash-flow model from a volumetric estimate
- Carry volume uncertainty through to an NPV range
- Identify the input that drives NPV
A short preview
If STOIIP and recovery factor are uncertain and independent, the 10th percentile of EUR is not the 10th percentile of STOIIP times the 10th percentile of recovery factor. Both being low together is rarer than one chance in ten, so that product is a more extreme case than the P10. With lognormal inputs whose high-to-low ratios are 4 and 2, the EUR ratio comes out at about 4.7, not 8. The way to get the right percentiles is to simulate the product, and the module shows how.
Who it is for
Petrophysicists, geoscientists and reservoir engineers who need to connect technical work to investment decisions, and analysts new to upstream economics.
Prerequisites: None required; familiarity with volumetric estimates helps.
Take the module in the Learning Hub
Decision Economics: Eight economics modules from NPV framing through portfolio ranking and capstone. The lesson opens in the Learning Hub once the track is purchased; graded quizzes and the certificate come with the certified option.