Line 88: |
Line 88: |
| | '''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''' |
| |} | | |} |
− | <sup>Source: After Thompson and Wright (1992)</sup><br> | + | :<sup>Source: After Thompson and Wright (1992)</sup><br> |
− | <sup>Assumed facts:</sup><br> | + | :<sup>Assumed facts:</sup><br> |
− | :<sup>Independent Producer and Royalty Owner status, therefore eligible for percentage depletion</sup><br> | + | ::<sup>Independent Producer and Royalty Owner status, therefore eligible for percentage depletion</sup><br> |
− | :<sup>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</sup><br> | + | ::<sup>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</sup><br> |
− | :<sup>Assumed Time 0 investments made on 1-1-91:</sup><br> | + | ::<sup>Assumed Time 0 investments made on 1-1-91:</sup><br> |
− | ::<sup>Lease Bonus and G&G (depletable basis for tax calculation) = $125,000</sup><br> | + | :::<sup>Lease Bonus and G&G (depletable basis for tax calculation) = $125,000</sup><br> |
− | ::<sup>IDC's (100 % expensed for tax calculation) = $950,000</sup><br> | + | :::<sup>IDC's (100 % expensed for tax calculation) = $950,000</sup><br> |
− | ::<sup>Tangible expenditures (depreciable basis for tax calculation) = $300,000</sup><br> | + | :::<sup>Tangible expenditures (depreciable basis for tax calculation) = $300,000</sup><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. |
Line 187: |
Line 187: |
| | '''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''' |
| |} | | |} |
− | <sub>'''Assumptions for Example Multiwell Extension Project'''</sub><br> | + | :<sup>'''Assumptions for Example Multiwell Extension Project'''</sup><br> |
− | <sub>NRI = 0.875</sub><br> | + | :<sup>NRI = 0.875</sup><br> |
− | <sub>Wellhead tax on oil and gas revenue is 8%</sub><br> | + | :<sup>Wellhead tax on oil and gas revenue is 8%</sup><br> |
− | <sub>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.</sub><br> | + | :<sup>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.</sup><br> |
− | <sub>Incremental tax rate is 34%</sub><br> | + | :<sup>Incremental tax rate is 34%</sup><br> |
− | <sub>Oil price is $18.00/bbl. Gas price is $1.50/MCF</sub><br> | + | :<sup>Oil price is $18.00/bbl. Gas price is $1.50/MCF</sup><br> |
− | <sub>Cost of Failure is assumed to be the after tax cost of 2 dry holes.</sub><br> | + | :<sup>Cost of Failure is assumed to be the after tax cost of 2 dry holes.</sup><br> |
− | :<sub>(750,000 x (1 - 0.34) x 2 = $990,000)</sub><br> | + | ::<sup>(750,000 x (1 - 0.34) x 2 = $990,000)</sup><br> |
− | <sub>Assumed investment schedule:</sub><br> | + | :<sup>Assumed investment schedule:</sup><br> |
− | :<sub>Time 0 investments made on 1-1-91:</sub><br> | + | ::<sup>Time 0 investments made on 1-1-91:</sup><br> |
− | ::<sub>Lease bonus and G&G = $125,000</sub><br> | + | :::<sup>Lease bonus and G&G = $125,000</sup><br> |
− | ::<sub>IDC's (100% expensed for tax calculation) = $950,000 (for one completion)</sub><br> | + | :::<sup>IDC's (100% expensed for tax calculation) = $950,000 (for one completion)</sup><br> |
− | ::<sub>Tangible expenditures (depreciable basis for tax calculation) = $300,000</sub><br> | + | :::<sup>Tangible expenditures (depreciable basis for tax calculation) = $300,000</sup><br> |
− | :<sub>Other investments made during 1991:</sub><br> | + | ::<sup>Other investments made during 1991:</sup><br> |
− | ::<sub>Lease bonus and G&G = $200,000</sub><br> | + | :::<sup>Lease bonus and G&G = $200,000</sup><br> |
− | ::<sub>IDC's (100% expensed for tax calculation) = $950,000 (for one completion)</sub><br> | + | :::<sup>IDC's (100% expensed for tax calculation) = $950,000 (for one completion)</sup><br> |
− | ::<sub>DHC's (100% expensed for tax calculation) = $1,500,000 (for two dry holes)</sub><br> | + | :::<sup>DHC's (100% expensed for tax calculation) = $1,500,000 (for two dry holes)</sup><br> |
− | ::<sub>Tangible expenditures (depreciable basis for tax calculation) = $600,000</sub><br> | + | :::<sup>Tangible expenditures (depreciable basis for tax calculation) = $600,000</sup><br> |
− | :<sub>Investments made during 1992:</sub><br> | + | ::<sup>Investments made during 1992:</sup><br> |
− | ::<sub>Lease bonus and G&G = $100,000</sub><br> | + | :::<sup>Lease bonus and G&G = $100,000</sup><br> |
− | ::<sub>IDC's (100% expensed for tax calculation) = $950,000 (for one completion)</sub><br> | + | :::<sup>IDC's (100% expensed for tax calculation) = $950,000 (for one completion)</sup><br> |
− | ::<sub>Tangible expenditures (depreciable basis for tax calculation) = $300,000</sub><br> | + | :::<sup>Tangible expenditures (depreciable basis for tax calculation) = $300,000</sup><br> |
− | :<sub>Investments made during 1993:</sub><br> | + | ::<sup>Investments made during 1993:</sup><br> |
− | ::<sub>IDC's (100% expensed for tax calculation) = $950,000 (for one completion)</sub><br> | + | :::<sup>IDC's (100% expensed for tax calculation) = $950,000 (for one completion)</sup><br> |
− | ::<sub>Tangible expenditures (depreciable basis for tax calculation) = $300,000</sub><br> | + | :::<sup>Tangible expenditures (depreciable basis for tax calculation) = $300,000</sup><br> |
− | :<sub>Assumed Production Schedule</sub><br> | + | :<sup>Assumed Production Schedule</sup><br> |
− | ::<sub>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.</sub><br> | + | ::<sup>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.</sup><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. |