PE-3712 Petroleum Economics Summer 2020

Assignment 2

Due Date: 7/9/2020 11:59pm

ABET Descriptors: 20%

Q1. The XYZ Oil Company acquires an oil and gas lease from the landowner A. The mineral deed shows
A will be entitled to landowner’s royalty interest (LORI) of 1/8th. The geologist who found the prospect
retains an ORRI of 1.5%. Calculate the NRI of the XYZ Oil Company assuming the company has a 100%
working interest.

Q2. A gas well is completed at a depth of 8,550 feet. The log analysis showed total formation thickness
of 12 feet of 16% porosity and 30% water saturation. On potential test, the well-produced dry gas with
a specific gravity of 0.75. The reservoir pressure was determined from a drill stem test (DST) to be 3,850
psi and the log heading showed a reservoir temperature of 155° F. The gas will be produced at the surface
where the standard pressure is 14.65 psi and the standard temperature is 60° F. The study of the offset
wells producing from the same formation has shown that the wells are capable of draining 160 acres at
a recovery factor of 85%. Compute the GIIP and the recoverable gas reserves. The gas formation volume
factor is 259.89 SCF/CF.

If the abandonment pressure has been determined to be 800 psi below which no gas could be
economically produced. Based on this information, compute the ultimate gas recovery and the recovery
factor. The formation volume factor at abandonment pressure is 51.88 SCF/CF.

Q3. An oil well has produced consistently for the last five years. The monthly oil production for each year
is given in the table below. It costs $2,000 per month to operate the well, the current oil price is $60/STB,
and the severance tax is 7.085% of the gross value. The well is not producing any associated gas.
Compute the following:

a. The EL based on 100% WI and 87.5% NRI

b. The exponential decline based on a graphed plot of production versus time
c. The remaining oil reserves as of 1/1/2011
d. Production rate at the end of 2011
e. The remaining life of the well
f. Ultimate oil recovery
g. Production for 2011, 2012, and 2013
 Oil Production, STB
Month 2006 2007 2008 2009 2010
January 2,399 1,882 1,637 1,334 1,151
February 2,059 1,621 1,265 1,177 1,028
March 1,808 1,536 1,386 1,208 1,151
April 1,627 1,551 1,310 1,191 1,075
May 1,699 1,526 1,300 1,370 1,081
June 1,575 1,553 1,241 1,315 983
July 1,618 1,514 1,289 1,268 1,037
August 1,660 1,428 1,299 1,312 959
September 1,575 1,320 1,240 1,224 989
October 1,538 1,534 1,290 1,229 897
November 1,541 1,309 1,240 1,202 1,044
December 1,702 1,474 1,348 1,229 996

Q4. For the problem stated in the question Q3, generate the cash flow to the EL of the lease.