Problem about the differences in Drilling Costs under SE and FC
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 ARE THE TOTAL EXPENSES DURING 2015 FOR A COMPANY USING FULL COST ACCOUNTING? ASSUME THAT PRODUCTION IS 225,000 BOE FOR THE YEAR.

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.

Question 26 options:

A)	$5,651,163 in total DDA charges for the barrels producted.

B)	$6,000,000

C)	$6,452,696

D)	$8,111,111

E)

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