12. Production forecast, Project cash flow (45 points) You are considering buying a gas well from a producer. The production of this well is given (the last 20 months) in the Table below: Production Production Month Month Production Month MScf MScf MScf 1 10,106 8 4,667 15 3,693 2 9,240 9 4,396 16 2,641 3 6,738 10 3,512 17 3,528 4. 11 4,230 18 3,250 6,138 5,608 5 12 3,918 19 3,209 6 3,957 13 20 2,038 3,834 3,712 7 3,943 14 The well is dry (CGR =0.01 stb/Mscf); The costs and other constraints are as follows: Working interest 100% Oil severance tax: 5%; Gas severance tax: 5% OPEX cost: $5000/month Ad valorem tax: 10% Royalties: 12.5% (a) Make a production forecast for the well (b) Estimate the Economic Limit rate, remaining reserves (c) Create a pre-tax cashflow for the well (d) (Bonus): How much should you pay for the well? (What is the maximum price you should offer - Use your cashflow model to state your arguments to defend that proposal) 12. Production forecast, Project cash flow (45 points) You are considering buying a gas well from a producer. The production of this well is given (the last 20 months) in the Table below: Production Production Month Month Production Month MScf MScf MScf 1 10,106 8 4,667 15 3,693 2 9,240 9 4,396 16 2,641 3 6,738 10 3,512 17 3,528 4. 11 4,230 18 3,250 6,138 5,608 5 12 3,918 19 3,209 6 3,957 13 20 2,038 3,834 3,712 7 3,943 14 The well is dry (CGR =0.01 stb/Mscf); The costs and other constraints are as follows: Working interest 100% Oil severance tax: 5%; Gas severance tax: 5% OPEX cost: $5000/month Ad valorem tax: 10% Royalties: 12.5% (a) Make a production forecast for the well (b) Estimate the Economic Limit rate, remaining reserves (c) Create a pre-tax cashflow for the well (d) (Bonus): How much should you pay for the well? (What is the maximum price you should offer - Use your cashflow model to state your arguments to defend that proposal)