Summary Because of current economic conditions and the resulting restriction of capital spending, it is necessary for management to possess tools to analyze future exploration efforts from a business viewpoint. Viability analysis is used to examine and quantify risks of exploration programs. Portfolio analysis allows management to programs. Portfolio analysis allows management to compare sets of exploration opportunities, thereby maximizing the effectiveness of capital allocations. Introduction Worldwide economic conditions and rapidly changing. The surplus of productive oil capacity is not being absorbed. The erosion of crude oil prices has caused reduced cash flows, which in turn have caused many companies to undergo major changes in their respective risk orientations. The limitation of capital has diverted exploration away from high-risk, high-expense plays of frontier and foreign areas back to the lower-risk, more mature domestic plays. Also, the U.S. domestic industry has experienced changes with smaller companies being short of capital. This is the result of diminished ability to raise capital from the equity markets or by borrowing. Changes in exploration strategies for both large companies and independents have been dictated by the change from debt financing to cash flow financing. To survive in this environment, each company will have to tie its exploration strategies to its corporate strategic plan. This will require treating exploration as a business rather than as merely an operational function. Exploration then can be compared with other business opportunities. Conventional strategic planning concepts that are used in the manufacturing type of strategic planning cannot be directly applied to exploration planning for very obvious reasons. Quick and later Quick and Buck proposed a systematic approach to applying the strategic planning process to exploration planning. This process has three process to exploration planning. This process has three overall phases. The first consists of analyzing the exploration environment, including the historical strengths and weaknesses of organizational exploration efforts. The second is made up of various techniques to evaluate future exploration opportunities within the historical framework that was established initially. The final phase tests the various alternative actions and strategies by using computer modelling techniques. The thrust of this paper is to discuss the techniques proposed for evaluating future opportunities: viability proposed for evaluating future opportunities: viability and portfolio analysis. The accompanying phases are discussed briefly so that the relationships are maintained. Environmental Analysis To treat exploration as a business, it is necessary to understand the exploration environment. Most of the oil and gas fields remaining to be found in the continental U.S. are in mature areas or basins, most of which have enough exploration history to allow statistically reliable forecasts of undiscovered fields. Kaufman and Drew et al. along with others have given detailed methods for reserve discovery forecasting. All studies have shown that the mean size of new discoveries declines markedly as the basin or area matures. As an example of the relationship between discovery size and basin maturity, Fig. I shows discovery size vs. the number of new field wildcats drilled. From 1914 through 1980 about 1,100 wildcats were drilled, which found about 140 fields in the Big Horn basin. This graph shows the decline in discovery size as additional test wells were drilled (note that the discovery size is shown on a log scale). The average field size for each data point is the mean of the ultimate reserves in thousands of equivalent barrels for all fields found in a particular 2-year period. For reference, years have been superimposed on the cumulative well axis to give some indication of the basin's history. Drew et al. predicted for the Permian basin 34,000 fields remaining; 98% or approximately 33,300 should yield less than 1.5 million equivalent bbl [238 × 10(5) m3], 680 fields should yield from 1.5 to 12 million equivalent bbl [2.38 × 10(5) to 19.07 × 10(5) m3], and only 27 fields left to be found will exceed 12 million equivalent bbl [19.07 × 10(5) m3]. The next step after analyzing the historical exploration environment is analyzing the strengths and weaknesses of the company's exploration program. What technical strengths are needed within a play to reduce risk and allow the company to discover the target field size that fits their objectives? This could be special seismic interpretation based on proprietary modeling methods or some innovative geological concept. This geological concept could be, for example, a new stratigraphic interpretation that would give a lead to finding a field that might be overlooked by conventional structural methods. JPT p. 619