\begin{frame}{Oil and Gas Production: Assumptions }
	\textbf{Assumptions}
	\begin{enumerate}
		\item{Engineer probabilistically knows the production path of each well }
		\item{Marginal production choice is to drill a new well in a particular location}
		\item{Future production is modeled by a best fit Arps model}
		\item{Constant discount rate of 4.5\%}
	\end{enumerate}
\end{frame}

\begin{frame}{Oil and Gas Production: Econometric Model }
	\begin{block}{Estimated model}
		\begin{equation}
			Q_{O,b,t}=\beta_{1} Q_{O,b,t-1}+\beta_{2} P_{WTI,t-1}+\beta_{3} P_{HH,t-1}+\beta_{4}\theta_{t}+\gamma_{t,b}+\epsilon_{b,t}  
	\end{equation}
\end{block}
Where \(Q_{O,b,t}\) is the net present oil produced in a basin state pair b, at time t, \(P_{WTI}\) is the West Texas Intermediate futures price, \(P_{HH}\) is the futures price of the Henry Hub spot market, \(\theta_{t}\) is a month dummy, and \(\gamma_{b,t}\) is a variable that represents the amount of monetary damage from natural disasters.\newline 


\textbf{2SLS is used, with instruments of:}
	\begin{enumerate}
		\item{VAR model residuals of oil refinery volumes, and gas storage}
		\item{Regional population weighted cooling and heating degree days}
		\item{Sum of the standard of each instrument over the last 12 months}
	\end{enumerate}

\end{frame}
