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?

Expert Solution

genius_generous answered 1 year ago

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