Changes

[[file:key-economic-parameters_fig3.png|thumb|{{figure number|3}}Expected value profile plot. Expected value is plotted versus probability of success example for development well and multiwell extension project.]]

[[file:key-economic-parameters_fig3.png|thumb|{{figure number|3}}Expected value profile plot. Expected value is plotted versus probability of success example for development well and multiwell extension project.]]

<fig id="KeyEconomicsufig1"><graphic mime-subtype="png" xlink:href="KeyEconomicsuFig1"></graphic></fig>If the extension project had been assigned a 70% chance of success by the geologist, the calculated ENPV (after-tax) at 4% would be [[cost::1,613,832 USD]] (0.70 × [[cost::2,729,760 USD]] – 0.30 × [[cost::990,000 USD]]). The breakover probability of success for the extension project is approximately 27% (see Figure 3).

If the extension project had been assigned a 70% chance of success by the geologist, the calculated ENPV (after-tax) at 4% would be [[cost::1,613,832 USD]] (0.70 × [[cost::2,729,760 USD]] – 0.30 × [[cost::990,000 USD]]). The breakover probability of success for the extension project is approximately 27% (see Figure 3).

The expected net present value is useful in comparing large or complex ventures, as well as projects having different discovery probabilities and reserves potential. The parameter is useful in prospect inventories and for program planning and budgeting if estimates of reserves and discovery probability are reliable. The expected net present value to expected investment ratio is also useful in capital investment decisions when capital is limited. Newendorp<ref name=pt02r13 />) demonstrates the use of this investment efficiency ratio.

The expected net present value is useful in comparing large or complex ventures, as well as projects having different discovery probabilities and reserves potential. The parameter is useful in prospect inventories and for program planning and budgeting if estimates of reserves and discovery probability are reliable. The expected net present value to expected investment ratio is also useful in capital investment decisions when capital is limited. Newendorp<ref name=pt02r13 />) demonstrates the use of this investment efficiency ratio.