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Buffalo Drilling Company has leased property on which oil has been discovered. The oil wells on this property produced 1 8 , 4 0 0
Buffalo Drilling Company has leased property on which oil has been discovered. The oil wells on this property
produced barrels of oil during the past year that sold at an average sales price of $ per barrel. Total
oil resources of this property are estimated to be barrels.
The lease provided for an outright payment of $ to the lessor owner before drilling could be
commenced and an annual rental of $ A premium of of the sales price of every barrel of oil removed
is to be paid annually to the lessor. In addition, Buffalo lessee is to clean up all the waste and debris from
drilling and to bear the costs of reconditioning the land for farming when the wells are abandoned. The
estimated fair value, at the time of the lease, of this cleanup and reconditioning is $
From the provisions of the lease agreement, compute the cost per barrel for the past year, exclusive of
operating costs, to Buffalo Drilling Company. Round answer to decimal places, eg
Total cost per barrel
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