Assume that the maximum value of Cost Recovery Crude Oil is limited to 50% of gross production, with costs to be recovered in the following order:

a- Operating costs (25% TPDC & 75% ABC Ltd)

b- Exploration costs (paid entirely by ABC Ltd)

c- Development costs (25% TPDC & 75% ABC Ltd).

Royalty is 12.5% of gross production and is to be paid in-kind.

Any excess production remaining after cost recovery becomes profit oil and shall be shared between TPDC and ABC Ltd (20% for TPDC and the remaining for ABC Ltd)

For the first round of production assume the following:

- Recoverable operating expenditures total $1,000,000.

- Exploration expenditures (unrecovered to date) total $20,000,000.

- Development expenditures (unrecovered to date) total $400,000,000.

- Any expenditures not recovered in the current round may be carried forward to be recovered in future rounds.

- The daily production was 10,000 barrels (bbl.) of oil.

- The duration of this production round was 90 days

- The agreed-upon price is $50/bbl.