PortfolioPath

PortfolioPath

PortfolioPath is the fourth and last element in a suite of tools specifically designed for opportunity evaluation and investment decision support for oil and gas exploration. Whilst the first three elements (ProspectSim, PlaySim and VentureSim) cover the entire evaluation range from a volume, risk and value perspective, PortfolioPath addresses specifically the long term investment decision support part of the exploration process. These tools reflect and contain the expertise accumulated by Daniel during three decades in the Exploration and R&D business. Whilst the first three elements are routinely used during consulting engagements, only PortfolioPath is a commercially available product service system.
In 2006 Daniel and two colleagues from Stanford and Cambridge University published the landmark paper on Probability Management, which contains the early history of what is today PortfolioPath as well as some of the computational methods developed. The key takeaway from this papers is the fact that making decisions based on ranking of opportunities, using solely averages and ignoring dependencies between parameters can lead to erroneous decisions at best. Besides the mathematical aspect of decision support this paper also addresses the ergonomics of decision making. In the past portfolio were optimized using more or less complex methodologies, often misunderstood and certainly considered a black box by decision makers. The result of lengthy optimization calculations were than presented in PowerPoint format to the decision makers, which at this stage had lost all ability to play what if scenarios. PortfolioPath is built on the premise that any system should be as interactive as possible so that decision maker can explore the impact of different strategies, enabling them to find the path to achieving their corporate goals, hence the name PortfolioPath.

PortfolioPath Choctaw

PortfolioPath

Probability Management

“Interactive simulation tools play the role of light bulbs by illuminating uncertainty and risk for a wide population of managers. New technologies will run simulations nearly instantaneously each time the parameter of a business model is changed. Interactive visual feedback will provide management with an experiential understanding of uncertainty and risk.”
Savage, S. L., Scholtes, S., & Zweidler, D. C. (2006). Probability Management (Part 1). ORMS Today, 33(1), 22–28.