Estimation of volatility of selected oil production projects

Journal of Petroleum Science and Engineering

Volumn 54, Issue 3-4, 2006, Pages 129-139

  Costa Lima, Gabriel A ^a   Suslick, Saul B ^a  

^a UNIVERSITY OF CAMPINAS   (Brazil)

Author keywords

Economic evaluation methods; Oil projects; Real options; Uncertainty; Volatility

Indexed keywords

GEOMETRIC BROWNIAN MOTION; MEAN-REVERTING MOTION; PROJECT VOLATILITY;

COMPUTER SIMULATION; DECISION MAKING; ECONOMICS; MONTE CARLO METHODS; PROJECT MANAGEMENT; RANDOM PROCESSES;

OFFSHORE OIL WELL PRODUCTION;

COMPUTER SIMULATION; DECISION MAKING; ECONOMICS; MONTE CARLO METHODS; OFFSHORE OIL WELL PRODUCTION; PROJECT MANAGEMENT; RANDOM PROCESSES;

BROWNIAN MOTION; CAPITAL FLOW; ECONOMIC PLANNING; ESTIMATION METHOD; MONTE CARLO ANALYSIS; NUMERICAL METHOD; OIL PRODUCTION; PRICING POLICY; STOCHASTICITY; VALUATION;

EID: 33751169601     PISSN: 09204105     EISSN: None     Source Type: Journal    
DOI: 10.1016/j.petrol.2006.07.005     Document Type: Article

References (27)

1. Baker M.P., Mayfield E.S., and Parsons J.E. Alternative models of uncertain commodity prices for use with modern asset pricing. Energy J. 19 1 (1998) 115-148
2. Black F., and Scholes M. The pricing of options and corporate liabilities. J. Polit. Econ. 81 (1973) 637-659
3. Bordieri, C.A. 2004. A Quantitative Method for Volatility Estimation of Oil-Producing Projects, Ms Dissertation, Unicamp, State University of Campinas, 144 pp. (in Portuguese).
4. Burns J.C., Lewis I.D., and Sick G.A. Valuing Petroleum Investments Using Discrete Option Pricing Theory (1992), Society of Petroleum Engineers (SPE) paper 24475
5. Copeland T., and Antikarov V. Real Options: a Practitioner's Guide (2001), Texere LLC Publ., New York
6. Cortazar G., and Schwartz E.S. Implementing a stochastic model for oil futures prices. Energy Econ. 25 3 (2003) 215-238
7. Costa Lima, G. A. 2004. Using real options and preference theory in projects of production and exploration of petroleum, Ph.D. Dissertation, State University of Campinas, Campinas, Brazil. (in Portuguese).
8. Costa Lima G.A., and Suslick S.B. Volatility of mineral and petroleum projects. Working Paper (2005), LAGE - Laboratory of Geoeconomic Analysis of Mineral Resources, State University of Campinas 20 pp. (in Portuguese)
9. Costa Lima G.A., Suslick S.B., and Bordieri C.A. A quantitative method for estimation of volatility of oil production projects. Society of Petroleum Engineers, Hydrocarbon Economics and Evaluation Symposium. Dallas, TX, U.S.A., 3 - 5 April 2005 (2005) SPE 94661
10. Davis G.A. Estimating volatility and dividend yield when valuing option to invest or abandon. Q. Rev. Econ. Finance 38 (1998) 725-754 (Special Issue)
11. Davis G.A. The impact of volatility on firms holding growth options. Eng. Econ. 47 2 (2002) 213-231
12. Dias M.A.G. Valuation of exploration and production assets: an overview of real options models. J. Pet. Sci. Eng. 44 (2004) 93-114
13. Dias M.A.G. Monte Carlo simulation of mean reversion. Real Options in Petroleum (2005). http://www.pucrio.br/marco.ind/sim_stoc_proc.htm#mc-mrd (http://www.pucrio.br/marco.ind/sim_stoc_proc.html#mc-mrd)
14. Dias M.A.G., and Rocha K.M.C. Petroleum concessions with extendible options using mean reversion with jumps to model oil prices. Working Paper Presented at the 3rd Annual International Conference on Real Options, Netherlands (1999) 23 pp.
15. Dixit A., and Pindyck R.S. Investment Under Uncertainty (1994), New Jersey University Press, New Jersey 476 pp.
16. Kemna A.G.Z. Case studies on real options. Financ. Manage. (1993) 259-270 Autum
17. McDonald R., and Siegel D. The value of waiting to invest. Q. J. Econ. 4 101 (1986) 707-727
18. Merton R.C. Theory of rational option pricing. Bell J. Econ. Manage. Sci. 4 1 (1973) 141-183
19. Metcalf G.E., and Hasset K.A. Investment under alternative return assumptions comparing random walks and mean reversion. J. Econ. Dyn. Control 19 (1995) 1471-1488
20. Paddock J.L., Siegel D.R., and Smith J.L. Option valuation of claims on real assets: the case of offshore petroleum leases. Q. J. Econ. 103 3 (1988) 479-508
21. Pickles E., and Smith J.L. Petroleum property valuation: a binomial lattice implementation of option pricing theory. Energy J. 14.2 (1993) 1-26
22. Pindyck R.S. The long-run evolution of energy prices. Energy J. 20 2 (1999) 1-27
23. Pindyck R.S. Volatility and commodity price dynamics. J. Futures Mark. 24 11 (2004) 1029-1047
24. Samuelson P. Proof that properly anticipated price fluctuate randomly. Ind. Manage. Rev. (1965) 41-49
25. Smith J.E., and Nau R.F. Valuing risk projects: option pricing theory and decision analysis. Manage. Sci. 41 5 (1995) 795-816
26. Trigeorgis L. Real options - managerial flexibility and strategy in resources allocation. Third edition (1996), The MIT Press, Cambridge 427 pp.
27. Zettl M. Valuing exploration and production projects by means of option pricing theory. Int. J. Econ. 78 (2002) 109-116