Revenues:

Year
Production(bbls)
Price($/bbl)
Gross Revenue

0
$
$

1
175
80 $
14,000 $

2
100
80
8,000

Costs:
Royalties(12.5%)
Operating Costs
Development Costs
Equipment Costs
Acquisition Costs
Total Costs

(1,750) $
(1,750) $
(2,500)
(6,700)

(1,000)
(1,000)

$
$

$
$
(7,500) $
$
(1,000)
(8,500) $

(12,700) $

(2,000)

BTCF
Discounted BTCF
Cum Discounted BTCF

$
$
$

(8,500) $
(8,500) $
(8,500) $

1,300 $
1,161 $
(7,339) $

6,000
4,783
(2,556)

NPV

$ 4,024.21
1
175
84.80 $
14,840 $

2
100
89.89
8,989

(1,855) $
(1,925) $
(2,500)
(6,700)

(1,124)
(1,210)

(12,980) $

(2,334)

BTCFs:

Escalation

Revenue
Costs:

Year
Production (bbls)
Price
Gross Revenue
Royalties(12.5%)
Operating Costs
Development Costs
Equipment Costs
Acquisition Costs
Total Costs

Before tax cash flow

Esc. BTCF
Discounted BTCF

Inflation

Revenue

Year
Production (bbls)
Price
Gross Revenue

Costs:

Royalties(12.5%)

$
$
$

$
$

$
$
(7,500) $
$
(1,000)
(8,500) $

$
(8,500) $
1,860 $
6,655
$ (8,500.00) $ 1,660.71 $ 5,305.48

$
$

1
175
84.80 $
14,840 $

2
100
89.89
8,989

(1,855) $

(1,124)

Operating Costs
Development Costs
Equipment Costs
Acquisition Costs
Total Costs

Question 4

$
$
$

$
(7,500) $
$
(1,000)
(8,500) $

(1,925) $
(2,500)
(6,700)

(1,210)

(12,980) $

(2,334)

Esc Cash Flow

$
(8,500) $
1,860 $
6,655
Constant Dollar Cash Flow$ (8,500.00) $ 1,771.43 $ 6,036.46
NPV
$ (8,500.00) $ 1,660.71 $ 5,305.48
Constant Rate

6.67%

$
$

3
75
80 $
6,000 $

4
55
80 $
4,400 $

5
35
80
2,800

$
$

(750) $
(750) $

(550) $
(500) $

(350)
(250)

(1,500) $

(1,050) $

(600)

$
$
$

4,500 $
3,203 $
647 $

3,350 $
2,129 $
2,776 $

2,200
1,248
4,024

$
$

3
75
95.28 $
7,146 $

4
55
101.00 $
5,555 $

5
35
107.06
3,747

$
$

(893) $
(998) $

(694) $
(732) $

(468)
(403)

(1,892) $

(1,426) $

(871)

$
5,255 $
4,128 $
2,876
$ 3,740.11 $ 2,623.73 $ 1,631.93

$
$

3
75
95.28 $
7,146 $

4
55
101.00 $
5,555 $

5
35
107.06
3,747

(893) $

(694) $

(468)

Discount Rate
Escalation (P)
Escalation (OC)
Inflation
Royalties
Price

Question 1
Escalated IRR
Before Escalated IRR
Question 2
NPV Escalated BTCF

12%
6%
10%
5%
12.5%
80

38%
29%

$6,461.97

(998) $

(732) $

(403)

(1,892) $

(1,426) $

(871)

$
5,255 $
4,128 $
2,876
$ 4,539.11 $ 3,396.52 $ 2,253.44
$ 3,740.11 $ 2,623.73 $ 1,631.93

Question 3
Constant Dollar IRR

32%

Constant Dollar IRR is less than escalated IRR but smaller than pre escalated IRR