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Tight oil vs deepwater: which is more valuable?

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10 July 2019

Tight oil vs deepwater: which is more valuable?

Report summary

Tight oil and deepwater project economics are often presented very differently. Methodologies and investment metrics vary – but should they? What if we look at both the same way? How do the economics compare? And does this help to explain some of the mixed messages on the value of the tight oil sector? We conclude: - Presenting tight oil economics on a well-only basis, focusing on IRR, can be misleading. - Like deepwater valuations, tight oil needs to be considered on a full-cycle basis. - The economics of deepwater projects and tight oil wells can appear very different or very similar – it just depends what metric you prefer to guide your investment decisions. - The profit-investment ratio – how much ‘bang for your buck’ – is a better measure for comparing the two investment propositions than NPV or IRR. - Deepwater projects do have higher geological risk but risk cannot be ignored in tight oil, especially as the upfront capital requirements increase with industrialisation.

Table of contents

  • Executive summary
  • Tight oil values – a mass of contradictions
  • Tight oil values – implications for capital allocation
  • Tight oil vs deepwater values: risk factors
  • Tight oil vs deepwater values: the way forward

Tables and charts

This report includes 7 images and tables including:

  • Figure 1: Tight oil average type well production, pre-royalty/tax cash flow and economics
  • Figure 2: Deepwater average well production, pre-royalty/tax cash flow and economics
  • Figure 3: Deepwater full-cycle project production, pre-royalty/tax cash flow and economics
  • Figure 4: Tight Oil Inc reported free cash flow
  • Table 1: Tight oil average type well pre-royalty/tax economics: well only and ‘fully loaded’
  • Tight oil well vs deepwater: the same economics
  • ...or different?

What's included

This report contains:

  • Document

    Tight oil vs deepwater: which is more valuable?

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