Weeks Oil and Gas Company manages oil and gas properties in the Permian Basin and is responsible for exploring, drilling and developing wells on the Gilbert Jones and UHD Leases. Weeks Oil and Gas Company owns a 70% working interest in the Gilbert Jones lease in Dawson County, Texas on which there is a 1/5 interest with the Gilbert Jones Family and a 100% interest in the UHD lease in Pecos County which there is a 1/8 royalty interest with the University of Houston. Musch Exploration Company shares a 30% in the Gilbert Jones lease with Weeks Oil and Gas Company. The Land Lease Agreement with the Gilbert Jones Family requires the Working Interest Owners to pay severance taxes on their behalf. During the month of July 2019, Weeks Energy produced and sold gas to PlainsAmerica and Hess under various Gas Purchasing Agreements, additionally during July 2019, crude oil was produced and sold (after correction for temperature, gravity and BS&W) to Enterprise Products and Nuevo Midstream under the existing Crude Oil Sale Agreements.

From the data above:

a) Assume the production from each well is commingled, and the commingled hydrocarbons flow is measured and sold at a central delivery metering point based on the flow schematic on page 2.

b) July 2019 the following data for the wells on the UHD lease was recorded: Well 24-Hr Test, Mcf 24-Hr Test, bbl. Days Produced D 3,404 Mcf 14 Bbl. 29 E 9,450 Mcf 140 Bbl. 23 F 1,023 Mcf 18 Bbl. 30

c) Purchase and Sales Agreements information below. The Purchase and Sales Agreement requires the value and allocation of gas sales on a MMbtu basis using the sale meter Btu analysis. Purchaser Agreement No. Purchaser Nat. Gas Price Oil Price Severance Tax ESP-09 PlainsAmerica $1.895/MMBtu $50.33/Bbl. 6.25% ESH-01 Hess $2.565/MMBtu $48.32/Bbl. 6.25% ETP-18 Enterprise Product $2.030/MMBtu $49.72/Bbl. 6.25% ETN-14 Nuevo Midstream $1.641/MMbtu $51.96/Bbl. 6.25% 2 3

Instructions Understand the physical flow of the hydrocarbons and allocate production, fuel and sale volumes for each of the wells on the Gilbert Jones and UHD leases. Provide the journal entries necessary to record the gas and oil sold; assuming the operator distributes taxes and royalty for each of the sale points: Enterprise Products; Plains America; Hess and Nuevo Midstream.

Please provide the allocated amount of sale volumes (oil & gas), gross revenue, severance tax, and royalties allocated to the following wells:

Well Sales MMBtu Gross Revenue ($) Severance Tax ($) Royalty ($) A B C Well Sales Bbl. Gross Revenue ($) Severance Tax ($) Royalty ($) A B C Well Sales MMBtu Gross Revenue ($) Severance Tax ($) Royalty ($) D E F Well Sales Bbl. Gross Revenue ($) Severance Tax ($) Royalty ($) D E F 4

(2) Weeks Oil and Gas Company s South West Texas district office expenses were $150,000 for July 2019. The district office supervised the following Gilbert Jones and UHD leases:

A. Record lease operating expense, assuming allocation based on the number of wells.

B. Record lease operating expense, assuming allocation based on the barrels of oil produced.

(3) Weeks Energy submitted an AFE to Musch Energy with the following data pertaining to a proposed development well (C1) on the Gilbert Jones Lease as follows: Acquisition Costs $250,000 Drilling Costs $300,000 Est Completion Costs $500,000 Est Selling Costs per bbl. $35.00/bbl. Est. Lifting Costs per bbl. $32.00/bbl. State Severance Tax 6.25% Royalty Interest 12.5%

Determine the net cash flow to the working interest owners and if the well should be completed, assuming the following total production. Provide a reason for your answer to complete or not complete.

A. Case A 10,000 bbl.

B. Case B 20,000 bbl.

C. Case C 30,000 bbl.