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133 bytes removed ,  15:04, 4 March 2014
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:<math>\text{After-tax NOI} = (\text{Net revenue interest}~\times~\text{Production}~\times~\text{Wellhead price})</math>
 
:<math>\text{After-tax NOI} = (\text{Net revenue interest}~\times~\text{Production}~\times~\text{Wellhead price})</math>
 
::<math>-~\text{Wellhead taxes}~-~\text{Operating costs}~-~\text{Federal income taxes} \ </math>
 
::<math>-~\text{Wellhead taxes}~-~\text{Operating costs}~-~\text{Federal income taxes} \ </math>
  −
[[File:Charles-l-vavra-john-g-kaldi-robert-m-sneider capillary-pressure 3.jpg|thumbnail|'''Table 4.''' Assumptions for example multi well extension project]]
      
After the revenue and expenditure schedule has been determined, we can now calculate cash income taxes for our project. Finally, once the cash income taxes have been calculated for each year, the [[The time value of money|cash flow time diagram]] can be prepared and we are ready to calculate the net present value for our venture.
 
After the revenue and expenditure schedule has been determined, we can now calculate cash income taxes for our project. Finally, once the cash income taxes have been calculated for each year, the [[The time value of money|cash flow time diagram]] can be prepared and we are ready to calculate the net present value for our venture.
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<sub>'''Assumptions for Example Multiwell Extension Project'''</sub><br>
 
<sub>'''Assumptions for Example Multiwell Extension Project'''</sub><br>
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<br>
 
<sub>NRI = 0.875</sub><br>
 
<sub>NRI = 0.875</sub><br>
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<br>
 
<sub>Wellhead tax on oil and gas revenue is 8%</sub><br>
 
<sub>Wellhead tax on oil and gas revenue is 8%</sub><br>
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<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>
 
<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>
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<br>
 
<sub>Incremental tax rate is 34%</sub><br>
 
<sub>Incremental tax rate is 34%</sub><br>
<sub>Oil price is $18.00/bbl. Gas price is $1.50/MCF</sub><br>
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<br>
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<sub>Oil price is $18.00/bbl.  
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Gas price is $1.50/MCF</sub><br>
 
<sub>Cost of Failure is assumed to be the after tax cost of 2 dry holes.</sub><br>
 
<sub>Cost of Failure is assumed to be the after tax cost of 2 dry holes.</sub><br>
 
:<sub>(750,000 x (1 - 0.34) x 2 = $990,000)</sub><br>
 
:<sub>(750,000 x (1 - 0.34) x 2 = $990,000)</sub><br>

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