Upstream Oil & Gas Company Financial Model

Description
This 20-Year 3-Statement Financial Model for an Upstream Oil & Gas Company consists of a fully integrated Income Statement, Cash Flow Statement, and Balance Sheet, driven by key operational and financial assumptions. Given the industry-specific nuances, the model must account for revenue from multiple hydrocarbons (Oil, Gas, and LNG), capital-intensive operations, depletion of reserves, and fluctuations in commodity prices.


1. Income StatementThe Income Statement reflects revenues, expenses, and profitability. It typically includes:
Revenue Section

• Oil Revenue = (Oil Production Volume * Oil Price Realization)
  
• Gas Revenue = (Gas Production Volume * Gas Price Realization)
  
• LNG Revenue = (LNG Export Volume * LNG Price Realization)
  
• Total Revenue = Sum of all hydrocarbon revenues
  Key Drivers:
  
  • Production forecasts (barrels of oil equivalent per day - BOE/d)
  • Price decks for oil (Brent/WTI), gas (Henry Hub), and LNG (JKM/TTF)
  • Revenue recognition policies (spot vs. long-term contracts)

Operating Expenses (OPEX)

• Lease Operating Expenses (LOE) – Cost of maintaining production (lifting costs)
• Transportation & Processing Costs – Pipeline tariffs, LNG liquefaction fees
• Production Taxes – Severance, ad valorem, and royalties
• General & Administrative (G&A) Expenses – HQ and corporate overhead
• Depletion, Depreciation & Amortization (DD&A) – Based on reserves and CAPEX

EBITDA & Profitability Metrics

• EBITDA = Revenue - OPEX - G&A
• Operating Profit (EBIT) = EBITDA - DD&A
• Net Interest Expense = Interest on debt financing
• Taxes – Effective tax rate applied to pre-tax profit
• Net Income = EBIT - Interest - Taxes

2. Cash Flow StatementThe Cash Flow Statement tracks cash movements and is divided into three sections:
Operating Cash Flow (OCF)

• Net Income (from Income Statement)
• Adjustments for Non-Cash Items:
  • Add back DD&A (non-cash)
  • Add back non-cash interest or stock-based compensation
• Changes in Working Capital:
  • Accounts Receivable
  • Accounts Payable
  • Inventory Changes

Investing Cash Flow (ICF)

• Capital Expenditures (CAPEX)
  • Exploration & Development Drilling
  • Facility Construction (Processing Plants, LNG Terminals)
  • Acquisition of Reserves (Asset Purchases)
• Asset Sales (if applicable)
• Investment in JV or Partnerships

Financing Cash Flow (FCF)

• Debt Issuance & Repayments (for funding projects)
• Equity Issuance (if raising capital)
• Dividend Payments & Share Buybacks

Free Cash Flow (FCF) Metrics

• Unlevered Free Cash Flow (UFCF) = OCF - CAPEX
• Levered Free Cash Flow (LFCF) = UFCF - Interest Payments

3. Balance SheetThe Balance Sheet provides a snapshot of financial health, categorized into assets, liabilities, and equity.
AssetsCurrent Assets

• Cash & Cash Equivalents – Cash on hand
• Accounts Receivable – Sales proceeds yet to be received
• Inventory – Stored hydrocarbons

Long-Term Assets

• Property, Plant & Equipment (PP&E)
  • Oil & Gas Reserves (Proved Developed Producing - PDP, Proved Undeveloped - PUD)
  • Pipelines, Gathering Systems, Processing Plants
  • LNG Terminals
• Exploration & Evaluation Assets – Pending reserves evaluation

LiabilitiesCurrent Liabilities

• Accounts Payable – Vendor payments due
• Short-term Debt – Maturing loans

Long-Term Liabilities

• Long-term Debt – Bank loans, bonds
• Deferred Taxes – Tax liabilities from asset valuations
• Decommissioning Liabilities – Future abandonment costs

Equity

• Shareholder Equity – Paid-in capital, retained earnings
• Retained Earnings – Cumulative net income reinvested

Key Integrations & Model Dynamics

1. Net Income → Flows into Retained Earnings (Balance Sheet)
2. DD&A → Added back in Operating Cash Flow
3. CAPEX → Reduces Cash and Increases PP&E
4. Debt & Equity Transactions → Impact Liabilities & Equity

This 20-Year 3-Statement Upstream Oil and Gas Refinery Financial Model delivers a granular view of performance, enabling data-driven decision-making and strategic planning in a complex and volatile industry.