“If you can’t describe what you are doing as a process,
you don’t know what you’re doing” W. Edwards Deming

Inserting your financial model databook, within your financial model

Written by Hedieh Kianyfard

Sometimes financial models are accompanied by another document called “The Databook” or “manual for using the Financial model”. I don’t like to call it a manual, as I agree with Elon Musk in that any product that needs a manual to work is broken!

To me, the purpose of the Databook is to provide the key technical, financing and project assumptions and give an overview of the cash flow projections and the main results of the financial model.

Usually the busy investment officers appreciate this document and use it to quickly extract information from it and use it with the project documents. Although I really like the idea of having a databook, personally I can’t handle updating it every time that I am circulating a different version of the financial model. So, I decided to include the databook within my models and link it to the model input sheet and Dashboard.

I would like to know what you think about the idea of having a databook along with the financial model and what you think are the important topics that should be included in the databook?

You can find a sample Databook sheet in the Excel file. Click here to download.

Below are the content headings of atypical financial model databook.

1. Model overview

1.1. Colour-codes
1.2. Worksheets description
1.3. Macros
1.4. Financial model flow diagram
1.5. Periodicity

2. Project overview

3. Key assumptions

3.1. Project schedule
3.2. Construction cost assumptions
3.3. Financing assumptions
3.4. Operating assumptions

3.4.1. Technical Assumptions
3.4.2. Revenue Assumptions
3.4.3. Operating Cost Assumptions
3.4.4. Major Maintenance Assumptions
3.4.5. Working Capital Assumptions
3.4.6. Tax Assumptions
3.4.7. Dividend policy

4. Output results

4.1. Sources & Uses
4.2. Key Ratios and Returns
4.3. Sensitivity summary results

Filed Under: Project updates Tagged With: ,

New F1F9 ebook: S-curve modelling in oil and gas

Oil and gas projects can require investment of many billions of dollars, and can have development times of a decade or more.

The amount and timing of the capex spend are critical model inputs and are therefore crucial to the decision making process. Capex modelling has a huge impact on value creation and the future profitability of the project.

As a project is developed and engineered, the accuracy and level of detail of the capex estimates and the schedule of spend evolve. S-curves are widely used for modelling project capex profiles.

In the latest ebook from F1F9, they explain the origin and application of the s-curve, and provide you with flexible worked example modules in excel, built to the FAST standard, that you can immediately apply in your own modelling.

Investment decision making in the Oil and Gas industry normally follows a defined process:

decision

The financial model evolves throughout each stage and modellers will find themselves having to update the capex estimates and profile throughout the process.

The excel files provided with the ebook demonstrate a flexible worked example S-curve calculation that allows for efficient updating of capex profiles.

Observation and experience gained since the inception of the O&G industry has established the relationship between capex and the S-curve. S-curves are widely used for planning, forecasting and control of cost, time and resources of a project.

s-curve_graph

Diagram above: S-curve (asymmetric)

The worked example excel files are based on the S-curve equation set out in the ebook. This is a powerful tool that modellers can use to manipulate the time variation of capex, prior to a full capex schedule being available.

As your project develops, the amount and schedule of the capex will change, and the Financial Modeller will be faced with numerous “what-if” questions.

These questions will come from decision makers and stakeholders such as management, the Executive Committee and the Board.

For those scenarios where the schedule estimate is altered, an existing S-curve, expressed in the format of percentage capex versus percentage of time, can be used as the basis to produce a revised capex profile for the new schedule.






Filed Under: About financial modelling, Project updates Tagged With: , ,