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Cowboy Energy is an oil and gas company that began operation in2014. Below is the drilling program late that year that will not begin production
Cowboy Energy is an oil and gas company that began operation in2014. Below is the drilling program late that year that will not begin production until 2015. At the beginning of 2015, Cowboy Energy has the following net investment by field, all located in the U.S. | |||||
Field | Cost ($mm) | Beginning of the year reserves (BOE) | |||
Woodford | $10 | 600,000 | |||
Mississippi Lime | $11 | 700,000 | |||
Eagle Ford | $14 | 850,000 | |||
Total | $35 | 2,150,000 | |||
The following activity takes place in 2015. | |||||
* CE drills a dry development well in a new field that costs: | $ 5,000,000 | ||||
* CE drills a dry exploratory well in the Woodford that costs: | $ 2,000,000 | ||||
* CE drills a successful exploratory well in the Woodford that costs: | $ 3,000,000 | ||||
* CE incurs G&G costs of $2 million | $ 2,000,000 | ||||
* CE drills a successful exploratory well in the Eagle Ford costing $5 million. | $ 5,000,000 | ||||
* CE incurs $2 million of delay rental costs to retain leases in the Eagle Ford field. | $ 2,000,000 | ||||
Total | $ 19,000,000 | ||||
QUESTION: WHAT WILL BE THE DD&A RATE PER BARREL FOR A COMPANY THAT USES FULL COST ACCOUNTING? |
Remember that DD&A stands for depreciation, depletion and amortization.
HINT: THIS QUESTION IS FROM CHAPTER 8 AND EXHIBIT 8.2 HAS AN EXAMPLE OF THIS TYPE OF ANALYSIS.
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