ModelRisk example · Oil and gas

Chance of Success with Shared Risk

One well, two stacked targets that share the same source rock. What are the real chances of success, and what is the well worth?

Complexity: ★★★★★
Free Excel workbook (OG-02)
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From the model’s saved run

Chance of success

Analytical with the charge shared, analytical as if independent, and simulated.

Chance of	Unit	Shared	Independent	Simulated
Oil in the Upper target	probability	42.0%	42.0%	40.8%
Oil in the Lower target	probability	27.3%	27.3%	26.9%
Oil in at least one target	probability	52.9%	57.8%	52.3%
Oil in both targets	probability	16.4%	11.5%	15.4%

Value of drilling — cumulative probability

S-curve (cumulative probability) of Value of drilling the well from the saved simulation.

The business question

The Harrier exploration well will test two stacked sandstone targets, Upper and Lower. Both need oil to have been generated and to have migrated into the structure — a single shared risk. Each target also needs its own reservoir and its own trap and seal, which are independent of the other target's.

A common mistake is to multiply each target's overall chance and treat the two targets as independent. Because the charge risk is shared, that overstates the chance of finding oil in at least one target and understates the chance of finding it in both. The model shows the difference, then values the well using the risked discovered volume.

Who it is for: Prospect evaluators, exploration managers and anyone combining chance factors for several targets or prospects.
Main outputs: Chance of success per target, of at least one discovery and of both · outcome probabilities · risked volume · expected value of the well.

How the model works

Three sheets after this one, read from left to right. Each one feeds the next.

Inputs sheet
Chance factors are probabilities; success volumes are Lognormal from P90 and P10 estimates; well cost and value per barrel are PERT ranges.
Outcomes sheet
The chances are first combined analytically — once correctly, with the charge risk shared, and once as if the two targets were independent. Then one well is simulated: a Bernoulli trial for the shared charge and one for each target's own elements. A target succeeds only if the charge works and its own elements are present.
Results sheet
The simulation confirms the shared-risk numbers. The value of drilling is the discovered volume times the value per barrel, minus the well cost. Its mean over all samples is the expected value.

ModelRisk techniques

Shared and independent risks (Bernoulli)
Lognormal volumes from P90 and P10
Risked value
Simulated vs exact probabilities

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The results in detail

Outcomes of drilling the well

Simulated share of wells ending in each outcome.

Outcome	Probability
Dry hole	47.7%
Upper target only	25.4%
Lower target only	11.5%
Both targets	15.4%
Total	100.0%

Value of drilling

Expected value = the average value over all simulated wells, dry holes included.

Discovered volume — chance of finding at least this much

Probability of at least each value of Chance of at least this volume from the saved simulation.

Measure	Unit	Value
Expected value of drilling the well	US$m	53.8
Value of drilling, 90th percentile	US$m	225.7
Risked volume (dry holes count as zero)	MMbbl	17.7
Chance of a discovery	probability	52.3%
Mean volume if oil is found	MMbbl	33.8
Chance of a dry hole (1 − chance of a discovery)	probability	47.7%
Chance the well loses money	probability	50.2%
Break-even size (mean cost ÷ mean value per barrel)	MMbbl	7.2
Recommendation		Drill: positive expected value

How to read these results

The charge is shared, so if it fails both targets are dry together. Treating the targets as independent counts the charge risk twice for 'both' and lets one target succeed while the other's charge fails — which cannot happen.
So the independent shortcut overstates the chance of at least one discovery and understates the chance of both. The simulated column matches the shared-charge column, not the independent one.
The expected value counts every outcome, including the dry holes. The 'mean volume if oil is found' is the risked volume divided by the chance of a discovery.
The well loses money more often than it is dry: a discovery smaller than the break-even size — the well's cost ÷ the value per barrel, about 7 MMbbl — does not pay for the well either.
The discovered-volume chart drops straight down at zero: the size of that drop is the chance of a dry hole.

See it move. Open the workbook, change an input on the Inputs sheet and run the simulation: every table and chart on this page updates in Excel.

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Inputs and assumptions

Every assumption in the model, with its uncertainty and where it comes from. The figures are illustrative.

Shared chance factor 1 input

Applies to both targets at once: if the charge fails, neither target can hold oil.

Assumption	Unit	Value
Source rock and chargeOil-prone source rock is proven nearby; the doubt is whether oil migrated into the Harrier structure.	probability	70%

Upper target 3 inputs

Target-specific elements, independent of the Lower target.

Assumption	Unit	Uncertainty	Low	Most likely	High
Reservoir presence and qualityChannel sands seen on seismic.	probability	Fixed	80%
Trap and sealDip closure under a thin shale.	probability	Fixed	75%
Recoverable volume if successfulVolumetric range for the Upper target.	MMbbl	Lognormal · P90, P10	8.0	–	40.0

Lower target 3 inputs

Target-specific elements, independent of the Upper target.

Assumption	Unit	Uncertainty	Low	Most likely	High
Reservoir presence and qualityDeeper sands; porosity may be degraded.	probability	Fixed	60%
Trap and sealFault-bounded closure; seal along the fault is uncertain.	probability	Fixed	65%
Recoverable volume if successfulVolumetric range for the Lower target.	MMbbl	Lognormal · P90, P10	12.0	–	60.0

Economics 2 inputs

Cost of the well and the value of each barrel discovered (US$, real terms).

Assumption	Unit	Uncertainty	Low	Most likely	High
Exploration well costDeeper well to reach both targets; spent whatever the result.	US$m	PERT	30.0	36.0	50.0
Value per barrel discoveredDevelopment NPV per barrel from screening economics of similar discoveries.	US$/bbl	PERT	3.00	5.00	8.00

Units and conventions

Chance factors: Probabilities that an element is present. A target succeeds only if every element it needs is present.
Volumes: Recoverable oil if the target succeeds, in million barrels (MMbbl); P90 is the low estimate, P10 the high.
Value: US$ million; value per barrel is the development NPV per barrel of discovered oil.

Key assumptions and limitations

Dependence: Only the charge is shared. In practice trap and seal can be partly shared too; add another shared Bernoulli for that.
Value: A constant value per barrel; development economics of each discovery size are not modelled (see OG-05).
Volumes: The two targets' volumes are independent of each other.
Data: All figures are illustrative. Harrier is not a real prospect.

How to use it

Change the chance factors, volumes and costs on the Inputs sheet.
Press F9 and watch the Outcomes sheet: each recalculation is one possible result of drilling Harrier.
Run a simulation from the ModelRisk ribbon (10,000 samples with a fixed seed are set).
Compare the three columns of the chance-of-success table on the Results sheet.

ModelRisk functions used

VoseBernoulli: Whether the shared charge works and whether each target's own elements are present.
VoseLognormalAlt: Success volumes from P90 and P10 estimates.
VosePERT: Well cost and value per barrel.
VoseInput, VoseOutput: Name the uncertain inputs and the outputs.
VoseSimMean, VoseSimProbability, VoseSimPercentile: Simulation statistics on the Results sheet.

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An illustrative example: the figures are invented for teaching and do not describe a real company, project or asset. Last updated 9 October 2026.