This paper was prepared for the 1972 Deep Drilling Symposium of the Society of Petroleum Engineers of AIME to be held in Amarillo, Tex., Sept. 11–12, 1972. Permission to copy is restricted to an abstract of not more than 300 words. Illustrations may not be copied. The abstract should contain conspicuous acknowledgment of where and by whom the paper is presented. Publication elsewhere after publication in the JOURNAL paper is presented. Publication elsewhere after publication in the JOURNAL OF PETROLEUM TECHNOLOGY or the SOCIETY OF PETROLEUM ENGINEERS JOURNAL is usually granted upon requested to the Editor of the appropriate journal, provided agreement to give proper credit is made. provided agreement to give proper credit is made. Discussion of this paper is invited. Three copies of any discussion should be sent to the Society of Petroleum Engineers Office. Such discussions may be presented at the above meeting and, with the paper, may be considered for publication in one of the two SPE magazines.

Abstract

A type prospect in the "Deep Anadarko Basin" is described and its profitability is measured in terms of Discounted Cash Flow Rate of Return. Certain of the prospect's parameters are varied between limits thought parameters are varied between limits thought to be reasonable for the area and the results of the variations compared by the use of the same profit indicator.

The use of the type prospect, or "Base Case," in the evaluation of other prospects is illustrated. It is evident in prospects is illustrated. It is evident in all the analyses made that gas price increases are the only available means of increasing profitability to the level necessary to solve the present gas shortage.

Introduction

The purpose of this paper is to present a general overview of the existing development of natural gas production in the deeper portion of the Anadarko Basin of Texas and portion of the Anadarko Basin of Texas and Oklahoma with particular emphasis on the economics of the play; past, present, and future. Such a study is thought to be worthwhile at this time to serve as an indicator of whether or not a continuing search for gas supply in the area can be maintained on its own merits. The viability of the effort depends on its ability to generate the income level necessary to support the investment required.

Any economic analysis must consider the cash return with respect to the cash expended. When such an analysis is made of a particular venture, in this case the search for and development and marketing of natural gas, then the income and expense items must be broken down into their component parts and each par examined as to its relationship to the total. It should be noted at this point that the detailed examination of the economics of the area has been made from the point of view of the industry, not from that of any of its ma facets. All expenditures, whether made for leasing, geophysical work, drilling, production, or employee benefits are charged to production, or employee benefits are charged to investment. Any income item, regardless of source, is credited to the return of that investment.

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