Queen City Sand Play

Economics

A success-case scenario of a less than 300,000 MCFG CUM well would yield an excellent investment, over and above payout. The following assumptions were made:

  1. With 100% Working Interest, the average 8/8th Net Revenue Interest is 75%.
  2. Gas price of $4.25 per MCFG.
  3. Oil price of $30 per barrel.
  4. Tite Gas tax credits apply, but are not figured into the numbers.
  5. $160,000 initial investment capital for a work-over.
  6. Operating cost of $7,200 per year, escalated at 2% per annum.
  7. Compression will be purchased, not leased.

This gives substantial upside for an initial small investment. With these assumptions, the economic yardstick numbers follow:

  1. A Finding and Development Cost (F&D) of $0.73 per MCFG.
  2. An Undiscounted Profit to Investment Ratio (P/I) of 4.24:1, and a Discounted (at 10% Interest) P/I of 3.4:1.
  3. Payout is less than 1 year.
  4. Cumulative cash position is $661,360 at the end of 8 years, or $544,031 discounted at 10% interest rate.
  5. The Internal Rate of Return (IROR) is in excess of 100%.

For a cash flow model, download queencitycash.xls.