User's Guide: Merak Fiscal Model Library For World Peep
User's Guide: Merak Fiscal Model Library For World Peep
The information in this document is subject to change without notice. The software in this document
is furnished under a license agreement. This software may be used or copied only in accordance
with the terms of such agreement.
3 Reporting.................................................................................................................................. 23
3.1 Report Types ................................................................................................................... 23
3.1.1 Level 1 Reports .................................................................................................. 23
3.1.2 Level 2 Reports .................................................................................................. 24
3.1.3 Level 3 Reports .................................................................................................. 27
3.2 Full Cycle vs. Point-Forward Economics......................................................................... 27
FML
Peep Products
Product Groups
Oil
Oil
Condensate
Gas1
Gas
Gas2
Propane
NGL
Butane
Ethane
As part of the modeling standards, the FML utilizes a strict naming convention to make the variable
names intuitive and clearly defined. This makes report building much easier. Project-level variables are
assigned the prefix “Proj.” Variables pertaining to the Host Country are assigned the prefix “NOC,” “Govt”
or “State.” Variables pertaining to the Contractor Group are assigned the prefix “Contr,” “Comp” or “Part.”
The following flow chart illustrates the model structure and the relationship between the parties:
Project (Proj)
Company Partner
(Comp) (Part)
“Govt” and “State” variables do not appear in the flow chart since they do not represent a discrete portion
of the project’s cash flow, but rather a combination of the NOC cash flow, Profit Share and Taxes. These
variables are primarily used for reporting purposes.
In general, go to the Burden and Tax tabs of a Case to view/change the Fiscal terms
Column heading
indicating an Add-
in is used to make
the calculation.
The window (often referred to as the “User Interface” in this user’s guide) that is displayed after clicking
the Add-in Settings… option is dependent upon the type of calculation the Add-in is performing. The
interface will have a title indicating which fiscal term is being exposed.
The Add-in functions display the model default settings when first opened. To override these settings,
select the Override Model Defaults option. Users can add new tiers and delete existing tiers using the
buttons. To edit existing tiers, double click on a specific cell. User-modified settings are stored with the
Case and do not have an impact on the model. This allows multiple Cases to represent different contract
terms, which is particularly useful for contract negotiations, or for simply using a single model with multiple
producing blocks.
NOTE: Company Interests are entered as a % of the foreign Contractor group (which may have
less than 100% of the contract if the NOC participates). The model automatically adjusts the
Company and Partner effective interests based on the NOC Participation settings.
The Interest inputs can be set to change over time by changing the ‘Revert’ column to ‘Yes’, or ‘Array’
using the dropdown menu (see figure 8).
st nd rd
If the ‘Yes’ option is selected, the interest reversions then can be set by entering the 1 , 2 , and 3
Reversion Rates in the next columns on the tab. The condition for the triggers can be set based on % of
Capital, Capital Amount, Produced Volume, and Specific Date on the ‘Triggers’ side tab. If the ‘ARRAY’
option is selected, the interest reversion is then controlled by the Int. Array side tab. In the bottom
picture, the Operating Interest % column becomes editable after the ‘ARRAY’ column is selected on the
Reversion tab.
NOTE: Peep’s Interest Reversions DO NOT WORK with INPUT CONSOLIDATIONS (‘sum inputs first’
option). This is not a function of FML models but an issue with Peep.
Other interest inputs adhere to the FML standard. Those interest inputs are same as the usual FML
interests, which are listed below.
- Capital Interest – used for Development Capital Interest.
- Exploration Cap – used for Exploration Capital Interest.
- *Other Inc. Interest and Royalty Interest are not used.
Initial Interest
These are the NOC or Partner interest positions as of the Evaluation Date of the Peep Case.
Interest Changes
These refer to the changes to the Initial Interests as defined by a number of Trigger options. FML models
currently support the following Triggers in this interface: Date, Prod Vol >, Prod Rate >, Cum Prod Vol >.
The default production stream used by the triggers is Project level total production (BOE). The order of
the changes entered has no impact on the calculations. The interface will honor each interest reversion
regardless of how it is entered.
Refer to the following reports to view Participation settings:
• NOC Participation
• Comp/Part Participation
Refer to the following reports to view Carry Payback settings and calculations:
• Contr NOC Carried Costs
• Contr NOC Carry Payback
• Comp/Part Carry Payback
• Comp Carried Costs
• Part Carried Costs
2.7 Setting Participation Add-in in a PSC with FIFO Cost Recovery Allocation
In PSC models, if the Cost Recovery Allocation method is set to First-In-First-Out (FIFO) method, the
Carried Interests for the carried party must be set to 0%. Also, the ‘Treat Carry As A Loan’ option has
to be unchecked (as the carried costs are recovered from cost recovery allocation as a revenue for the
carrying party). No error will be reported if these parameters are not correctly set. However, the
Contractor and Company Net Revenues will be overstated due to the double counting of Carried Costs by
means of Cost Recovery and NOC Payback Revenue.
Figure 15 below illustrates how to view or change the settings, using the Profit Sharing Rate fiscal term as
an example. A general description for each fiscal term’s settings is provided in the help text which can be
viewed by making the right-click on a column header and choosing Display Model Help Text ….
Use the drop down menu to select the method of adding reserves. The option Pro-rate Based on
Successful Drilling is the default setting. If users wish to add reserves manually, the option Manual
must be selected.
Click the Detail… button (Activated If the Manual option is selected) to select a method of Manual Entry (see
figure 19).
Enter
Opening
Balance for
un-recovered
costs.
(1) Opening Balance – Enter Net Balance for Company Income Tax Depreciation, or
Gross Balance for Project Cost Recovery Depreciation. Balance entered will be
added to the balance in the year 0 and will be depreciated as per the depreciation
schedule for its tier that is set in the add-in.
(2) Manual Depreciation Input – (Burden-Custom side tab) is the column for users to
manually input depreciation schedule for the depreciation group. Values input in this
column will be calculated as the value depreciated in the year it is entered. Total
value will be added into the depreciation balance in the year 0.
Economic Summary (Party) Comp Net Revenue Proj Royalty Proj Profit Sharing - Oil
Comp Participation Comp Bonuses & Fees Proj Profit Sharing Proj Profit Sharing - Gas
Comp Operating
Input Summary Proj Cost Recovery Proj Profit Sharing - Rate
Costs
Proj Production
Comp Tariffs Proj Cost Rec - Opcost
Bonus
Comp Prod/Asset
Party Property Tax Proj Cost Rec - Expl
Taxes
Comp Capital Costs Party Income Tax Proj Cost Rec - Dev
Comp Net Reserves Contr NOC Carry Comp Inc Tax - Revenue
Select “Sum
case input
values, then
calculate.”
Figure 35 Aggregation
Select “Calculate Cases, then sum results.”
• Most of the listed variables exist at several Interest Levels (Company, Partner, Contractor and
NOC)
• The Input category lists below for Operating Costs and Capital Costs are comprehensive.
• The other lists below represent reduced subsets of the standard variables, and display variables
that are normally used for reporting and planning functions, and for integration with other
systems.
*Comp Overhead Home Office opcost group is Company’s level operating cost that has no effect on the Company’s
Income Tax position, but to the After Tax Cash Flow only.
**Optional Columns are the columns that do not appear in new cases, but can be added by selecting the menu, “Edit
Add Column…” The variable operating costs ($/Bbl) for Propane, Butane, Ethane, Sulphur, Other, and Water Injection
are set to be optional columns since they are rarely used. These optional columns input are reported in the “Proj Opcosts
– Other” Any Model column report.
Descriptions of economic indicators and items found in the Economic Summary Report are as follows:
Economic Description
Indicator
BTCF Before – Tax Discounted Cash Flow
ATCF After – Tax Discounted Cash Flow
NPV Net Present Value: ∑ ( ATCF ) or ∑ ( BTCF )
PIR Profit/Investment Ratio: NPV Discounted Capital
ME Maximum Exposure: Maximum Cumulative cash outlay
IE Investment Efficiency: NPV ME
The following pages include samples of the reporting and graphics output from the standardized models.
As previously mentioned, many of these reports work across all the models and illustrate the ability to
evaluate petroleum assets consistently across all regimes. The graphs are from the FML Excel-based
graphics tool that lets users select a Peep Case or Consolidation and automatically generates a variety of
charts. The tool also has the ability to run a prototype case across multiple regimes and compare the
attractiveness of the regimes.