NAV model/O&G valuation
Doing my homework on an O&G interview. I read previous threads on E&P valuation/NAV model but am still confused.
So, I'm pretty clear what DCF is: discounting back future FCF and terminal value at WACC to arrive at total asset value. NAV, by definition, is the difference between market value of assets minus market value of liabilities. Market value of assets is estimated by an SOTP of oil reserves and exploration sites.
My understanding for now is that I should discount FCF generated by a reserve (projected production*oil price - operating costs - royalty - capex - cash tax) at WACC. Then do a SOTP. But if this is the case how does it differ from a DCF?
Correct me if anything above is wrong.
Thanks very much.