Fundamentals of Oil & Gas Accounting 5th Edition by Rebecca Gallun, Charlotte Wright

Exercise 6

In 2009, Fitzgerald Smith leased the mineral rights in a property in Wyoming, agreeing
to a 1/6 royalty. The joint working interest in the property is owned by the following
companies: In 2010, a successful exploratory well was drilled on the property. On December 31,
2011, the property was producing. On that date, total proved reserves are estimated to
be 1,200,000 barrels, and total proved developed reserves are estimated to be 180,000
barrels. Total production during 2011 was 60,000 barrels.
REqUIRED:
a. Compute the proved reserves and proved developed reserves that belongs to the
working interest and royalty interest owners.
b. Determine the production that each of the working interest owners would use in
computing DD&A.