Congratulations! You have just inherited 250 acres of land in south Texas. An oil company approached...

Congratulations! You have just inherited 250 acres of land in south Texas. An oil company approached you and offered you a one 1/2 percent (0.005) royalty for the rights to your oil. Given the following information, answer the questions below. Size = 250 acres Porosity of oil zone rock = 20 % Recoverable Oil = 30 % You do not need to consider the cost of the wells. Thickness of oil zone = 20 feet Oil saturation in pores = 40 % Life of the wells = 30 years Helpful conversions 1 acre = 43,560 square feet 1 cubic foot = 0.178 barrels

1. How many barrels of oil are in the ground?

2. How many barrels of oil are recoverable?

3. What is the value of recoverable oil at $95 per barrel?

4. What is the value of recoverable oil at $30 per barrel?

5. How much total money do you expect if oil stays at $95 per barrel?

6. How much total money do you expect if oil stays at $30 per barrel?

7. What will be your average monthly royalty check at $95 per barrel?

8. What will be your average monthly royalty check at $30 per barrel?

Solutions

Expert Solution

genius_generous answered 1 year ago

Next > < Previous

Related Solutions

Siblings Dana, Dan, and Doug have inherited 50 acres of pasture land from their Uncle Bob....

Siblings Dana, Dan, and Doug have inherited 50 acres of pasture land from their Uncle Bob. They plan to start ranching but cannot agree on what type of animals they should raise. They decide to build three adjoining rectangular pens of the same size. One pen will be Dana to use, one pen for Dan to use, and one pen for Doug to use. They have 1000 yards of chain link fence to build the adjoining pens. Part 1: Solution:...

Congratulations! You have just won $1,000,000 in the New York Lottery. You will receive payments of...

Congratulations! You have just won $1,000,000 in the New York Lottery. You will receive payments of $40,000 per year (at the end of each year) for the next 25 years. If the discount rate is 14 percent, what are your winnings worth today?

Case: You have just inherited a large sum of money and you are trying to determine...

Case: You have just inherited a large sum of money and you are trying to determine how much you will get after retirement and how much you can spend now. For retirement you will deposit today (January 1,2015) 2,500,000 euros in a bank account paying 4.55% compounded annually. You do not plan on touching this deposit until you retire in five years (January 1, 2020) and you plan on living for 20 additional years and then drop dead on December...

Joyce has just contracted to sell a small parcel of land that she inherited a few...

Joyce has just contracted to sell a small parcel of land that she inherited a few years ago. The buyer is willing to pay R28 000 at the closing of the transaction or will pay the amounts shown in the following table at the beginning of each of the next five years. Because Joyce doesn’t really need the money today, she plans to let it accumulate in an account that earns 10% annual interest. Given her desire to buy a...

BigBox Stores, Inc., has just purchased 100 acres of land in Happyville. The town, fearful of...

BigBox Stores, Inc., has just purchased 100 acres of land in Happyville. The town, fearful of a huge chain store ruining the economy and putting local retailers out of business, quickly passes an ordinance restricting the size of any new buildings to no more than 5,000 square feet. The typical BigBox store averages approximately 100,000 square feet. Does the town of Happyville have the right to enact a zoning restriction of this nature?

You have mineral rights on a piece of land that you believe may have oil underground....

You have mineral rights on a piece of land that you believe may have oil underground. There is only a 10% chance that you will strike oil if you drill, but the payoff is $200,000. It costs $10,000 to drill. The alternative is not to drill at all, in which case your profit is zero. (c) Draw a decision tree to represent your problem. Should you drill? (d) Use the decision tree to calculate EVPI. (e) Before you drill you...

You have just been approached by a magazine with an offer for renewing your subscription. You...

You have just been approached by a magazine with an offer for renewing your subscription. You can renew for one year at $20, two years for $36, or three years at $45. Assuming that you have an opportunity cost of 20% and the cost of a subscription will not change over time, which of these three options should you choose? A) 1 year at $20 B) 2 years at $36 C) 3 years at $45

You are considering the purchase of 10 acres to plant an apple orchard. The land is...

You are considering the purchase of 10 acres to plant an apple orchard. The land is priced at $17,500/acre and it will cost $65,000 to plant the trees and install the irrigation system. Based on your research, you won't be producing enough apples to sell until year 5. From then on you estimate your net returns will be $45,000 a year. If you plan on operating the orchard for 15 years, what is your NPV? Assume that the land appreciates...

Congratulations! You have just been elected to the United States House of Representatives to represent your...

Congratulations! You have just been elected to the United States House of Representatives to represent your district in our nation's capitol. As your first order of business, you have been selected to address your colleagues in the house on the subject of Community Development Block Grants (CDBG) and other taxpayer funded community development initiatives. You have 2 minutes to argue for one of the following points: continuing the CDBG program and increasing the amount of money in the federal budget...

Factual Background Congratulations. You have just been promoted to a Senior Manager position in the Finance...

Factual Background Congratulations. You have just been promoted to a Senior Manager position in the Finance Department. You now supervise five (5) employees who process payroll for a large successful publishing company. You have worked for the company for six (6) years and you’ve worked alongside the employees you now supervise the entire time. You consider these coworkers who are now your subordinates as some of your closest friends. You often socialized after work, attended events together, and truly got...

Subjects