On 1/1/X1, Boomer Oil Company paid Ms. Ellis $100,000 and acquired the working interest and Ms. Ellis retained a 1/8 royalty interest. On March 1, X1, Boomer Oil Company farmed out the WI in the Ellis property to Sooner Oil Company. The farmout agreement provided that Boomer would retain a 10% of 7/8 overriding royalty interest convertible to a 50% working interest after payout. Payout is defined as the first day of the month after which the net cash flow to the farmee equals the expenses paid by the farmee for IDC and L&WE. Sooner Oil Company incurred expenses of $400,000 for IDC and $100,000 for lease and well equipment for drilling the Ellis #1 well. The present value of the cost to plug and abandon the well at the end of its productive life is estimated to be $100,000. The cost will be borne equally by Boomer and Sooner. Production began on October 1, X1. Gross oil production, reserves, sales price, and expenses for X1 were as follows: Total production during X1 (Constant for Oct through Dec at 240 barrels per month) 720 bbls Sales price for year $90/bbl Severance tax rate 5% Lease operating expenses $10/bbl Proved reserves 12/31/X1 30,000 bbls Proved developed reserves 12/31/X1 16,000 bbls Required:

Compute DD&A for Boomer Oil Company and Sooner Oil Company for X1. What is the remaining balance in the payout account as of 12/31/X1 (or if payout occurred, in which month)? Gross oil production, reserves, sales price, and expenses for X2 were as follows: Total production during X2 (Constant per month) 2,760 bbls Sales price for year $100/bbl Severance tax rate 5% Lease operating expenses $12/bbl Proved reserves 12/31/X2 25,000 bbls Proved developed reserves 12/31/X2 12,000 bbls