Frontiers · Oil & Energy · Energy value chain
Different assets. Different cash flows.
Energy value chain labs
Test refining spreads, minimum-volume pipeline contracts and PPA-backed power economics as separate businesses.
Compare the cash-flow mechanism
Your research connects farmland with upstream oil, infrastructure and power. The useful comparison is how cash is earned and what can interrupt it—not a ranking built from mismatched return series.
| Asset | Main receipts | Capital / duration | Principal underwriting questions |
|---|---|---|---|
| Leased annual cropland | Rent; eventual land sale | Land with recurring maintenance | Tenant credit, water, soil, renewal and comparable valuation. |
| Permanent crops | Crop receipts or rent | Land plus ageing biological assets | Replanting, maturation, crop economics and water costs. |
| Producing oil interest | Net oil sales | Depleting production plus closure | Decline, price differential, capital calls and final liability. |
| Royalty interest | Contract-defined production receipts | Term and title govern duration | Operator decisions, deductions, payment and legal claim. |
| Midstream infrastructure | Throughput / contracted payments | Long-lived facilities; contract may be shorter | Credit, enforceability, utilisation and maintenance. |
| Power generation | Energy; eligible capacity receipts | Upfront capital and operating life | PPA terms, grid access, curtailment, financing and merchant tail. |
Refining — a spread is not a profit margin
The 3–2–1 proxy converts three barrels of crude into two gasoline barrels and one distillate barrel. This is a fixed illustrative yield basket, not the output of a specific refinery.
Modelled refining outcome
3–2–1 spread
$29.20/bbl
Before processing costs
Annual throughput
3,285,000 bbl
Capacity × 365 × utilisation
Operating contribution
$59,642,000
After entered operating costs
Operating break-even
$11.04/bbl
Required gross crack spread
| Two gasoline barrels | One distillate barrel | Three crude barrels | Divide net by three |
|---|---|---|---|
| $210 | $118 | −$240 | $29.20 |
Formula: (2 × gasoline $/gallon × 42 + distillate $/gallon × 42 − 3 × crude $/barrel) ÷ 3.
Crude-price sensitivity
| Crude $/bbl | Spread $/bbl | Annual contribution $ |
|---|---|---|
| 60 | 49.20 | $125,342,000 |
| 70 | 39.20 | $92,492,000 |
| 80 | 29.20 | $59,642,000 |
| 90 | 19.20 | $26,792,000 |
| 100 | 9.20 | −$6,058,000 |
No capital expenditure, debt, tax, inventory timing, other products, processing gains or price-basis mismatch is modelled. Negative spreads are allowed; no automatic shutdown is assumed. EIA: crack-spread scope.
Midstream — contracted revenue still needs to be collected
A simplified minimum-volume commitment charges the larger of actual throughput and the contracted floor. Credit stress is applied separately to billing.
Modelled midstream outcome
Physical throughput
11,862,500 bbl
Variable costs use actual volume
Billed volume
14,600,000 bbl
Larger of actual and minimum
Annual cash
$32,868,750
Collected revenue less operation
Project NPV
$214,944,753
Before income tax; no exit value
| Volume & cash bridge | Annual amount |
|---|---|
| Minimum committed barrels | 14,600,000 |
| Billable shortfall barrels | 2,737,500 |
| Gross tariff billing | $43,800,000 |
| Cash collected | $43,800,000 |
| Operating costs | $10,931,250 |
| Operating cash | $32,868,750 |
Credit stress with the same contract
| Collection % | Annual cash | NPV |
|---|---|---|
| 100% | $32,868,750 | $214,944,753 |
| 90% | $28,488,750 | $179,638,938 |
| 75% | $21,918,750 | $126,680,215 |
| 50% | $10,968,750 | $38,415,676 |
| 0% | −$10,931,250 | −$138,113,400 |
Capacity, costs and tariffs remain flat through the selected contract life. Capital is paid initially; annual cash is paid at year-end. No maintenance capital, closure, debt, inflation or terminal value is included. This is a screening case, not a complete infrastructure valuation.
Power — financing changes the cost of power
Unlevered project economics with fixed capacity, energy generation, PPA expiry and an optional capacity-payment stream. No preset represents a named nuclear or renewable project.
Modelled power outcome
Delivered energy
291,270 MWh
Each operating year
Levelised cost
$61.54/MWh
Discounted costs / energy
Project NPV
$13,972,435
At selected project discount rate
Capacity revenue
$0
Separate from energy receipts
Cost of capital sensitivity
| Discount rate | LCOE $/MWh | Project NPV |
|---|---|---|
| 0% | 33.90 | $204,623,250 |
| 2% | 39.68 | $133,551,797 |
| 4% | 46.26 | $81,764,246 |
| 6% | 53.59 | $43,227,850 |
| 8% | 61.54 | $13,972,435 |
| 10% | 70.03 | −$8,660,801 |
| 12% | 78.96 | −$26,483,264 |
Operating schedule
| Year from investment | Operating year | Energy $/MWh | Revenue $ | Cost $ | Cash $ |
|---|---|---|---|---|---|
| 1 | 1 | 70.00 | $20,388,900 | $3,873,810 | $16,515,090 |
| 2 | 2 | 70.00 | $20,388,900 | $3,873,810 | $16,515,090 |
| 3 | 3 | 70.00 | $20,388,900 | $3,873,810 | $16,515,090 |
| 4 | 4 | 70.00 | $20,388,900 | $3,873,810 | $16,515,090 |
| 5 | 5 | 70.00 | $20,388,900 | $3,873,810 | $16,515,090 |
| 6 | 6 | 70.00 | $20,388,900 | $3,873,810 | $16,515,090 |
| 7 | 7 | 70.00 | $20,388,900 | $3,873,810 | $16,515,090 |
| 8 | 8 | 70.00 | $20,388,900 | $3,873,810 | $16,515,090 |
| 9 | 9 | 70.00 | $20,388,900 | $3,873,810 | $16,515,090 |
| 10 | 10 | 70.00 | $20,388,900 | $3,873,810 | $16,515,090 |
| 11 | 11 | 70.00 | $20,388,900 | $3,873,810 | $16,515,090 |
| 12 | 12 | 70.00 | $20,388,900 | $3,873,810 | $16,515,090 |
| 13 | 13 | 70.00 | $20,388,900 | $3,873,810 | $16,515,090 |
| 14 | 14 | 70.00 | $20,388,900 | $3,873,810 | $16,515,090 |
| 15 | 15 | 70.00 | $20,388,900 | $3,873,810 | $16,515,090 |
| 16 | 16 | 50.00 | $14,563,500 | $3,873,810 | $10,689,690 |
| 17 | 17 | 50.00 | $14,563,500 | $3,873,810 | $10,689,690 |
| 18 | 18 | 50.00 | $14,563,500 | $3,873,810 | $10,689,690 |
| 19 | 19 | 50.00 | $14,563,500 | $3,873,810 | $10,689,690 |
| 20 | 20 | 50.00 | $14,563,500 | $3,873,810 | $10,689,690 |
| 21 | 21 | 50.00 | $14,563,500 | $3,873,810 | $10,689,690 |
| 22 | 22 | 50.00 | $14,563,500 | $3,873,810 | $10,689,690 |
| 23 | 23 | 50.00 | $14,563,500 | $3,873,810 | $10,689,690 |
| 24 | 24 | 50.00 | $14,563,500 | $3,873,810 | $10,689,690 |
| 25 | 25 | 50.00 | $14,563,500 | $3,873,810 | $10,689,690 |
All capital is paid at time zero. Delay shifts the entire operating life and PPA start; it does not shorten a fixed calendar contract or model construction-period spending. PPA prices apply from operation for the entered term, then merchant prices apply. No degradation, tax, inflation, fuel escalation, replacements, debt or residual value. Final closure cost is included. LCOE includes closure and excludes revenue; capacity payments do not reduce physical generation cost. Use a discount rate consistent with cash flows and currency. A generic regional WACC is not a financing quote.
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