Question

At the end of the first year, O&G paid a delay rental of $100/acre on the lease and began drilling at the end of the first month of the second year. Over the course of the year, 15 wells were drilled at a cost of $3,200,000 per well. Resulting aggregate production at the end of year 2 was 2,500,000 bbls which were sold at an average price of $52.26/bbl. Lifting costs for the year averaged $17.19/bbl. What were the net proceeds for each participant in this lease at the end of year 2?

Answer 1

	$
Selling price per bbl	52.26
Less: Lifting cost per bbl	(17.19)
Contribution per bbl	35.07
Total contribution (2,500,000 bbl x $ 35.07 per bbl)	87,675,000
Less: Fixed drilling cost ( 15 Wells x $ 3,200,000 per well)	(48,000,000)
Net proceeds	39,675,000