PET E 411

WORK SESSION-9

Jan.3, 2018

FIELD DEVELOPMENT PROJECT

OIL PRICE 20 $/bbl

OPERATION COST 4 $/bbl

INVESTMENT: (1000 $)

Years Wells Others

1 1 750 250
2 7 000 1 500
3 9 000 910
4 10 000 630
5 400 -

30 % will be 100 % will be

depreciated depreciated
in 5 years in 5 years
 Year Inv Oil prod Oil prod Gross income Royalty$ Operation Deprec. Taxable Corp. Tax Net cash
1000$ bbl/year $ cost $ charge $ income $ $ flow
0 0 0 0 0 0 0 0 0 0 0
1 2000 0 0 0 0 0 0 0 0 -2000000
2 8500 3561 1299765 25995300 3249413 5199060 155000 17391827 6956730.8 2090096
3 9910 11871 4332915 86658300 10832288 17331660 875000 57619352 23047740.8 25536611
4 10630 23741 8665465 173309300 21663663 34661860 1597000 115386777 46154710.8 60199066
5 400 25225 9207125 184142500 23017813 36828500 2323000 121973187 48789274.8 75106912.5
6 21441 7825965 156519300 19564913 31303860 2347000 103303527 41321410.8 64329116
7 18225 6652125 133042500 16630313 26608500 2192000 87611687 35044674.8 54759012
8 15491 5654215 113084300 14135538 22616860 1472000 74859902 29943960.8 46387941
9 13168 4806320 96126400 12015800 19225280 750000 64135320 25654128 39231192
10 11193 4085445 81708900 10213613 16341780 24000 55129507 22051802.8 33101704
11 9514 3472610 69452200 8681525 13890440 46880235 18752094 28128141
12 8087 2951755 59035100 7379388 11807020 39848692 15939476.8 23909215
13 6874 2509010 50180200 6272525 10036040 33871635 13548654 20322981
14 5843 2132695 42653900 5331738 8530780 28791382 11516552.8 17274829
15 4966 1812590 36251800 4531475 7250360 24469965 9787986 14681979
16 4221 1540665 30813300 3851663 6162660 20798977 8319590.8 12479386
17 3588 1309620 26192400 3274050 5238480 17679870 7071948 10607922
18 3050 1113250 22265000 2783125 4453000 15028875 6011550 9017325
19 2592 946080 18921600 2365200 3784320 12772080 5108832 7663248
20 2204 804460 16089200 2011150 3217840 10860210 4344084 6516126

Taxable Income= Gross Income – (Royalty + Operation Cost + Depreciation Charges)

Corporation Tax= Taxable Income x 0.4
Net Cash Flow= Gross Income – (Investment + Royalty + Operation Cost + Corporation Tax)

1) Payout time of the field development project:

Payout time at (year) = 1 + 2000000 / 2090096 = 1.96 years

2) Calculating present worth for %12 discount rate

PW = 0 – 2000000 x 0.892857143 + 2090096 x 0.797193878 + 25536611 x 0.711780248 + 60199066 x 0.635518078 + 75106912.5 x
0.567426856 + 64329116 x 0.506631121 + 54759012 x 0.452349215 + 46387941 x 0.403883228 + 39231192 x 0.360610025 + 33101704 x
0.321973237 + 28128141 x 0.287476104 + 23909215 x 0.256675093 + 20322981 x 0.22917419 + 17274829 x 0.204619813 + 14681979 x
0.182696261 + 12479386 x 0.163121662 + 10607922 x 0.145644341 + 9017325 x 0.13003959 + 7663248 x 0.116106777 + 6516126 x
0.103666765
PW = 231250088.213 $

PW = 0 – 2 / (5) + 2.09 / (x^2) + 25.54 / (x^3) + 60.2 / (x^4) + 75.1 / (x^5) + 64.3 / (x^6) + 54.7 / (x^7) + 46.4 / (x^8) + 39.2 / (x^9) + 33.1 / (x^10)
+ 28.1 / (x^11) + 23.9 / (x^12) + 20.3 / (x^13) + 17.3 / (x^14) + 14.7 / (x^15) + 12.5 / (x^16) + 10.6 / (x^17) + 9/ (x^18) + 7.7 / (x^19) + 6.5 / (x^20)
=0
1 + i = 5.076
i = 4.076
Rate of return = 407.6%

Depreciation charge calculation:

Year 1: 1.75 x 0.3 + 0.25 = 0.775 => 0.775/5 = 0.155 million $
Year 2: 7 x 0.3 + 1.5 = 3.6 => 3.6/5 = 0.72 million $
Year 3: 9 x 0.3 + 0.910 = 3.61 => 3.61/5 = 0.722 million $
Year 4: 10 x 0.3 + 0.630 = 3.63 => 3.63 / 5 = 0.726 million $
Year 5: 0.4 x 0.3 = 0.12 => 0.12 / 5 = 0.024 million $
Year Inv. $ Depreciation
 charge $
0 0
1 2000
2 8500 155000 155000
3 9910 155000 720000 875000
4 10630 155000 720000 722000 1597000
5 400 155000 720000 722000 726000 2323000
6 155000 720000 722000 726000 24000 2347000
7 720000 722000 726000 24000 2192000
8 722000 726000 24000 1472000
9 726000 24000 750000
10 24000 24000

Taxable Income= Gross Income – (Royalty + Operation Cost + Depreciation Charges)

Corporation Tax= Taxable Income x 0.4
Net Cash Flow= Gross Income – (Investment + Royalty + Operation Cost + Corporation Tax)

Calculate;

1) Payout time of the field development project.

2) Present worth of after tax net cash flow wit 12 % discount rate.
3) Rate of return of the project.
Sensitivity Analyses:

- Sensitivity to oil price: Calculate the present worth of after tax cash flow with 12 % discount rate for 0.5,
1.5 and 2.0 times the wellhead price of oil in the base case.

- Sensitivity to operation cost: Calculate the present worth of after tax cash flow wit 12 %
Discount rate for 0.5, 1.5 and 2.0 times the operation cost in the base case.

- Sensitivity to capitol cost: Calculate the present worth of after tax cash flow with 12 % discount rate for
0.5, 1.5 and 2.0 times the capital cost in the base case.

For 0.5 times well head price:

Inv Oil prod Gross Operation Deprec. Taxable Corp. Tax Net cash
Year Oil prod Royalty$
1000$ bbl/year income $ cost $ charge $ income $ $ flow
 0 0 0 0 0 0 0 0 0 0 0
1 2000000 0 0 0 0 0 0 0 0 -2000000
2 8500000 3561 1299765 12997650 1624706,3 5199060 155000 6018883,8 2407553,5 -4733669,8
3 9910000 11871 4332915 43329150 5416143,8 17331660 875000 19706346 7882538,5 2788807,8
4 10630000 23741 8665465 86654650 10831831 34661860 1597000 39563959 15825584 14705375
5 400000 25225 9207125 92071250 11508906 36828500 2323000 41410844 16564338 26769506.25
6 21441 7825965 78259650 9782456,3 31303860 2347000 34826334 13930534 23242800
7 18225 6652125 66521250 8315156,3 26608500 2192000 29405594 11762238 19835356
8 15491 5654215 56542150 7067768,8 22616860 1472000 25385521 10154209 16703313
9 13168 4806320 48063200 6007900 19225280 750000 22080020 8832008 13998012
10 11193 4085445 40854450 5106806,3 16341780 24000 19381864 7752745,5 11653118
11 9514 3472610 34726100 4340762,5 13890440 16494898 6597959 9896938,5
12 8087 2951755 29517550 3689693,8 11807020 14020836 5608334,5 8412501,8
13 6874 2509010 25090100 3136262,5 10036040 11917798 4767119 7150678,5
14 5843 2132695 21326950 2665868,8 8530780 10130301 4052120,5 6078180,8
15 4966 1812590 18125900 2265737,5 7250360 8609802,5 3443921 5165881,5
16 4221 1540665 15406650 1925831,3 6162660 7318158,8 2927263,5 4390895,3
17 3588 1309620 13096200 1637025 5238480 6220695 2488278 3732417
18 3050 1113250 11132500 1391562,5 4453000 5287937,5 2115175 3172762,5
19 2592 946080 9460800 1182600 3784320 4493880 1797552 2696328
20 2204 804460 8044600 1005575 3217840 3821185 1528474 2292711

PW = 0 – 2000000 x 0.892857143 – 4733669.8 x 0.797193878 + 2788807.8 x 0.711780248 + 14705375 x 0.635518078 + 26769506.25 x

0.567426856 + 23242800 x 0.506631121 + 19835356 x 0.452349215 + 16703313 x 0.403883228 + 13998012 x 0.360610025 + 11653118 x
0.321973237 + 9896938.5 x 0.287476104 + 8412501.8 x 0.256675093 + 7150678.5 x 0.22917419 + 6078180.8 x 0.204619813 + 5165881.5 x
0.182696261 + 4390895.3 x 0.163121662 + 3732417 x 0.145644341 + 3172762.5 x 0.13003959 + 2696328 x 0.116106777 + 2292711 x
0.103666765
= 68308804.5338 $

1.5 times the wellhead price

Inv Oil prod Gross Operation Deprec. Taxable Corp. Tax Net cash
Year Oil prod Royalty$
1000$ bbl/year income $ cost $ charge $ income $ $ flow

0 0 0 0 0 0 0 0 0 0 0
1 2000000 0 0 0 0 0 0 0 0 -2000000
2 8500000 3561 1299765 38992950 4874118,8 5199060 155000 28764771 11505909 8913862,8
 3 9910000 11871 4332915 129987450 16248431 17331660 875000 95532359 38212944 48284415
4 10630000 23741 8665465 259963950 32495494 34661860 1597000 191209596 76483839 105692758
5 400000 25225 9207125 276213750 34526719 36828500 2323000 202535531 81014213 123444318.8
6 21441 7825965 234778950 29347369 31303860 2347000 171780721 68712289 105415433
7 18225 6652125 199563750 24945469 26608500 2192000 145817781 58327113 89682669
8 15491 5654215 169626450 21203306 22616860 1472000 124334284 49733714 76072570
9 13168 4806320 144189600 18023700 19225280 750000 106190620 42476248 64464372
10 11193 4085445 122563350 15320419 16341780 24000 90877151 36350861 54550291
11 9514 3472610 104178300 13022288 13890440 77265573 30906229 46359344
12 8087 2951755 88552650 11069081 11807020 65676549 26270620 39405929
13 6874 2509010 75270300 9408787,5 10036040 55825473 22330189 33495284
14 5843 2132695 63980850 7997606,3 8530780 47452464 18980986 28471478
15 4966 1812590 54377700 6797212,5 7250360 40330128 16132051 24198077
16 4221 1540665 46219950 5777493,8 6162660 34279796 13711919 20567878
17 3588 1309620 39288600 4911075 5238480 29139045 11655618 17483427
18 3050 1113250 33397500 4174687,5 4453000 24769813 9907925 14861888
19 2592 946080 28382400 3547800 3784320 21050280 8420112 12630168
20 2204 804460 24133800 3016725 3217840 17899235 7159694 10739541

PW = 0 – 2000000 x 0.892857143 + 8913862.8 x 0.797193878 + 48284415 x 0.711780248 + 105692758 x 0.635518078 + 123444318.8 x

0.567426856 + 105415433 x 0.506631121 + 89682669 x 0.452349215 + 76072570 x 0.403883228 + 64464372 x 0.360610025 + 54550291 x
0.321973237 + 46359344 x 0.287476104 + 39405929 x 0.256675093 + 33495284 x 0.22917419 + 28471478 x 0.204619813 + 24198077 x
0.182696261 + 20567878 x 0.163121662 + 17483427 x 0.145644341 + 14861888 x 0.13003959 + 12630168 x 0.116106777 + 10739541 x
0.103666765
= 394191376.603 $

2 times the wellhead price

Inv Oil prod Gross Operation Deprec. Taxable Corp. Tax Net cash
Year Oil prod Royalty$
1000$ bbl/year income $ cost $ charge $ income $ $ flow

0 0 0 0 0 0 0 0 0 0 0
1 2000000 0 0 0 0 0 0 0 0 -2000000
 2 8500000 3561 1299765 51990600 6498825 5199060 155000 40137715 16055086 15737629
3 9910000 11871 4332915 173316600 21664575 17331660 875000 133445365 53378146 71032219
4 10630000 23741 8665465 346618600 43327325 34661860 1597000 267032415 106812966 151186449
5 400000 25225 9207125 368285000 46035625 36828500 2323000 283097875 113239150 171781725
6 21441 7825965 313038600 39129825 31303860 2347000 240257915 96103166 146501749
7 18225 6652125 266085000 33260625 26608500 2192000 204023875 81609550 124606325
8 15491 5654215 226168600 28271075 22616860 1472000 173808665 69523466 105757199
9 13168 4806320 192252800 24031600 19225280 750000 148245920 59298368 89697552
10 11193 4085445 163417800 20427225 16341780 24000 126624795 50649918 75998877
11 9514 3472610 138904400 17363050 13890440 107650910 43060364 64590546
12 8087 2951755 118070200 14758775 11807020 91504405 36601762 54902643
13 6874 2509010 100360400 12545050 10036040 77779310 31111724 46667586
14 5843 2132695 85307800 10663475 8530780 66113545 26445418 39668127
15 4966 1812590 72503600 9062950 7250360 56190290 22476116 33714174
16 4221 1540665 61626600 7703325 6162660 47760615 19104246 28656369
17 3588 1309620 52384800 6548100 5238480 40598220 16239288 24358932
18 3050 1113250 44530000 5566250 4453000 34510750 13804300 20706450
19 2592 946080 37843200 4730400 3784320 29328480 11731392 17597088
20 2204 804460 32178400 4022300 3217840 24938260 9975304 14962956

PW = 0 – 2000000 x 0.892857143 + 15737629 x 0.797193878 + 71032219 x 0.711780248 + 151186449 x 0.635518078 + 171781725 x

0.567426856 + 146501749 x 0.506631121 + 124606325 x 0.452349215 + 105757199 x 0.403883228 + 89697552 x 0.360610025 + 75998877 x
0.321973237 + 64590546 x 0.287476104 + 54902643 x 0.256675093 + 46667586 x 0.22917419 + 39668127 x 0.204619813 + 33714174 x
0.182696261 + 28656369 x 0.163121662 + 24358932 x 0.145644341 + 20706450 x 0.13003959 + 17597088 x 0.116106777 + 14962956 x
0.103666765

= 557132661.55 $

0.5 times operation cost

Inv Oil prod Gross Operation Deprec. Taxable Corp. Tax Net cash
Year Oil prod Royalty$
1000$ bbl/year income $ cost $ charge $ income $ $ flow

0 0 0 0 0 0 0 0 0 0 0
1 2000000 0 0 0 0 0 0 0 0 -2000000
2 8500000 3561 1299765 25995300 3249412,5 2599530 155000 19991358 7996543 3649814,5
3 9910000 11871 4332915 86658300 10832288 8665830 875000 66285183 26514073 30736110
 4 10630000 23741 8665465 173309300 21663663 17330930 1597000 132717708 53087083 70597625
5 400000 25225 9207125 184142500 23017813 18414250 2323000 140387438 56154975 86155462.5
6 21441 7825965 156519300 19564913 15651930 2347000 118955458 47582183 73720275
7 18225 6652125 133042500 16630313 13304250 2192000 100915938 40366375 62741563
8 15491 5654215 113084300 14135538 11308430 1472000 86168333 34467333 53173000
9 13168 4806320 96126400 12015800 9612640 750000 73747960 29499184 44998776
10 11193 4085445 81708900 10213613 8170890 24000 63300398 25320159 38004239
11 9514 3472610 69452200 8681525 6945220 53825455 21530182 32295273
12 8087 2951755 59035100 7379387,5 5903510 45752203 18300881 27451322
13 6874 2509010 50180200 6272525 5018020 38889655 15555862 23333793
14 5843 2132695 42653900 5331737,5 4265390 33056773 13222709 19834064
15 4966 1812590 36251800 4531475 3625180 28095145 11238058 16857087
16 4221 1540665 30813300 3851662,5 3081330 23880308 9552123 14328185
17 3588 1309620 26192400 3274050 2619240 20299110 8119644 12179466
18 3050 1113250 22265000 2783125 2226500 17255375 6902150 10353225
19 2592 946080 18921600 2365200 1892160 14664240 5865696 8798544
20 2204 804460 16089200 2011150 1608920 12469130 4987652 7481478

PW = 0 – 2000000 x 0.892857143 + 3649814.5 x 0.797193878 + 30736110 x 0.711780248 + 70597625 x 0.635518078 + 86155462.5 x

0.567426856 + 73720275 x 0.506631121 + 62741563 x 0.452349215 + 53173000 x 0.403883228 + 44998776 x 0.360610025 + 38004239 x
0.321973237 + 32295273 x 0.287476104 + 27451322 x 0.256675093 + 23333793 x 0.22917419 + 19834064 x 0.204619813 + 16857087 x
0.182696261 + 14328185 x 0.163121662 + 12179466 x 0.145644341 + 10353225 x 0.13003959 + 8798544 x 0.116106777 + 7481478 x
0.103666765

= 268493814.681 $

1.5 times the operation cost

Inv Oil prod Gross Operation Deprec. Taxable Corp. Tax Net cash
Year Oil prod Royalty$
1000$ bbl/year income $ cost $ charge $ income $ $ flow

0 0 0 0 0 0 0 0 0 0 0
1 2000000 0 0 0 0 0 0 0 0 -2000000
2 8500000 3561 1299765 25995300 3249412,5 7798590 155000 14792298 5916919 530378,5
3 9910000 11871 4332915 86658300 10832288 25997490 875000 48953523 19581409 20337114
4 10630000 23741 8665465 173309300 21663663 51992790 1597000 98055848 39222339 49800509
 5 400000 25225 9207125 184142500 23017813 55242750 2323000 103558938 41423575 64058362.5
6 21441 7825965 156519300 19564913 46955790 2347000 87651598 35060639 54937959
7 18225 6652125 133042500 16630313 39912750 2192000 74307438 29722975 46776463
8 15491 5654215 113084300 14135538 33925290 1472000 63551473 25420589 39602884
9 13168 4806320 96126400 12015800 28837920 750000 54522680 21809072 33463608
10 11193 4085445 81708900 10213613 24512670 24000 46958618 18783447 28199171
11 9514 3472610 69452200 8681525 20835660 39935015 15974006 23961009
12 8087 2951755 59035100 7379387,5 17710530 33945183 13578073 20367110
13 6874 2509010 50180200 6272525 15054060 28853615 11541446 17312169
14 5843 2132695 42653900 5331737,5 12796170 24525993 9810397 14715596
15 4966 1812590 36251800 4531475 10875540 20844785 8337914 12506871
16 4221 1540665 30813300 3851662,5 9243990 17717648 7087059 10630589
17 3588 1309620 26192400 3274050 7857720 15060630 6024252 9036378
18 3050 1113250 22265000 2783125 6679500 12802375 5120950 7681425
19 2592 946080 18921600 2365200 5676480 10879920 4351968 6527952
20 2204 804460 16089200 2011150 4826760 9251290 3700516 5550774

PW = 0 – 2000000 x 0.892857143 + 530378.5 x 0.797193878 + 20337114 x 0.711780248 + 49800509 x 0.635518078 + 64058362.5 x

0.567426856 + 54937959 x 0.506631121 + 46776463 x 0.452349215 + 39602884 x 0.403883228 + 33463608 x 0.360610025 + 28199171 x
0.321973237 + 23961009 x 0.287476104 + 20367110 x 0.256675093 + 17312169 x 0.22917419 + 14715596 x 0.204619813 + 12506871 x
0.182696261 + 10630589 x 0.163121662 + 9036378 x 0.145644341 + 7681425 x 0.13003959 + 6527952 x 0.116106777 + 5550774 x
0.103666765
= 194006369.856 $

2 times the operation cost

Inv Oil prod Gross Operation Deprec. Taxable Corp. Tax Net cash
Year Oil prod Royalty$
1000$ bbl/year income $ cost $ charge $ income $ $ flow

0 0 0 0 0 0 0 0 0 0 0
1 2000000 0 0 0 0 0 0 0 0 -2000000
2 8500000 3561 1299765 25995300 3249412,5 10398120 155000 12192768 4877107 -1029339,5
3 9910000 11871 4332915 86658300 10832288 34663320 875000 40287693 16115077 15137616
4 10630000 23741 8665465 173309300 21663663 69323720 1597000 80724918 32289967 39401951
 5 400000 25225 9207125 184142500 23017813 73657000 2323000 85144688 34057875 53009812.5
6 21441 7825965 156519300 19564913 62607720 2347000 71999668 28799867 45546801
7 18225 6652125 133042500 16630313 53217000 2192000 61003188 24401275 38793913
8 15491 5654215 113084300 14135538 45233720 1472000 52243043 20897217 32817826
9 13168 4806320 96126400 12015800 38450560 750000 44910040 17964016 27696024
10 11193 4085445 81708900 10213613 32683560 24000 38787728 15515091 23296637
11 9514 3472610 69452200 8681525 27780880 32989795 13195918 19793877
12 8087 2951755 59035100 7379387,5 23614040 28041673 11216669 16825004
13 6874 2509010 50180200 6272525 20072080 23835595 9534238 14301357
14 5843 2132695 42653900 5331737,5 17061560 20260603 8104241 12156362
15 4966 1812590 36251800 4531475 14500720 17219605 6887842 10331763
16 4221 1540665 30813300 3851662,5 12325320 14636318 5854527 8781790,5
17 3588 1309620 26192400 3274050 10476960 12441390 4976556 7464834
18 3050 1113250 22265000 2783125 8906000 10575875 4230350 6345525
19 2592 946080 18921600 2365200 7568640 8987760 3595104 5392656
20 2204 804460 16089200 2011150 6435680 7642370 3056948 4585422

PW = 0 – 2000000 x 0.892857143 – 1029339.5 x 0.797193878 + 15137616 x 0.711780248 + 39401951 x 0.635518078 + 53009812.5 x

0.567426856 + 45546801 x 0.506631121 + 38793913 x 0.452349215 + 32817826 x 0.403883228 + 27696024 x 0.360610025 + 23296637 x
0.321973237 + 19793877 x 0.287476104 + 16825004 x 0.256675093 + 14301357 x 0.22917419 + 12156362 x 0.204619813 + 10331763 x
0.182696261 + 8781790.5 x 0.163121662 + 7464834 x 0.145644341 + 6345525 x 0.13003959 + 5392656 x 0.116106777 + 4585422 x
0.103666765
= 156762647.362 $

0.5 times the capital costs

Inv Oil prod Gross Operation Deprec. Taxable Corp. Tax Net cash
Year Oil prod Royalty$
1000$ bbl/year income $ cost $ charge $ income $ $ flow

0 0 0 0 0 0 0 0 0 0 0
1 1000000 0 0 0 0 0 0 0 0 -1000000
2 4250000 3561 1299765 25995300 3249412,5 5199060 155000 17391828 6956731 6340096,5
3 4955000 11871 4332915 86658300 10832288 17331660 875000 57619353 23047741 30491612
4 10630000 23741 8665465 173309300 21663663 34661860 1597000 115386778 46154711 60199067
5 200000 25225 9207125 184142500 23017813 36828500 2323000 121973188 48789275 75306912.5
 6 21441 7825965 156519300 19564913 31303860 2347000 103303528 41321411 64329117
7 18225 6652125 133042500 16630313 26608500 2192000 87611688 35044675 54759013
8 15491 5654215 113084300 14135538 22616860 1472000 74859903 29943961 46387942
9 13168 4806320 96126400 12015800 19225280 750000 64135320 25654128 39231192
10 11193 4085445 81708900 10213613 16341780 24000 55129508 22051803 33101705
11 9514 3472610 69452200 8681525 13890440 46880235 18752094 28128141
12 8087 2951755 59035100 7379387,5 11807020 39848693 15939477 23909216
13 6874 2509010 50180200 6272525 10036040 33871635 13548654 20322981
14 5843 2132695 42653900 5331737,5 8530780 28791383 11516553 17274830
15 4966 1812590 36251800 4531475 7250360 24469965 9787986 14681979
16 4221 1540665 30813300 3851662,5 6162660 20798978 8319591 12479387
17 3588 1309620 26192400 3274050 5238480 17679870 7071948 10607922
18 3050 1113250 22265000 2783125 4453000 15028875 6011550 9017325
19 2592 946080 18921600 2365200 3784320 12772080 5108832 7663248
20 2204 804460 16089200 2011150 3217840 10860210 4344084 6516126

PW = 0 – 1000000 x 0.892857143 + 6340096.5 x 0.797193878 + 30491612 x 0.711780248 + 60199067 x 0.635518078 + 75306912.5 x

0.567426856 + 64329116 x 0.506631121 + 54759012 x 0.452349215 + 46387941 x 0.403883228 + 39231192 x 0.360610025 + 33101704 x
0.321973237 + 28128141 x 0.287476104 + 23909215 x 0.256675093 + 20322981 x 0.22917419 + 17274829 x 0.204619813 + 14681979 x
0.182696261 + 12479386 x 0.163121662 + 10607922 x 0.145644341 + 9017325 x 0.13003959 + 7663248 x 0.116106777 + 6516126 x
0.103666765
= 239171377.583 $

1.5 times the capital costs

Inv Oil prod Gross Operation Deprec. Taxable Corp. Tax Net cash
Year Oil prod Royalty$
1000$ bbl/year income $ cost $ charge $ income $ $ flow

0 0 0 0 0 0 0 0 0 0 0
1 3000000 0 0 0 0 0 0 0 0 -3000000
2 12750000 3561 1299765 25995300 3249412,5 5199060 155000 17391828 6956731 -2159903,5
3 14865000 11871 4332915 86658300 10832288 17331660 875000 57619353 23047741 20581612
4 15945000 23741 8665465 173309300 21663663 34661860 1597000 115386778 46154711 54884067
5 600000 25225 9207125 184142500 23017813 36828500 2323000 121973188 48789275 74906912.5
 6 21441 7825965 156519300 19564913 31303860 2347000 103303528 41321411 64329117
7 18225 6652125 133042500 16630313 26608500 2192000 87611688 35044675 54759013
8 15491 5654215 113084300 14135538 22616860 1472000 74859903 29943961 46387942
9 13168 4806320 96126400 12015800 19225280 750000 64135320 25654128 39231192
10 11193 4085445 81708900 10213613 16341780 24000 55129508 22051803 33101705
11 9514 3472610 69452200 8681525 13890440 46880235 18752094 28128141
12 8087 2951755 59035100 7379387,5 11807020 39848693 15939477 23909216
13 6874 2509010 50180200 6272525 10036040 33871635 13548654 20322981
14 5843 2132695 42653900 5331737,5 8530780 28791383 11516553 17274830
15 4966 1812590 36251800 4531475 7250360 24469965 9787986 14681979
16 4221 1540665 30813300 3851662,5 6162660 20798978 8319591 12479387
17 3588 1309620 26192400 3274050 5238480 17679870 7071948 10607922
18 3050 1113250 22265000 2783125 4453000 15028875 6011550 9017325
19 2592 946080 18921600 2365200 3784320 12772080 5108832 7663248
20 2204 804460 16089200 2011150 3217840 10860210 4344084 6516126

PW = 0 – 3000000 x 0.892857143 – 2159903.5 x 0.797193878 + 20581612 x 0.711780248 + 54884067 x 0.635518078 + 74906912.5 x

0.567426856 + 64329116 x 0.506631121 + 54759012 x 0.452349215 + 46387941 x 0.403883228 + 39231192 x 0.360610025 + 33101704 x
0.321973237 + 28128141 x 0.287476104 + 23909215 x 0.256675093 + 20322981 x 0.22917419 + 17274829 x 0.204619813 + 14681979 x
0.182696261 + 12479386 x 0.163121662 + 10607922 x 0.145644341 + 9017325 x 0.13003959 + 7663248 x 0.116106777 + 6516126 x
0.103666765
= 219951023.75 $

2.0 times the capital cost

Inv Oil prod Gross Operation Deprec. Taxable Corp. Tax Net cash
Year Oil prod Royalty$
1000$ bbl/year income $ cost $ charge $ income $ $ flow

0 0 0 0 0 0 0 0 0 0 0
1 4000000 0 0 0 0 0 0 0 0 -4000000
2 17000000 3561 1299765 25995300 3249412,5 5199060 155000 17391828 6956731 -6409903,5
3 19820000 11871 4332915 86658300 10832288 17331660 875000 57619353 23047741 15626612
4 21260000 23741 8665465 173309300 21663663 34661860 1597000 115386778 46154711 49569067
5 800000 25225 9207125 184142500 23017813 36828500 2323000 121973188 48789275 74706913
 6 21441 7825965 156519300 19564913 31303860 2347000 103303528 41321411 64329117
7 18225 6652125 133042500 16630313 26608500 2192000 87611688 35044675 54759013
8 15491 5654215 113084300 14135538 22616860 1472000 74859903 29943961 46387942
9 13168 4806320 96126400 12015800 19225280 750000 64135320 25654128 39231192
10 11193 4085445 81708900 10213613 16341780 24000 55129508 22051803 33101705
11 9514 3472610 69452200 8681525 13890440 46880235 18752094 28128141
12 8087 2951755 59035100 7379387,5 11807020 39848693 15939477 23909216
13 6874 2509010 50180200 6272525 10036040 33871635 13548654 20322981
14 5843 2132695 42653900 5331737,5 8530780 28791383 11516553 17274830
15 4966 1812590 36251800 4531475 7250360 24469965 9787986 14681979
16 4221 1540665 30813300 3851662,5 6162660 20798978 8319591 12479387
17 3588 1309620 26192400 3274050 5238480 17679870 7071948 10607922
18 3050 1113250 22265000 2783125 4453000 15028875 6011550 9017325
19 2592 946080 18921600 2365200 3784320 12772080 5108832 7663248
20 2204 804460 16089200 2011150 3217840 10860210 4344084 6516126

PW = 0 – 4000000 x 0.892857143 – 6409903.5 x 0.797193878 + 15626612 x 0.711780248 + 49569067 x 0.635518078 + 74706913 x

0.567426856 + 64329116 x 0.506631121 + 54759012 x 0.452349215 + 46387941 x 0.403883228 + 39231192 x 0.360610025 + 33101704 x
0.321973237 + 28128141 x 0.287476104 + 23909215 x 0.256675093 + 20322981 x 0.22917419 + 17274829 x 0.204619813 + 14681979 x
0.182696261 + 12479386 x 0.163121662 + 10607922 x 0.145644341 + 9017325 x 0.13003959 + 7663248 x 0.116106777 + 6516126 x
0.103666765
= 208651957.824 $