Abstract

Acquisition of oil and gas properties plays a vital role for most companies in their continued growth and diversification. A co-ordinated approach is presented here for the most reasonable evaluation. A computer program is briefly described for production and revenue analysis. The major profitability criteria, e. g., payout, rate of return, etc, are discussed and their advantages and disadvantages pointed out. For a proper evaluation other factors, e. g., present and future state of the petroleum industry, price increases, income taxes, interest rate, etc. should also be considered.

Introduction

There are many different ways of evaluating oil and gas properties and the criteria of fair market value varies from one company to the other. A logical work sequence – geological, engineering and economics – should be followed for evaluating oil and gas properties. The geological considerations should deal with the location of the field, type of structure, type of formation, etc. Net pay, porosity and connate water saturation can be determined from the logs and formation volume factor from PVT analysis. The recovery factor depends on such factors as productive capacity, past performance, recovery schemes, etc. It is not the intent of this paper to go into the details of reservoir engineering. After this data has been analyzed and the pertinent values assigned, the recoverable reserves can be calculated-by using the appropriate equations.

Next comes the most important part of an economic evaluation, i.e., the forecast of production rates which is a combination of reservoir, geological and economic data and a knowledge of how various reservoirs will perform over their lifetime even though only limited data may be available at the time of evaluation. The forecast must obviously reflect prorationing regulations. For example, in Alberta, the oil allowable, as set by the Energy Resources Conservation Board, is a function of both domestic and export demands, ultimate reserves and cumulative production. The following formula is used for light and medium gravity crude:

Equation (Available In Full Paper)

Figure 1 shows a plot of allocation factor (A) vs, time. Note an appreciable increase in recent years.

It should be pointed out here that gas production is not prorated. The evaluation of gas reserves depends on such factors as capital cost, deliverability, price, gas composition, etc.

COMPUTER PROGRAM

Among the many economics and evaluation programs available, a new "PETRO$" program. developed by GIGOL's engineers and C. G. E. is considered to be quite comprehensive and easy to use, especially on time-sharing terminals. This particular program is very well suited to the users in Canada. The following are some of the outstanding features:

  1. The input is very simple as shown in Tables 1 and 2.

  2. The production forecast can be handled in three different ways, which allows the Evaluation Engineer to use almost any type of decline desired. Another important feature is its capability to calculate Alberta allowables.

  3. The program is designed to calculate most types of royalties, e.g. crown sliding scale, "Jumping Pound" formula, freehold, etc.

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