Changes

| '''NCF AFIT, $M''' || '''-1375.000''' || '''1359.098''' || '''578.462''' || '''314.450''' || '''168.376''' || '''87.377''' || '''44.916''' || '''19.417''' || '''4.795'''

| '''NCF AFIT, $M''' || '''-1375.000''' || '''1359.098''' || '''578.462''' || '''314.450''' || '''168.376''' || '''87.377''' || '''44.916''' || '''19.417''' || '''4.795'''

|}

|}

^{Source: After Thompson and Wright (1992)}<br>

:^{Source: After Thompson and Wright (1992)}<br>

^{Assumed facts:}<br>

:^{Assumed facts:}<br>

:^{Independent Producer and Royalty Owner status, therefore eligible for percentage depletion}<br>

::^{Independent Producer and Royalty Owner status, therefore eligible for percentage depletion}<br>

:^{NRI = 0.875, Wellhead tax on oil and gas revenue is 8%, annual operating cost is $24,000, incremental tax rate is 34%, oil price is $18/bbl, and gas price is $1.50/MCF}<br>

::^{NRI = 0.875, Wellhead tax on oil and gas revenue is 8%, annual operating cost is $24,000, incremental tax rate is 34%, oil price is $18/bbl, and gas price is $1.50/MCF}<br>

:^{Assumed Time 0 investments made on 1-1-91:}<br>

::^{Assumed Time 0 investments made on 1-1-91:}<br>

::^{Lease Bonus and G&G (depletable basis for tax calculation) = $125,000}<br>

:::^{Lease Bonus and G&G (depletable basis for tax calculation) = $125,000}<br>

::^{IDC's (100 % expensed for tax calculation) = $950,000}<br>

:::^{IDC's (100 % expensed for tax calculation) = $950,000}<br>

::^{Tangible expenditures (depreciable basis for tax calculation) = $300,000}<br>

:::^{Tangible expenditures (depreciable basis for tax calculation) = $300,000}<br>

:<sup>Estimated dry hole cost if the well is unsuccessful is $750,000 (After-tax = $750,000 x (1 - 0.34) = $495,000)

::<sup>Estimated dry hole cost if the well is unsuccessful is $750,000 (After-tax = $750,000 x (1 - 0.34) = $495,000)

A completed cash flow time diagram is shown in Table 2 along with the equivalent net present value calculation.

A completed cash flow time diagram is shown in Table 2 along with the equivalent net present value calculation.

| '''Totals''' || '''680.632''' || '''1101.931''' || '''11991.572''' || '''7225.000''' || '''4766.572''' || '''1131.851''' || '''3634.721''' ||  || '''2729.760''' || || '''6859.396'''

| '''Totals''' || '''680.632''' || '''1101.931''' || '''11991.572''' || '''7225.000''' || '''4766.572''' || '''1131.851''' || '''3634.721''' ||  || '''2729.760''' || || '''6859.396'''

|}

|}

_{'''Assumptions for Example Multiwell Extension Project'''}<br>

:^{'''Assumptions for Example Multiwell Extension Project'''}<br>

_{NRI = 0.875}<br>

:^{NRI = 0.875}<br>

_{Wellhead tax on oil and gas revenue is 8%}<br>

:^{Wellhead tax on oil and gas revenue is 8%}<br>

_{Annual operating cost is $24,000/well. Note in the last four years the operating costs are not a multiple of $24,000. This is because the typical well produces only a fraction of a year in the eighth year.}<br>

:^{Annual operating cost is $24,000/well. Note in the last four years the operating costs are not a multiple of $24,000. This is because the typical well produces only a fraction of a year in the eighth year.}<br>

_{Incremental tax rate is 34%}<br>

:^{Incremental tax rate is 34%}<br>

_{Oil price is $18.00/bbl. Gas price is $1.50/MCF}<br>

:^{Oil price is $18.00/bbl. Gas price is $1.50/MCF}<br>

_{Cost of Failure is assumed to be the after tax cost of 2 dry holes.}<br>

:^{Cost of Failure is assumed to be the after tax cost of 2 dry holes.}<br>

:_{(750,000 x (1 - 0.34) x 2 = $990,000)}<br>

::^{(750,000 x (1 - 0.34) x 2 = $990,000)}<br>

_{Assumed investment schedule:}<br>

:^{Assumed investment schedule:}<br>

:_{Time 0 investments made on 1-1-91:}<br>

::^{Time 0 investments made on 1-1-91:}<br>

::_{Lease bonus and G&G = $125,000}<br>

:::^{Lease bonus and G&G = $125,000}<br>

::_{IDC's (100% expensed for tax calculation) = $950,000 (for one completion)}<br>

:::^{IDC's (100% expensed for tax calculation) = $950,000 (for one completion)}<br>

::_{Tangible expenditures (depreciable basis for tax calculation) = $300,000}<br>

:::^{Tangible expenditures (depreciable basis for tax calculation) = $300,000}<br>

:_{Other investments made during 1991:}<br>

::^{Other investments made during 1991:}<br>

::_{Lease bonus and G&G = $200,000}<br>

:::^{Lease bonus and G&G = $200,000}<br>

::_{IDC's (100% expensed for tax calculation) = $950,000 (for one completion)}<br>

:::^{IDC's (100% expensed for tax calculation) = $950,000 (for one completion)}<br>

::_{DHC's (100% expensed for tax calculation) = $1,500,000 (for two dry  holes)}<br>

:::^{DHC's (100% expensed for tax calculation) = $1,500,000 (for two dry  holes)}<br>

::_{Tangible expenditures (depreciable basis for tax calculation) = $600,000}<br>

:::^{Tangible expenditures (depreciable basis for tax calculation) = $600,000}<br>

:_{Investments made during 1992:}<br>

::^{Investments made during 1992:}<br>

::_{Lease bonus and G&G = $100,000}<br>

:::^{Lease bonus and G&G = $100,000}<br>

::_{IDC's (100% expensed for tax calculation) = $950,000 (for one completion)}<br>

:::^{IDC's (100% expensed for tax calculation) = $950,000 (for one completion)}<br>

::_{Tangible expenditures (depreciable basis for tax calculation) = $300,000}<br>

:::^{Tangible expenditures (depreciable basis for tax calculation) = $300,000}<br>

:_{Investments made during 1993:}<br>

::^{Investments made during 1993:}<br>

::_{IDC's (100% expensed for tax calculation) = $950,000 (for one completion)}<br>

:::^{IDC's (100% expensed for tax calculation) = $950,000 (for one completion)}<br>

::_{Tangible expenditures (depreciable basis for tax calculation) = $300,000}<br>

:::^{Tangible expenditures (depreciable basis for tax calculation) = $300,000}<br>

:_{Assumed Production Schedule}<br>

:^{Assumed Production Schedule}<br>

::_{The production forecast for the typical well in the Example Development Well was used for the Multiwell Extension Project. A typical well was assumed to be placed on production at the beginning of each of the years 1991, 1992, 1993, and 1994.}<br>

::^{The production forecast for the typical well in the Example Development Well was used for the Multiwell Extension Project. A typical well was assumed to be placed on production at the beginning of each of the years 1991, 1992, 1993, and 1994.}<br>

Since the project has a longer life than the example development well, the results are summarized in a slightly different format. [[:Image:Charles-l-vavra-john-g-kaldi-robert-m-sneider_capillary-pressure_3.jpg|Table 4]] presents the production, investment, and tax assumptions for the multiwell extension project.

Since the project has a longer life than the example development well, the results are summarized in a slightly different format. [[:Image:Charles-l-vavra-john-g-kaldi-robert-m-sneider_capillary-pressure_3.jpg|Table 4]] presents the production, investment, and tax assumptions for the multiwell extension project.