Valuing Petroleum Reserves Using Current Net Price

摘要: I. INTRODUCTION The Hotelling Valuation Principle (HVP) states that, when valuing any depleting mineral reserve, one can simply multiply the current net price (price less unit extraction cost) associated with those reserves by quantity of reserves: (1) [V.sub.S] = [[Lambda].sub.S][R.sub.S], where [[Lambda].sub.S] ([p.sub.S] - [c.sub.S]) is (time s) and [R.sub.S] recoverable in place (Miller Upton [1985a]). derivation combines Discounted Cash Flow (DCF) analysis Hotelling's [1931] result that equilibrium a non-renewable resource must rise at rate interest. With cash flows being inflated discounted same rate, intuitive, its simplicity has drawn attention appraisers national income accounting agencies.(1) U.S. Department Commerce, for instance, uses equation as method stock depletion nation's assets (Carson [1994]). Miller [1985a, 24] empirically test principle against oil gas reserve values imputed from firm balance sheets, conclude it "provides not only reasonably good descriptions structure actual market sample petroleum-producing companies, but substantially better than publicly available alternative appraisals based on much underlying raw data." They claim abstractions HVP constant marginal cost, perfect information competition do appear to invalidate empirical performance, so propose remains theoretically intact even these are relaxed. Further investigation, however, found severely overvalue reserves. For example, Watkins [1992] finds formula overvalues transactions an average 85%.(2) Indeed, Upton's original work, 81 94 valuations first data set, 95 98 second many cases 50% or more.(3) Several studies have coefficient [[Lambda].sub.S][R.sub.S] order half. This tendency overstate value petroleum recognized users such Bartelmus et al. [1994], who nevertheless continue rely valuation. economists attempted explain overvaluation. Magliolo [1986] investigates sources tax effects. Cairns Davis [1998] Moore show case hard-rock mining, capacity constraints production produce one. Others instead rejected valuation tool, also entire theory principle. Adelman [1993] argue (i) practical purposes there no binding constraint gas, explicitly assumed [1931], (ii) reveal r% rule. McDonald [1994] adds regulation well spacing rates another important facet modeled Hotelling, this could be cause failure Still others cannot valued accurately using flow framework. Rather, analyst incorporate "option value" which arises whenever producers adjust through time response realizations stochastic events fluctuations (Brennan Schwartz [1985]; Paddock, Siegel Smith [1988]; Smit [1997]). position valid, does failures (1). …