4-3 CASH FLOW FOR A SINGLE GAS WELL INVESTMENT OPPORTUNITY

INITIAL PROD. RATE

=
500 MCF/d
PROD. DECLINE
ROYALTY
INITIAL OP. COSTS
OP COST ESCALATION
INITIAL GAS PRICE

=
=
=
=
=

35%
20%
$500
5%
$2.00

GAS PRICE ESCALATION =

INVESTMENT =
(1)

(2)

YR. INVESTMENT
($)
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17

/MONTH
/YEAR
/MCF

NET CASH FLOW

ECONOMIC LIMIT
ULTIMATE GAS REC.

=
=
=

$337,783
10 YEARS
503,182 MCF

3% /YEAR
$450,000

(3)
AVG.
PROD.
RATE
(MCF/d)

$450,000

(2)

SUMMARY ECONOMIC RESULTS

/YEAR

(4)
ANNUAL
GAS
PROD.
(MCF)

(5)
CUM
GAS
PROD.
(MCF)

(6)

(7)

(8)

(9)

(10)

(11)

(12)

(13)

GAS
PRICE
($/MCF)

TOTAL
REVENUE
($)

ROYALTY
($)

NET
INCOME
($)

OPERATING
COST
($)

NET
CASH FLOW
($)

CUM.
NCF
($)

EC.
LIM.
(YR)

500
403
262
170

(1)
91,500
147,136
95,639
62,165

91,500
238,636
334,275
396,440

$2.00
$2.06
$2.12
$2.19

$183,000
$303,101
$202,926
$135,859

$36,600
$60,620
$40,585
$27,172

$146,400
$242,480
$162,341
$108,687

$3,000
$6,300
$6,615
$6,946

($450,000)
$143,400
$236,180
$155,726
$101,741

111
72
47
30
20
13
8
5

40,407
26,265
17,072
11,097
7,213
4,688
3,047
1,981

436,847
463,112
480,184
491,281
498,494
503,182
506,230
508,210

$2.25
$2.32
$2.39
$2.46
$2.53
$2.61
$2.69
$2.77

$90,957
$60,896
$40,770
$27,295
$18,274
$12,235
$8,191
$5,484

$18,191
$12,179
$8,154
$5,459
$3,655
$2,447
$1,638
$1,097

$72,766
$48,717
$32,616
$21,836
$14,619
$9,788
$6,553
$4,387

$7,293
$7,658
$8,041
$8,443
$8,865
$9,308
$9,773
$10,262

$65,473
$41,059
$24,575
$13,394
$5,755
$480
($3,220)
($5,875)

$252,520
$293,580
$318,155
$331,549
$337,303
$337,783
$334,563
$328,688

0.00
0.00
0.00
0.00
0.00
0.00
10.13
0.00

4
2
1
1
1

1,288
837
544
354
230

509,498
510,335
510,879
511,232
511,462

$2.85
$2.94
$3.03
$3.12
$3.21

$3,671
$2,458
$1,646
$1,102
$738

$734
$492
$329
$220
$148

$2,937
$1,966
$1,317
$881
$590

$10,775
$11,314
$11,880
$12,474
$13,097

($7,838)
($9,347)
($10,563)
($11,592)
($12,507)

$320,850
$311,502
$300,939
$289,347
$276,840

0.00
0.00
0.00
0.00
0.00

511,612
$3.31
511,709
$3.40
511,772
$3.51
OF YEAR ONE
END OF YEAR TEN

$494
$331
$221

$99
$66
$44

$395
$265
$177

$13,752
$14,440
$15,162

($13,357)
($14,175)
($14,985)

$263,483
$249,308
$234,323

0.00
0.00
0.00

18
0
149
19
0
97
20
0
63
(1) PRODUCED FOR 183 DAYS DURING THE LAST HALF
(2) ECONOMIC LIMIT REACHED - WELL ABANDONED AT

($450,000)
($306,600)
($70,420)
$85,306
$187,047

0.00
0.76
0.00
0.00
0.00

600
d =

PRODUCTION - MCF/day

5000

1000

PRODUCTION

0.5
0.5
1
1
1.5
4002
2
2.5
3
3
3.5
300
4
4
4.5
5
5
200
5.5
6
6
6.5
7
1007
7.5
8
8
8.5
9
09
9.5 0
10
10
10.5
11
11
11.5
12

0
0
500
500
403
403
403
262
262
262
170
170
170
111
111
111
72
72
72
47
47
47
30
30
30
20
20
20
13
2
13
13
8
8
8
5
5
5

500
500
403
325
325
262
211
211
170
137
137
111
89
89
72
58
58
47
38
ECONOMIC
38
30
LIMIT
25
25
20
16
16
4 13 6
8
10
10
TIME - YEARS
10
8
7
7
5
4

PRODUCTION - MCF/day

TIME

0.35

100

10

1
0

12

14

6
TIME -

ECOMOMIC
LIMIT

TIME - YEARS

10

12

14

400000

350000

300000

NET PRESENT VALUE (NPV)

250000

200000

150000

100000

50000

-50000
0

0.05

0.1

0.15
DISCOUNT RATE

0.2

0.25

0.3

0.35

PAYOUT
$400,000
$300,000

CUMULATIVE NET CASH FLOW

$200,000
UNDISCOUNTED

$100,000
$0
($100,000)
PRESENT VALUE

($200,000)
($300,000)
($400,000)
($500,000)
0

5
6
YEARS

10

11