Oil Gas Accounting- Energy ratio formula

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Ch. 16 Assignment ALL

Analysis of Oil and Gas Companies' Financial Statements- Homework
#17 What is the reserve replacement ratio? What is the reserve replacement ratio attempting to measure? How would you interpret it?
The reserve replacement ratio measures a company's success in replacing production and accordingly measures a company's ability to continue to operate in the future. It is used to measure the performance of a company. The most basic form formula:
Reserve replacement ratio = Extensions and discoveries + Improved recovery Revisions in previous estimates + Purchases of reserves in place
Production
#13 The following reserve table appeared in the financial statements of Lomax Company.
Estimated Quantities of Net Proved Crude Oil and Natural Gas
(Worldwide Totals only)
in Thousands of Barrels and Millions of Cubic Feet
Year ended Dec. 31 2015 2016 2017
Oil Gas Oil Gas Oil Gas
Beginning of year 171 779 234 783 335 724
Revisions of prevision estimates 10 12 15 31 (11) 22
Improved recovery 21 30 25 23 15 50
Purchases of reserves in place 0 0 12 12 0 24
Sales of reserves in place (12) (12) (20) (99) (70) (24)
Extension & discoveries 69 78 90 42 6 150
Production (25) (104) (21) (68) (24) (76)
End of year totals 234 783 335 724 251 870
Year Net Wells Gross Wells
2015 750 2010
2016 840 1910
2017 900 2050
i. Reserve replacement ratio = Extensions and discoveries + Improved recovery
Production
Extensions and discoveries + Improved recovery+ Revisions in previous estimates
ii. Reserve replacement ratio =
Production
Extensions and discoveries + Improved recovery + Revisions in previous estimates + Purchase of reserves in place
iii. Reserve replacement ratio =
Production + Sales of reserves in place
REQUIRED: Compute the following ratios for all three years:
a. The reserves replacement ratio computed for all three methods and for oil and gas separately
2015 Oil Gas
i. = 3.600 1.038
ii. = 4.000 1.154
iii. = 2.703 1.034
2016 Oil Gas
i. = 5.476 0.956
ii. = 6.190 1.412
iii. = 3.463 0.647
2017 Oil Gas
i. = 0.875 2.632
ii. = 0.417 2.921
iii. = 0.106 2.460
b. The reserve life ratio computed for oil and gas separately
Reserve life ratio = Total proved reserves at beg. of year 2015 Oil Gas
Production 6.84 7.490
2016 Oil Gas
11.143 11.515
2017 Oil Gas
13.958 9.526
c. The net wells to gross wells ratio
Net to gross wells = Net wells 2015
Gross wells 0.3731343284
2016
0.440
2017
0.439
d. The average reserves per well ratio computed using BOE, i.e., combining reserves based on relative energy content
Average reserves per well ratio= Total proved reseves @ beg 2015
Net wells 0.401 BOE/well
2016
0.434 BOE/well
2017
0.506 BOE/well
e. The average daily production per well computed using BOE
Average daily production per well= Annual production/365 2015
Net wells 0.155 bbl/day/well
2016
0.105 bbl/day/well
2017
0.112 bbl/day/well
#15
Lomax Company reported the following expenses in its financial statements (in thousands):
Year Lifting Costs DD&A
2015 $211 $500
2016 226 450
2017 183 525
REQUIRED: Using the reserve disclosure for Lomax Company given in problem 13 and the data presented in this problem:
a. Compute lifting costs per BOE
Lifting cost/BOE= Total annual lifting costs 2015 $ 4.984 /BOE
Annual production (BOE)
2016 $ 6.990 /BOE
2017 $ 4.991 /BOE
b. Compute DD&A per BOE
DD&A/BOE= Total annual DD&A 2015 $ 11.811 /BOE
Annual production (BOE)
2016 $ 13.918 /BOE
2017 $ 14.318 /BOE