How to Make Sense of Volatile Markets With Modern Scenario Analysis

Omnira Software

If you’ve ever looked up “end of the world predictions,” you probably noticed that more than 100 dates have come and gone for an apocalyptic event, yet we’re still here. Apparently, we’re not as good at predicting the future as we’d thought.

Let’s take a more in-depth look at the years following the oil price crash in 2015: oil and gas price forecasts showed conservative increases for future years. However, when you look back at what was predicted for oil prices in, say 2012, there was certainly a lot of agreement that prices would remain in, or around $100/bbl.

Price forecasts provided by Reserve Evaluations firms from that time tended to follow the trend with either flat or increasing prices into and beyond 2019.

Once again, those predictions didn’t come true.

If Predictions Can’t Be Trusted, Why Do Businesses Still Use Them?

There are countless examples that prove that companies have always been interested in running sensitivities and doing scenario analysis to better understand what their businesses look like if current gas and oil forecasts aren’t accurate. This extends even beyond price.

Being able to compare different projects and understand where there is more sensitivity to changes in production, operating or capital costs is also incredibly useful when making decisions on future activity.

Because of the complexities of declining production, sliding-scale royalties, and non-linear indicators—such as rate of return and payout—it’s not simply a matter of arithmetic. In projects with steep declines, high up-front costs, and slim margins, it’s critical to the varying possible outcomes. Considering humankind’s success in prediction, it’s inexcusable not to do this homework.

Business Sensitivities Play A Crucial Role In A Company’s Forecasting Capabilities

It stands to reason that even if we aren’t always able to predict the future with great accuracy, being able to understand our business sensitivities is beneficial.

Analysis that is easy to generate can help bridge the gap from what is currently expected to seeing into what could be under different assumptions. Next-generation software can do just that. While there are many solutions in the E&P market, you need to purchase software that provides the most value to your entire team.

When Employing A Modern Software Solution, You & Your Team Should Be Able To:

  • Easily execute price scenario analysis using completely different inputs or variations of the current data.
  • Alter production, operating costs, and capital by applying factors to the base data.
  • Apply variants without impacting the foundational data.
  • Allow all users to access data, even when you’re running an analysis.
  • Run Spider and Tornado analysis by altering variables between a high base and low, with a defined step.
  • Execute hundreds or thousands of evaluations in a matter of minutes. Make all of the resulting economic data available, as well as graphically displayed.
  • Understand what the relational impact of different scenario analyses is on a single Type Well, a project, or your entire corporate portfolio.

With this extensive list of capabilities, it’s easy to see how you’ll be better able to understand your business sensitivities and generate more valuable data. When you’re ready to step into the digital age and leverage improved scenario analysis, MOSAIC can help.

Next-Gen Software Enhances Scenario Analysis & Drives Business Forward

Our software solution has all of the next-gen capabilities described above and then some!

Through MOSAIC’s Analysis Workbench tools, MOSAIC bases the scenario analyses on your existing portfolio, which requires no extra work from you to create data, including your budget or reserves in another system. Our software is simple and straightforward, and quickly generates the data you need to be successful.

Schedule a free discovery demo to learn more about how you can understand your business better with scenario and sensitivity analysis.


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