Handbook of Decision Analysis, 2nd Edition

Appendix DRoughneck North American Strategy

CHAPTER MENU

• D.1 Context
• D.2 Decision Process
• D.3 Framing
• D.4 Objectives and Value Measures
• D.5 Alternatives
• D.6 Uncertainty Structuring
• D.7 Uncertainty Quantification
• D.8 Evaluation Logic (Spreadsheet Model)
  • D.8.1 Selectors
  • D.8.2 Inputs Sheet
  • D.8.3 Strategy Table Sheet
  • D.8.4 Calculations Sheets
• D.9 Probabilistic Analysis
• D.10 Real Options
• D.11 Portfolio Resource Allocation
• Reference

The body of this handbook includes fully worked examples that illustrate our techniques and approaches. This appendix provides a more complex example, which explores additional useful approaches but without step‐by‐step instructions on replicating it. It is written from the point of view of the decision analysis team, which happened to be external consultants brought in to help with the project. While the project illustrates many good practices, we also acknowledge places where improvements could have been made.

D.1 Context

The example is an oil and gas problem that uses a single‐attribute economic net present value (NPV) approach. We call it the Roughneck North American Strategy (RNAS). This example is based on a specific decision analysis consulting engagement, and the content is changed to preserve client confidentiality. Roughneck is the fictitious name of an international oil and gas operator with headquarters and sizeable holdings in North America. Typical revenues were $1.5B a year. Its market cap was roughly $5B. In the years preceding ...