An oil company in New Brunswick has a licence to operate an oil well that has just started producing. The company expects to extract 424,400 barrels of oil this year and the total oil reserves are estimated to be 4,244,000 barrels. Their capitalized costs for the licence are $12,732,000.
Using units-of-production method, calculate how much of this expense they will report this year(amortization expense)?
An oil company in New Brunswick has a licence to operate an oil well that has...
Cheney Oil, Inc. has an account titled Oil and Gas Properties. Cheney paid $6,900,000 for oil reserves holding an estimated 600,000 barrels of oil. Assume the company paid $560,000 for additional geological tests of the property and $460,000 to prepare for drilling. During the first year, Cheney removed and sold 62.000 barrels of oil. Record all of Cheney's transactions, including depletion for the first year (Record debits first, then credits Select the explanation on the last line of the journal...
Deveton Class pack problem-depletion of an oil and gas well Reggio Company purchased an oil lease for $500,000 and expects to produce 31,250 barrels of oil from the lease. During the first year of operations, the lease produced 3,200 barrels of oil. What is the depletion for the first year? What is the journal entry to record the depletion? Journal Date Accounts and Explanations Debit Credit
You own an oil well that can produce 100k barrels of oil one year from now. Next year, the price of oil will be either $80/barrel if the economy is good and $40/barrel if the economy is bad. Oil costs $50/barrel to extract. One year forwards for oil has a forward price of $55 and the risk-free rate is 4%. What is the value of the oil well if you have to decide today whether to drill for oil or...
An oil company is drilling a series of new wells on the perimeter of a producing oil field. About 40% of the new wells will be dry. Even if a new well strikes oil, there is still uncertainty about the amount of oil produced: 30% of new wells which strike oil produce only 3,000 barrels a week; 70% produce 40,000 barrels a week. (a) Forecast the annual revenues from a new perimeter well. Use a future oil price of $100...
An oil well cost $2,030,000 and is calculated to hold 350,000 barrels of oil. There is no residual value. Which journal entry is needed to record the expense for the extraction of 47,000 barrels of oil during the year? All 47,000 barrels were sold during the year. (Round any intermediate calculations to the nearest cent and your final answer to the nearest dollar.) 272,600 272,600 272,600 272,600 O A. Depletion Expense - Oil Reserve Oil Revenue O B. Cost of...
Suppose an oil company is considering whether to develop production facilities for a newly discovered oil field on lands owned by a state government. If the firm spends $2 billion in present value in capital costs, it could install facilities capable of producing 80,000 barrels per day. Annual operating costs for the oil field are anticipated to be $30 per barrel produced. The company expects production from the field to start at 80,000 barrels per day but then decline at...
Problem 2 (25 points) Suppose that an oil well is expected to produce 100,000 barrels (BBL) of oil during its first year of production. However, its subsequent production (or yield) is expected to decrease by 12% over the previous year's production for each year of production over the 7-year project. The oil well has proven reserves to satisfy the project requirements. The price of oil is expected to start at $120 per barrel during the first year and increase 8.5%...
YOUR COMPANY CURRENTLY PRODUCES 10000 STOCK TANK BARRELS OF OIL PER DAY STBOPD THE QUOTED R/P RATIO FOR YOUR COMPANY IS 5 YEARS WHAT IS THE VOLUME OF RESERVES THAT YOUR COMPANY HAS CURRENTLY ON THE BOOKS HOW DOES IT COMPARE TO THE SAME RATIO FOR THE UNITED STATE AS A WHOLE IF YOU HAVE THE SAME AMOUNT OF ESTIMATED RESERVES BUT YOU PRODUCTION DROPS BY 10% PER YEAR CONSTRUCT A TABLE SHOWING THE REMAINING RESERVES VOLUMES FOR THE NEXT...
Swift Oil Company is considering investing in a new oil well. It is expected that the oil well will increase annual revenues by $130,000 and will increase annual expenses by $70,000 including depreciation. The oil well will cost $490,000 and will have a $10,000 salvage value at the end of its 10-year useful life. Calculate the annual rate of return.
Suppose an oil company is considering whether to develop production facilities for a newly discovered oil field on lands owned by a state government. If the firm spends $2 billion in present value in capital costs, it could install facilities capable of producing 80,000 barrels per day. Annual operating costs for the oil field are anticipated to be $30 per barrel produced. The company expects production from the field to start at 80,000 barrels per day but then decline at...