Oil & Gas Project Model Checklist
Executive Summary
Key Takeaways
- ✓ An oil and gas asset or project model checklist verifies structural elements specific to the segment and facility type, well-level detail, contract structure, and decommissioning provisioning, that a generic model review checklist does not address.
- ✓ Confirming that reserve and decline assumptions in the model match the current reserve engineering report is the first and most consequential check for any upstream or field development asset model.
- ✓ Contract structures, take-or-pay, tariff methodology, processing agreements, must be verified against their actual negotiated terms rather than a generic assumed margin or price.
- ✓ Decommissioning provisioning should be verified as a progressive, lifecycle-long funding schedule against the applicable regulatory requirement, not a terminal-year addition.
Objective¶
This checklist verifies an oil and gas asset or project financial model's structural integrity, specific to the segment and facility type addressed across Oil & Gas Financial Modelling. It supplements, and does not replace, the structural formula testing baseline addressed on Financial Model Auditing.
Applicability¶
Applicable to any upstream, midstream, downstream or LNG asset or project model ahead of a development decision, financing submission, or periodic review.
Checklist¶
| # | Check Item | Why It Matters | Evidence to Collect |
|---|---|---|---|
| 1 | Reserve and production decline assumptions match the current reserve engineering report | The entire upstream revenue and debt capacity projection depends on this consistency | Reconciliation against the latest reserve report |
| 2 | The correct reserve category (proved, 2P, or 3P) is used for the model's specific purpose | Using a lower-certainty category for a higher-confidence purpose overstates supportable value | Documented reserve category basis |
| 3 | Fiscal regime mechanics (royalty, PSC cost recovery and profit split, or tax terms) are modelled against the actual contract or regulation | A generic effective tax rate misstates the true government-operator value split | Fiscal terms reconciliation to the actual agreement |
| 4 | Facility type economics (fixed platform, FPSO, subsea tieback, or onshore well pad) reflect the asset actually planned or built | Applying generic cost assumptions across facility types misstates capital intensity | Facility-specific cost basis documentation |
| 5 | Contracted revenue structures (take-or-pay, tariff methodology, processing agreement type) are modelled against their actual negotiated terms | A generic assumed margin or price misrepresents actual revenue certainty and risk allocation | Contract term reconciliation |
| 6 | Turnaround or major maintenance events are scheduled explicitly in the periods they occur | Smoothing turnaround cost into an average understates cash flow impact in turnaround years | Turnaround schedule and associated capex |
| 7 | Decommissioning cost is provisioned progressively across the production life against the applicable regulatory requirement | Under-provisioning is one of the most common structural findings in upstream and midstream models | Decommissioning funding schedule and security mechanism documentation |
| 8 | Decommissioning cost estimate reflects the correct offshore or onshore cost basis for the specific asset | Applying the wrong basis materially misstates the provisioning requirement | Cost estimate basis documentation |
| 9 | Hedging programmes required as a financing condition are reflected in realized price assumptions | Ignoring required hedging misstates the model's actual price exposure | Hedge structure and realized price reconciliation |
Common Failures¶
- Decline curve or reserve category assumptions in the model diverging from the current reserve engineering report.
- Production sharing contract or royalty mechanics collapsed into a single blended effective tax rate.
- Take-or-pay or tariff revenue modelled as though it were uncontracted, merchant volume.
- Turnaround capital expenditure smoothed into an average annual maintenance figure rather than scheduled explicitly.
- Decommissioning omitted, under-provisioned, or based on the wrong offshore/onshore cost basis.
Recommended Evidence¶
A completed oil and gas project model review should be accompanied by a reserve report reconciliation, documented fiscal and contract term verification, a turnaround and decommissioning schedule, and a hedging structure reconciliation. The table above is structured for direct use in a model governance file, a lender due diligence working paper, or an internal review evidence file.
How to Use This Checklist¶
Apply the general Financial Model Auditing structural checks first, then work through this checklist against the specific segment and facility elements of the model under review. See Upstream Financial Models and Decommissioning Cost Models for the full technical grounding this checklist verifies.
Continue Reading¶
Related Pillars¶
Related Technical Guides¶
Related Industries¶
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Frequently Asked Questions
What makes an oil and gas project model checklist different from a general financial model audit checklist?
It adds verification checks specific to the sector and asset type, reserve and decline curve consistency, contract structure replication, and decommissioning provisioning, none of which a generic model review checklist addresses.
Why is reserve and decline curve consistency the first item checked?
Because the entire revenue and debt capacity projection for an upstream asset model depends on this consistency, and any divergence between the model and the current reserve engineering report undermines every downstream calculation built on it.
How should contract structures be verified using this checklist?
By confirming the model replicates the actual negotiated terms of any take-or-pay, tariff, processing, or offtake agreement in place, rather than a generic assumed margin, price, or volume figure standing in for the specific contract.
What evidence should be collected for decommissioning provisioning?
A documented funding schedule showing progressive provisioning across the production life against the applicable regulatory or contractual requirement, and confirmation of the specific financial security mechanism, sinking fund, parent guarantee, or letter of credit, actually required.
Who typically uses this checklist?
Energy developers, EPC contractors, project finance lenders and financial modellers reviewing an oil and gas asset or project model, whether upstream, midstream, downstream, or LNG, before it supports a development or financing decision.
How does this checklist relate to the general financial model audit checklist?
It supplements the general financial model audit baseline addressed on Financial Model Auditing with checks specific to oil and gas asset and project models; it does not replace the underlying structural formula testing a standard model audit performs.
Related Articles
Oil & Gas Financial Modelling
Oil and gas financial modelling is the practice of building financial models across the four structurally distinct segments of the hydrocarbon value chain, upstream exploration and production, midstream transport and processing, downstream refining and petrochemicals, and LNG, each governed by different revenue mechanics, contract structures and risk drivers. This page is the hub for the Knowledge Centre's oil and gas financial modelling content: industry structure and segment definitions, the financial KPIs the sector is measured against, the investment lifecycle from exploration through decommissioning, and how this domain builds toward asset and project-level models, commercial and investment analysis, and governance and assurance practice as it expands.
Upstream Financial Models
Upstream financial models project revenue and debt capacity from a depleting reserve base using a production decline curve rather than a steady-state or growth volume forecast common to most other industries. This guide sets out how upstream models are structured around exploration and production economics, reserve categories, decline mechanics, fiscal terms, and the reserve-based lending structures that finance the segment, the foundational technical grounding this domain's asset-level and commercial analysis content builds on.
Decommissioning Cost Models
Decommissioning cost models estimate and provision the mandatory end-of-life obligation to plug wells and remove oil and gas infrastructure, an obligation that should be funded progressively across the production life rather than treated as a single terminal-year cost. This guide sets out how decommissioning cost is estimated, the funding mechanisms, sinking funds, parent company guarantees, and letters of credit, regulators typically require, and why timing and discounting of the liability matter to how it is represented in a financial model.
Financial Model Audit for Oil & Gas
Upstream oil and gas financial models project revenue and debt capacity from a depleting reserve base, using production decline curves rather than a going-concern volume forecast. Reserve-based lending structures, where the borrowing base is periodically redetermined against updated reserve and price estimates, fiscal terms specific to production sharing contracts or concession agreements, and mandatory decommissioning liabilities each interact with that declining production profile in ways a standard corporate model does not test. This page sets out the modelling risks specific to oil and gas, the audit findings that recur in upstream financing models, and what lenders typically expect under a reserve-based lending structure.
What Is a Financial Model Audit?
A financial model audit is an independent, structured examination of an Excel based financial model to confirm that its mechanics, logic, and outputs are reliable enough to support a decision. It is not a check of whether the assumptions are optimistic or conservative. It is a check of whether the model actually calculates what its author believes it calculates. Every year, lenders extend debt, investment committees approve capital, and boards sign off on transactions using numbers that came out of a spreadsheet nobody outside the immediate deal team has independently verified. A financial model audit exists to close that gap before it becomes expensive.