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Energy Finance > Exam 1 Study Questions 2 > Flashcards

Exam 1 Study Questions 2 Flashcards

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1
Q

What are the three largest shale oil plays in the US?

A

Eagle Ford, Bakken, and Permian Basin

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2
Q

What are oil sands

A

Deposits of sand, clay, water, and bitumen

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3
Q

Natural gas can be cooled to -260 degrees F to form a liquid, which enables it to be shipped via tanker. This form of natural gas is known as:

A

LNG

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4
Q

A light sweet crude will have a ____ API and ____ percent of sulfur

A

higher; lower

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5
Q

In 1985/86, Saudi Arabia’s jettisoning of the swing producer role and adoption of netback pricing triggered ____ in oil prices

A

a sharp decrease

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6
Q

The EIA estimates that ___ % of total energy needs will be met by oil, gas and coal in 2040 as compared to ___ actually used in 2011. Renewable energy is forecast to increase from about ___ in 201 to ___ % of total demand in 2040.

A

87, 77. Renewables: 9, 13

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7
Q

Which renewable fuel is expected to provide the greatest percentage of our energy needs in 2040 in the US?

A

Biomass; corn based ethanol is largest one currently in use

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8
Q

___ is the cleanest, quickest, and most cost-efficient way to extend today’s energy supply in the future.

A

Energy efficiency

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9
Q

The least and most expensive oil transportation methods are: ____ is least expensive and ____ is most expensive.

A

Tanker, semi-truck

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10
Q

the two main NGL markets in the US are in ____ and ____

A

Mont Belvieu, TX and Conway, KS

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11
Q

3 processing categories of primary refining units

A

Distillation, Conversion Process (cracking and non-cracking), and Treatment and Blending

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12
Q

a physical separation process that does not alter the molecular structure of hydrocarbons

A

Distillation

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13
Q

Involves cracking and non-cracking of hydrocarbon molecules, and may involve heat, pressure, and catalysts

A

Conversion processes

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14
Q

Final stage and may involve adding MTBE to gasoline to increase the octane level

A

Treatment and blending

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15
Q

“sweet” or “sour” refers to the amount of ____ in the crude oil

A

Sulfur

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16
Q

What are the largest investor owned companies for providing natural gas based on reserves and production

A

Exxon Mobil and ExxonMobil based on proven reserves and production, respectively.

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17
Q

What are the 3 prices associated with marketing petroleum products

A

Spot, wholesale, and retail

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18
Q

Which is not a major finished petroleum product from refining?

A

Methane

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19
Q

What are the 3 specific petrochemicals from Stage 1 that form the foundation of the industry?

A

Ethylene, propylene, and benzene

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20
Q

Commodity chemical prices are more cyclical than specialty chemical prices. T or F?

A

TRUE

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21
Q

In recent years, petroleum dropped from 97% of the total energy use in the transportation sector to 92.8%. This was due to an increase in the use of what?

A

Biofuels and natural gas

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22
Q

Why has propane usage remained strong in the residential sector while heating oil usage has declined?

A

Propane is more versatile, has more uses in homes, and is more ideal for rural residences than heating oil

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23
Q

Sharply higher oil prices can be a major contributor to what?

A

Recessions

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24
Q

Name the 7 basic finished products from refining in order of LIGHTER to HEAVIER

A

LPG, Gasoline, Kerosene, Distallate fuel oil, Residual Fuel Oil, Petroleum coke, Asphalt/bitumens and road oil

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25
Q

Which type of accounting method is considered more conservative

A

Successful efforts

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26
Q

Generally, a ___ % of PUD’s on a company’s financial statements is considered ___ conservative

A

lower/ more

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27
Q

When determining the amount of PUD’s a company has, the study considers the use of an ___ engineer to be ___ conservative

A

outside/ more

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28
Q

Under SE method, all exploratory dry holes are

A

expensed

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29
Q

Which 3 of the 11 accounting concepts are of prime importance in understanding financial reporting in the oil and gas industry?

A

Realization, matching, cost

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30
Q

The ceiling test limitation is of greater concern for companies using which of the accounting methods?

A

Full cost

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31
Q

What are the 3 principal feedstocks for the chemical industry?

A

Naptha, natural gas, and natural gas liquids

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32
Q

Which of the following are required to be disclosed for public companies in the 10-K reports?

A

Proven oil and gas reserves

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33
Q

Over the last decade, if the US would have reduced CO2 emissions to 0, global CO2 emissions would have done what over the same decade?

A

Increased by 7%

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34
Q

What are the two basic laws of thermodynamics?

A
  1. Energy is neither created nor destroyed, 2. In a closed system, heat energy tends toward randomness
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35
Q

Which of the following questions can be answered by one of the reserve ratios in Chapter 9?

A

How long will reserve last?

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36
Q

The Finding Cost Ratio measures a company’s ability to continue to operate in the future by measuring the extent to which a company is replacing the reserves it is producing. T or F?

A

FALSE

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37
Q

3 facts about Current ratio

A
  1. Calculated by dividing current assets by current liabilities,2. Shows how well the company is able to meet short-term financial obligations, 3. Higher ratio is better and indicates greater liquidity
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38
Q

When and where was the first commercial oil well drilled in the US?

A

1859; Titusville, Pennsylvania

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39
Q

Who are the Seven Sisters?

A

Anglo-Persian, Gulf Oil, Exxon, Texaco, Royal Dutch Shell, Chevron, Mobil

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40
Q

Who are the new Seven Sisters

A

China, Russia, Iran, Brazil, Benequela, Malaysia, Saudia Arabia

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41
Q

What does “petroleum” mean

A

from the Latin words petra, or rock, and oleum, oil

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42
Q

3 elements a trap requires

A
  1. A porous reservoir rock to accumulate the oil and gas, 2. An overlying impermeable rock to prevent the oil and gas from escaping, 3. A source for the oil and gas, typically black waxy shales
43
Q

Two main types of traps

A
  1. Structural: formed by earth’s movement’s that fold the rock into suitable shapes, 2. Stratigraphic: combo of rock types deposited
44
Q

3 general properties of reservoirs

A

Porosity, Permeability, and Reservoir homogeneity

45
Q

Proved reserves (P90 or 1P)

A

90% probability that at least the proved reserves will be recovered; required to disclose

46
Q

Probable reserves (P50 or 2P)

A

50% probability that at least the proved + probable reserves will be recovered

47
Q

Possible reserves (P10 or 3P)

A

10% probability that at least proved + probable+ possible reserves will be recovered; largest volume

48
Q

How is crude oil classified?

A

According to Weight (Density) and Sulphur Content

49
Q

US benchmark for natural gas

A

Henry Hub index in Louisiana

50
Q

First true gusher

A

Spindletop (Texas) in 1901 known as the Lucas Well

51
Q

holds the tools and measuring devices while the blow-out preventer controls fluid pressure

A

bottom hole assembly

52
Q

speed at which pressure forces the oil upwards into the borehole

A

flow rate

53
Q

heavy, viscous oil that combined with water, clay, and sand produces oil sands

A

bitumen

54
Q

The second oil price shock

A

1979/1980- The Iranian Revolution followed by the Iran/ Iraq war. Triggered tripling in prices.

55
Q

The third oil price shock

A

1985/1986- Saudi Arabia’s adoption of netback pricing. Triggered drop in prices.

56
Q

Oil chokepoint that is 4 miles wide and connects the Persian gulf with the Gulf of Oman and the Arabian Sea

A

Strait of Hormuz

57
Q

Oil checkpoint that connects the Red Sea to the Mediterranean Sea

A

Suez Canal, Egypt

58
Q

Oil checkpoint that connects the Red Sea to the Mediterranean Sea and separates Europe and Asia

A

Bosporus Straits, Turkey

59
Q

found in separate accumulations from crude oil

A

Non associated gas

60
Q

found in combination with or in solution in crude oil

A

associated gas

61
Q

hydrocarbons other than methane are present; rich in natural gas

A

wet gas

62
Q

gas that is almost pure methane; minimal liquids

A

dry gas

63
Q

gas that contains significant amounts of hydrogen sulphide

A

sour gas

64
Q

Oklahoma’s natural gas producing rank in 2012

A

4

65
Q

What are the primary 2 NGLs that make up LPG?

A

Propane and Butane

66
Q

Method of converting natural gas into liquids for ease of transportation

A

Gas to Liquids (GTL)

67
Q

What is the cleanest fossil fuel and why

A

Natural Gas because it has a low carbon content

68
Q

Largest importer of LNG

A

Japan (33%)

69
Q

Largest exporter of LNG

A

Qatar (31%)

70
Q

High level physical trade types

A

Arbitrage

71
Q

opportunity for Location/Arb trade (transportation agreements)

A

Improve margin by moving product to another market

72
Q

opportunity for Quality trade (storage & blending capabilities)

A

Improve margin by blending products to create a higher valued product

73
Q

opportunity for Timing trade (storage capabilities)

A

Improve margin by holding product until prices increase

74
Q

Newer refining technique that uses chemical processes on some of the fractions

A

Conversion

75
Q

Distribution and sale of refined products

A

Marketing

76
Q

World’s largest refiner

A

ExxonMobil Corp.

77
Q

3 major classes of hydrocarbons

A
  1. Paraffins- saturated chains, 2. Naphthenes- saturated rings, 3. Aromatics- unsaturated rings
78
Q

What hydrocarbons make up crude oil

A

83-87% Carbonm 11-15% Hydrogen, 1-6% Sulfur

79
Q

Light crude

A

greater than 30 API

80
Q

Intermediate crude

A

22 to 30 API

81
Q

Heavy crude

A

less than 22 API

82
Q

Refineries are categorized by ___ and ___

A

size (measured by crude distillation capacity) , configuration (level of sophistication and complexity)

83
Q

How is complexity measured

A

The Nelson Complexity Index assigns a complexity factor to each piece of equipment based on complexity and cost. Ex: complex refinery will have an index of 13

84
Q

3 categories of petroleum products

A
  1. Light distillates (LPG, naphtha, gasoline), 2. Middle distillates (kerosene, diesel), 3. Heavy distillates (heavy fuel oil, lubricants, asphalt, petroleum coke)
85
Q

Refinery profit drivers

A

-Raw material & input costs-Refinery configuration-Reliability & efficiency-Product value

86
Q

Linear programming (LP)

A

computer simulation to optimize refinery operation

87
Q

How to find the refining margin

A

Value of products - cost of crude - costs of refining = refining margin

88
Q

Used by refineries and industry stock analysts to assess the general profitability of a given market

A

crack spreads

89
Q

Most important component of downstream profitability

A

Marketing

90
Q

Spot price

A

aka refinery gate pricing or bulk pricing; lowest price paid for refined products

91
Q

Wholesale price

A

majority of refined products sold pass through wholesale distribution network; wholesale margins and prices vary directly with spot prices

92
Q

Retail price

A

oil companies distribute fuel to wholly owned and operated company sites or to independent dealers.

93
Q

The Realization concept

A

Revenue should be recognized only at the time a transaction is completed

94
Q

The matching concept

A

revenues should be matched with the corresponding costs of producing such revenues

95
Q

The cost concept

A

Cost is the basis for all accounting for an asset, so the accounting entry has little to do with the actual value of the asset

96
Q

Energy Ratios

A
  1. Production Ratio 2. Reserve Life Index 3. Production Replacement Ratio 4. Finding&Development Reserve Ratio 5. Reserve Replacement Cost Ratio 6. Finding Costs Ratio 7. Lifting Costs 8. Value of Proved Reserves Additions 9. Value Added Ratio
97
Q

he 9 Energy Ratios can be broken up into 3 Separate Categories which are:

A

Reserve Ratios, Reserve Cost Ratios, Reserve Value Rations

98
Q

Production Ratio

A

Production/Reserves

99
Q

Reserve Life Index

A

Reserves/Production

100
Q

Production Replacement

A

(Change in reserves + Production)/Production

101
Q

Finding And Development Reserve Ration

A

(Extensions & Discoveries + Improved Recovery + Reserve Revisions)/production

102
Q

Reserve Replacement Cost

A

Costs Incurred/(Revisions+Improved Recovery + Extensions& Discoveries+Purchases)

103
Q

Finding Cost Ration

A

exploration cost/(extensions & Discoveries)

104
Q

Lifting Costs Ratio

A

Total Lifting Costs/Annual Production

Energy Finance (4 decks)

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