Today, most petroleum explorationists
acknowledge two professional responsibilities:
Find opportunities (= prospects).
Measure them objectively (estimate chance,
reserves and profitability).
But before about 1965, the assignment of risked
economic value to drilling ventures mostly used "rules of thumb"
that were based on individual experience. Expectably, such pragmatic
measures varied widely among provinces and companies (and even
Salesmanship thrived -- but often the stake-holder
The subjective nature of geology and intuitive
judgments involved in prospect ranking together encouraged a prevailing
attitude that, somehow, geoscientists just weren't supposed to
know much about prospect economics.
Geoscientists were expected to be optimistic, whereas
engineers became economic "gate-keepers" -- both self-fulfilling
Two pioneering geoscientists -- Bob Megill and
Ed Capen -- were instrumental in changing all that. They disseminated
and developed concepts and tools that laid the foundation by which
geoscientists could finally begin to take professional responsibility
for objective representation of the value of their prospects as
Robert E. Megill (BS degree in geological engineering
from the University of Tulsa) worked for Carter, Humble and Exxon
from 1941 to 1984, and early in his career he showed great talent
for understanding petroleum economics and statistics and using
During the 1960s Bob began teaching Exxon's geotechnical
staff about prospect economics, and later about risk analysis
of exploration ventures.
In 1973, Exxon gave Megill permission to publish
An Introduction to Exploration Economics (Pennwell 1973, 1978,
1988). Subsequently, Megill published a companion volume, An Introduction
to Exploration Risk Analysis (1979, 1984). Both books became industry
Upon retirement from Exxon, Megill became a sought-after
consultant -- but he always made time for AAPG service, writing
a very popular column for the EXPLORER for eight years, "The Business
Side of Geology." He also wrote three key articles for AAPG's
best-selling The Business of Petroleum Exploration (1992).
Beginning in 1984, Megill helped design and team-teach
the popular AAPG school, "Managing and Assessing Exploration Risk,"
together with Ed Capen and myself. A gifted teacher and exceptionally
clear writer, Bob Megill taught thousands of explorationists to
value their prospects correctly, and to portray them in economic
Bob retired again in 1990. He and his lovely wife,
Margie, live in Kingwood, north of Houston.
Ed C. Capen (BA in Math/Physics from the University
of Texas at Austin) worked for Arco from 1957 to 1992. He started
as a research geophysicist, where he soon sensed that the repeated
trials and high uncertainty so characteristic of petroleum exploration
made statistics an under-appreciated, but very powerful tool.
At Arco he took part in a series of highly original,
insightful, applied research projects, on competitive bonus bidding,
economic yardsticks, dealing with uncertainty, capital budgeting
and probabilistic reserves estimating, among others. Many of these
found their way into SPE publications.
AAPG published one of Ed's very best in The Business
of Petroleum Exploration (1992), where he presented all the statistical
formulae involved with correctly estimating prospect reserves.
Capen's 14-year team-teaching of AAPG's "Managing
and Assessing Petroleum Risk" gave the school many insightful
exercises illustrating uncertainty, risk, bid strategies and value
of information. Recognizing that the course was about making money
in the E&P business, it was his idea for students to use their
own pocket money to participate.
An innovative, dynamic teacher, Ed made learning
fun -- and challenging, for he did not suffer fools gladly.
From this corner, Ed Capen has been the most original,
rigorous, perceptive and influential authority in the burgeoning
field of petroleum economics and risk analysis. In 1995, AIME-SPE
recognized him with its coveted J.J. Arps Award, for Significant
Contribution to Petroleum Evaluation.
Ed is now retired; he and his charming wife, Betty,
divide their time between Telluride, Colo., and the Texas Hill
It is no exaggeration to say that Bob Megill and
Ed Capen laid the foundation that allowed the petroleum geoscientist
to move from promoter to professional. We stand on the shoulders
of the pioneers who have gone before, enriched and inspired by
Thanks, Bob; thanks, Ed.