Yost Petroleum is considering drilling one well on either the Rivera lease or the Cade lease in
Question:
Yost Petroleum is considering drilling one well on either the Rivera lease or the Cade lease in Texas. Force does not have sufficient funds to drill both wells and must decide which of the two wells to drill. Information relating to each of the wells follows:
REQUIRED: Using the payback method, determine which well Yost should drill.
Transcribed Image Text:
Drilling cost Completion cost Selling price ($/bbl) Lifting cost ($/bbl) State severance tax Royalty interest percentage Estimated monthly production Rivera Well $500,000 400,000 120 24 6% 12% 1,000 bbl Cade Well $400,000 450,000 120 24 6% 12% 750 bbl
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