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Line 38: − − [[File:Rose time-value-of-money 1.jpg|thumbnail|'''Table 2.''' Comparison of project cash flows and equivalent present value fir example development well (in $ thousands)]]
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[[File:Charles-l-vavra-john-g-kaldi-robert-m-sneider capillary-pressure 1.jpg|thumbnail|left|'''Table 1.''' Cash flow model for a development well]]
[[File:Charles-l-vavra-john-g-kaldi-robert-m-sneider capillary-pressure 1.jpg|thumbnail|left|'''Table 1.''' Cash flow model for a development well]]
[[File:Rose time-value-of-money 1.jpg|thumbnail|'''Table 2.''' Comparison of project cash flows and equivalent present value fir example development well (in $ thousands)]]
The basis of economic evaluation of any proposed drilling venture—a new field, pool, or just a single well—is the ''cash flow model'' of investments, expenses, taxes, and wellhead revenues involved with the project. The values for the parameters in this model must come from a geotechnical analysis (including maps, cross sections, and reservoir analysis) of the anticipated new field or well and from geotechnical estimates of area, ultimate recoverable reserves, and projected well production schedules. Here are the general data that are required:
The basis of economic evaluation of any proposed drilling venture—a new field, pool, or just a single well—is the ''cash flow model'' of investments, expenses, taxes, and wellhead revenues involved with the project. The values for the parameters in this model must come from a geotechnical analysis (including maps, cross sections, and reservoir analysis) of the anticipated new field or well and from geotechnical estimates of area, ultimate recoverable reserves, and projected well production schedules. Here are the general data that are required:
==Calculations in the cash flow model==
==Calculations in the cash flow model==
The ''net cash flow'' (NCF) for each assumed time period, including time 0, can be determined using the following equation.
The ''net cash flow'' (NCF) for each assumed time period, including time 0, can be determined using the following equation.