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Unformatted text preview: (b) For each additional completed well you will pay 33.3% of the CWC ($600,000) C - Calculate the values below -- both gross numbers and net to you. Gross Numbers Net to You (100 % numbers) (NRI = 25%) (WI = 33.3%) a. Expected reserves (barrels of oil) 100,000 (x NRI) = 25,000 (25%) b. Expected income ($100/barrel) $10,000,000 (x NRI) = $2,500,000 ( 25%) c. Expected expenses (4 wells) $2,400,000 (x WI) = $799,200 (33.3%) D. What is the net risk capacity for you for this venture? ___ 21.4 ___ Risk Capacity = PV Profit (whole venture) + DHC DHC Risk Capacity [net to you] = (Net income net expenses) + (your initial DHC investment) (your initial DHC investment) = (2,500,000 799,200) + 83,250 = 21.4 83,250 E. Since the Ps = 20% - would this be a good venture? Yes or No (circle one) Ps x RC = 0.2 x 21.4 = 4.28 This is much > 1, so yes it is a good venture...
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- Fall '11