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

Exercise 14

Placid Oil Corporation operates the Reida Lease. The accounting procedure attached
to the JOA allows Placid to recoup its overhead by the use of a combined fixed rate-
well basis of $1,000/producing well and $10,000/drilling well.
REqUIRED:
a. How much total overhead would Placid bill the joint account if the Reida Lease
had four wells that produced every day the previous month?
b. What if three wells produced every day, and only one produced for 5 days?
c. What if the only operation on the lease the previous month was the drilling of a
well? Drilling operations commenced on the first day of the month. Operations
were suspended for 4 days on the 20th, commenced again on the 24th, and
continued through the end of the month. A month is considered to be 30 days.