Cooper Oil Company enters into a risk service agreement with the Chilean government.

Cooper Oil Company pays the government, in US dollars, an $8,000,000 signing bonus and also agrees to pay all of the costs associated with exploration, development, and production. (The contract defines costs incurred in the exploration and development phase of each project area as CAPEX, and all costs incurred in the production phase as OPEX.)

Each year in which production occurs, the government agrees to pay Cooper Oil Company a fee comprised of the following:

a. All OPEX incurred in the current year

b. 1/10th of all unrecovered CAPEX

c. $0.30/bbl on production from 0 to 4,000 bbl/day, $0.50/bbl on production from 4,001 to 10,000 bbl/day, and $0.90/bbl on production greater than 10,000 bbl/day The maximum total fee that will be paid in any year is $1.30/bbl times the total number of barrels produced. Any unrecovered OPEX or CAPEX (unrecovered due to the maximum fee) can be carried forward to future years.

Assume that in 2019, production commences on the Llama Field. At that time, Cooper Oil Company had spent $15,000,000 on CAPEX, and during 2019 spends

$5,000,000 in OPEX. Production equals 5,110,000 barrels or 5,110,000/365 =

14,000 bbl/day.

REQUIRED: Compute the fee that Cooper Oil Company would receive for 2019.