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A tale of two carbon metrics

How can our new carbon metrics help you benchmark upstream oil and gas resilience to a low-carbon future?

Our new metrics, NPV/tonne and cash margin, can be used together to benchmark companies’ upstream portfolios from a low carbon and resilience perspective.

What variables do we consider?

  • The potential impact of carbon cost on value
  • The potential impact of lower hydrocarbon prices on company cashflows.

During our WoodMacLive broadcast, Simon Flowers, Akif Chaudhry and Amy Bowe discussed the newly introduced carbon efficiency metrics which, in a nutshell, can be used together to benchmark companies’ upstream portfolios from a low carbon and resilience perspective. They looked at why these two metrics, (i) NPV/tonne and (ii) cash margin (upstream project cashflow on a per boe basis), were important for companies and investors to consider.

 

Simon Flowers, Amy Bowe, Akif Chaudhry discussed the newly introduced carbon efficiency metrics

The two new metrics being discussed are designed to measure the sustainability of a company's upstream growth and the resilience of their returns. Traditional performance metrics, which emphasise growth or returns, are lacking when it comes to assessing how upstream portfolios will perform in the future and which companies are better positioned to withstand the transition.

The live event, which lasted around 40 minutes, explored why investors need new metrics to benchmark the sustainability of companies' upstream portfolios in a low-carbon future, from both an emissions and financial perspective—and the trade-off between those. And they also shared some of the surprising results from the initial benchmarking based on these metrics and why the devil really is in the detail.