OIL AND GAS ACCOUNTING

1. A purchase in fee is when ______.

when a company trades services for the right to drill for oil.

the landman bills the company for services in acquiring a lease.

both the mineral rights and surface rights are purchased.

when a lease bonus will be paid conditional on finding oil or gas.

2. A lease bonus is when _________.

the property produces more oil than was expected so the oil company pays the landowner extra money.

the oil company pays an upfront amount for the right to drill for oil or gas.

the fee the landman gets for getting the rights owner to sign a lease.

when the company finds both oil and gas on a lease.

3. When using the successful efforts method of accounting and a lease that is significant is considered impaired, the proper entry is;

dr. Lease impairment expense _________cr. proved property

dr. Unproved property ___________cr. proved property

dr. Unproved property ___________cr. Allowance for impairment

dr. Lease impairment expense ____________cr. Allowance for impairment

4. Which of the following would be and intangible drilling cost?

cost of a drill stem test

cost of surface casing

cost of flowlines, tanks, and separators

labor costs to build a road to a producing well

5. The type of contract where the company pays a set rate to drill a well regardless of what costs are incurred by the contractor.

footage-rate contract

turnkey contract

day-rate contract

all of the above