PETRO 4300 S 11 CLASS 3

PETRO 4300 S 11 CLASS 3 - PETRO 4300 PROPERTY(ASSET...

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PETRO 4300 PROPERTY (ASSET) EVALUATION LECTURE 3
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CASH FLOW MODEL FOR OIL AND GAS
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BASIC CONCEPTS PROFIT = REVENUE – COST PROFIT HAS PERIODICITY, IT KEEPS OCCURRING AT REGULAR INTERVALS IN PROPERTY EVALUATION WE ESTIMATE FUTURE PROFIT AND NORMALLY THE PERIOD IS ONE YEAR. THREE PROFIT MODELS CASH FLOW MODEL FINANCIAL MODEL TAX MODEL
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BASIC CONCEPTS CASH FLOW MODEL REVENUES ARE “RECOGNIZED” WHEN CASH IS RECEIVED EXPENSES ARE “RECOGNIZED” WHEN CASH IS PAID OUT FINANCIAL MODEL SIGNIFICANT DIFFERENCE IS IN THE HANDLING OF CAPITAL COST, (COST WHICH WILL PRODUCE REVENUE IN FUTURE PERIODS AS WELL AS CURRENT). TOTAL PROFIT OVER THE LIFE OF THE PROJECT IS THE SAME
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BASIC CONCEPTS FOR ECONOMIC ANALYSIS ALWAYS USE THE CASH FLOW MODEL . THE REASON LIES IN THE TIME VALUE OF MONEY CONCEPT . INCREMENTAL ANALYSIS. YOU ARE ALWAYS COMPARING TWO SCENARIOS, ONE IS THE BASE, THINGS AS THEY ARE THE OTHER IS IMPROVED OR OPPORTUNITY DRIVEN . DEPENDING ON SITUATION THE INCREMENTAL ANALYSIS MIGHT HAVE AN IMPACT ON ISSUES SUCH AS TAXES.
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OIL/GAS PR0PERTY CASH FLOW DIAGRAM GROSS PRODUCTION - SHRINKAGE = GROSS SALES * NET REVENUE INTEREST ( NET TO GROSS RATIO) = NET SALES * PRICE = GROSS REVENUE - SEVERANCE AND AD VALOREM TAXES = NET REVENUE
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OIL/GAS PR0PERTY CASH FLOW DIAGRAM - OPERATING EXPENSES - LOAN INTEREST = NET OPERATING INCOME BFIT - FEDERAL INCOME TAX = NET OPERATING INCOME AFIT - INVESTMENTS - LOAN PRINCIPAL PAYMENTS = NET CASH FLOW AFIT
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This note was uploaded on 07/12/2011 for the course PETR 4300 taught by Professor Watson during the Spring '11 term at Texas Tech.

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PETRO 4300 S 11 CLASS 3 - PETRO 4300 PROPERTY(ASSET...

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