Introduction

This is the training course that energy industry professionals must attend to acquire the financial know-how and techniques essential in support of successful business management.

The financing of new investment in all industries usually requires major funding and is generally risky. The financing of investment in the acquisition, exploration, and development, and subsequent operation and maintenance of new assets in the energy industry faces additional risk. The decisions as to whether or not to invest in new capital projects require critical business decision-making during the investigation and feasibility assessment phases but also appraisal of returns on capital employed and other financial implications, and the analysis of risk.

The financial evaluation of potential investments requires the preparation of detailed cash flow projections to determine, as accurately as possible, the expected returns to an organisation under varying conditions of uncertainty. Realistic cash flow projections will reflect the initial capital expenditure required for the acquisition of assets, working capital requirements, and expected revenues and operational costs that include, for example, maintenance of assets over their expected economic lives. 

On a global scale many capital projects fail to meet targeted milestones, and strategic and financial objectives. This is usually as a result of failing to plan properly and apply appropriate techniques of investment evaluation. The financing decision-making, planning, and risk analysis tools and techniques used to evaluate potential investments and determine the likelihood of success are all included in this training course.

This Energy Training Centre course will highlight how to:

  • Identify how financial decision-making regarding investment and financing both impact on value creation
  • Use financial planning models as the basis for determining cash flows for investment appraisal
  • Apply the wide range of methods of investment appraisal
  • Use the tools and techniques of risk analysis, for example sensitivity analysis, simulation modelling and scenario analysis to evaluate investments
  • Evaluate the financial strategies used to manage and mitigate financial risk
  • Use the techniques of problem-solving and root cause analysis to develop continuous improvement initiatives for enhanced business performance

Objectives

By the end of this training course participants will have learned about:

  • Fundamentals of decision analysis
  • The business decision-making process
  • Measuring profitability
  • Strategy formulation and direction
  • Financial planning and modelling
  • Decision analysis and appraisal of domestic and international investment
  • Sources of financing and the cost of capital
  • Risk identification, analysis and management using appropriate responses
  • Risk analysis, expected values, simulation and scenario analysis
  • Problem-solving techniques, decision support and performance improvement techniques

Training Methodology

This Energy Training Centre course does not assume prior knowledge of the topics covered and is presented in a very hands-on way to suit individuals with varying levels of financial knowledge and experience.  Delegates will acquire the financial know-how and techniques and essential skills, with the benefits from the Instructor’s own commercial career experiences and through presentations and interactive learning methods.

This training course includes numerous illustrative examples, real-world experiences and many real-world business scenarios. New ideas, tools and techniques are introduced incrementally to enable participants to progress from the fundamental to the more complex topics. Participants will develop their learning through group discussions, and team-based exercises and case studies that reinforce the application of each of the learning points. Difficult mathematical concepts are minimised wherever possible and handled in a visual way that is easy to understand – our aim is for this to be an enjoyable learning experience. The material has been designed as a reference point to which participants may refer regarding application of the various tools and techniques back in the workplace. 

Organisational Impact

You will go back to your workplace with an up-to-date and relevant skillset that will benefit your organisation through:

  • Appreciating the importance and recognising the factors that impact on the decision-making process and value creation
  • Understanding how the key financial statements are used as the basis for developing financial plans
  • Appraising the financial consequences of alternative strategic decisions relating to capital investment
  • Evaluating alternative sources of financing, and the costs of capital with the aim of maximisation of shareholder wealth
  • Mitigating and minimising business risk and financial risk through risk analysis and the effective use of the appropriate techniques of risk management
  • Appropriate use of insurance, and hedging the risk of interest rates and foreign currency exchange rates exposures
  • The use of problem-solving and root cause analysis (RCA) techniques and continuous performance improvement initiatives
  • Communicating more effectively with financial professionals and sharing throughout the organisation the knowledge gained from this training course

Personal Impact

This training course will greatly improve your understanding of the influence of financial factors and risk on decision-making, and the impact of the consequences of those decisions through:

  • An appreciation of decision analysis and the various analytical models used to develop strategy, and the links between strategic objectives and financial and non-financial key performance indicators (KPIs) using a balanced scorecard
  • A clear understanding of exactly how the financial statements are used to support effective decision-making and financial planning
  • Evaluating how the proportions of debt and equity financing critically impact on organisational performance and the maximisation of shareholder wealth
  • Being able to apply the DCF techniques of NPV, IRR, MIRR, and EAC to evaluate new capital project investments, and the techniques of capital budgeting, capital rationing and the PI to determine how financial resources may be optimally allocated between alternative investment projects
  • Considering how risk may be most effectively managed using the appropriate risk management tools, and insurance and hedging of interest rates and foreign currency exchange rates
  • Using the techniques of problem-solving and RCA to identify key areas I which to implement continuous improvement initiatives
  • Improving your self-confidence to be better placed to deal with financial and other professionals on financial and strategic issues

Who Should Attend?

This training course is designed for energy industry professionals including project leaders, project engineers, production engineers, financial managers, analysts and other managers who are responsible for business management and decision-making, risk management, and project investment evaluation, and for managing costs, revenues and cash flows.

It will greatly benefit energy professionals working in:

  • General management, sales, and marketing
  • Estimating, costing, and project management
  • Operations, and engineering
  • Procurement, and logistics
  • Asset management
  • Human resources
  • Other financial and non-financial professionals that need or wish to develop or refresh their understanding of finance, risk, and the decision-making process

The Course Outline

Day One: Decision-Making in Conditions of Uncertainty 

  • Decision analysis
  • Opportunity costs, sunk costs and disposal values
  • Strategic development
  • Uncertainty and risk
  • Real options
  • Identification of the key factors in decision-making and measurement of value
  • Performance measurement and the balanced scorecard

Day Two: Planning and Measuring Profit and Cash Flow

  • The financial statements
  • Balance sheet
  • Income statement
  • Statement of cash flows
  • The importance of cash flow
  • Time value of money
  • Discounted cash flow (DCF)
  • Financial plan modelling, and its use as the basis for project evaluation

Day Three: Investment Decision Analysis 

  • Capital expenditure and operating expenditure (CAPEX/OPEX)
  • Return on investment (ROI), residual income (RI), and economic value added (EVA)
  • Accounting rate of return (ARR), and payback
  • Net present value (NPV), internal rate of return (IRR), modified internal rate of return (MIRR), discounted payback, and equivalent annual cost (EAC)
  • Cost-benefit analysis (CBA), and dis-benefits
  • Project financial plans, future cash flows and evaluation of risk
  • Capital rationing and the profitability index (PI)
  • Energy industry, and international operations and investment projects
  • Stakeholders and their level of influence
  • Determining the scope of work, and project workflow management 

Day Four: Financing, Cost of Capital, and Business and Financial Risk Analysis 

  • Sources of finance and the cost of capital
  • Systematic risk, unsystematic risk, business risk and financial risk
  • Risk impact and probability analysis, the ranking of priorities, and attitudes to risk
  • Expected values, standard deviation, and coefficient of variation
  • Sensitivity analysis, scenario analysis, simulation modelling and tornado diagram, NPV break-even

Day Five: Financial Risk Management, Root Cause Analysis (RCA), Problem-Solving and Improvement Techniques

  • Financial risk management and hedging of interest rates and foreign currency exchange rates exposure
  • Root cause analysis (RCA)
  • The toolkit of problem-solving techniques
  • Project planning and monitoring using Gantt charts and PERT charts
  • Tools for continuous improvement – Kaizen

The Certification

Certificate of Completion will be given to the participants who attend and complete the training course.

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