Oil and Gas Well Investment Analysis Using the LOTUS 1-2-3 Decision Support System

Abstract

This paper describes a decision support system using Lotus 1-2-3 designed to introduce the student to widely used measures of investment worth. The software has been applied successfully in the classroom and also on a professional level in evaluating the value of oil and gas investment proposals. The basic procedure involves forecasting revenues and expenses and the resulting cash flows. These cash flows are then evaluated using several different techniques. The student can use sensitivity analysis to gain an appreciation for the critical variables by changing the values of the input variables and observing the corresponding changes in the output variables.