This paper analyzes the relative economics of domestic oil and gas exploration and development for the period 1978–1983 by constructing annual ratios of oil and gas prices to their finding cost. This analysis is done in the context of the economic theory of depletable natural resources and the causal factors that determine the domestic net prices and finding cost for oil and gas. The paper concludes that industry economics improved in 1983 from the peak levels of industry activity in 1981 and 1982 due to oil price stabilization, a fall in Windfall Profits Tax (WPT) liability and operating costs, increases in gas prices, and a large drop in finding cost.

Keywords:
capital budget, asset and portfolio management, oil and gas, current dollar, long term net price path, natural resource, economic theory, long term path, depletable natural resource, reserves replacement
Subjects:
Reserves Evaluation, Asset and Portfolio Management, Reserves replacement, booking and auditing
Copyright 1985, Society of Petroleum Engineers
You can access this article if you purchase or spend a download.