View the step-by-step solution to:

Lil Oil Company has a WI in Lease X with the following costs and reserves as of January 1, 20X1.

Lil Oil Company has a WI in Lease X with the following costs and reserves as of January 1, 20X1.

Proved

                                                                                   Property                         IDC & Eqpt

Asset                                                                          100,000                           500,000    

Accumulated DD&A                                                 ( 40,000)                      ( 200,000)    

Net carrying value                                                      60,000                           300,000    


Estimated proved reserves 1/1/20X1                                                              220,000 bbls

Estimated proved developed reserves 1/1/20X1                                            140,000 bbls


No additional drilling occurred during the year.


(a)              During the first quarter of 20X1, production was 20,000 Bbls. Compute DD&A expense for the first quarter of 20X1.


(b) On June 30, 20X1, a new reserve report estimated the following reserves as of June 30, 20X1:

Proved reserves                                                                                              250,000 Bbls

Proved developed reserves                                                                             150,000 Bbls


Production for the second quarter of 20X1 was 25,000 bbls. Compute DD&A expense for the second quarter of 20X1 assuming that Lil Oil Company uses the new reserve report to compute DD&A expense for the entire second quarter.


(c)  Discuss how production of both oil and gas affects the DD&A computation (No computation is necessary).

Recently Asked Questions

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

-

Educational Resources
  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question