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Company A and Company B enter into an agreement where Company A, the carrying party, will drill a well to a specified depth on Bs
Company A and Company B enter into an agreement where Company A, the carrying party, will drill a well to a specified depth on B’s lease. Company A will have 100 percent of the working interest until payout. After payout, Company A will have a 50 percent WI and Company B will have a 50 percent WI. The leasehold acquisition costs paid by Company B were $90,000. Company A incurred IDC of $880,000 and equipment costs of $150,000. The lease is subject to a 1/8 royalty interest. The estimated sales price per barrel of oil is $80 and the estimated operating expenses are $15 per barrel. The severance tax rate is 5%. The estimated reserves before any production are as follows: Proved reserves 70,000 barrels Proved developed reserves 40,000 barrels Question: What is Company B’s share of the proved reserves? Group of answer choices
21,875
22,432
22,280
23,238
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