1.A field has recently been brought into production. 14 development wells have already been

drilled but a further 7 development wells have yet to be drilled. Depreciation is based only on

those reserves that are proved and developed.

Capitalised exploration and appraisal costs $62,000,000

Capitalised development costs $874,000,000

Total proved reserves 326,000,000 barrels

Proved developed reserves 214,000,000 barrels

Production in period 21,000,000 barrels

Required:

Calculate DD&A charge for the accounting period using:

a) Proved developed reserves only;

b) Total proved reserves.

2.Again we will use the data in the example above, but in this example we will

have to add in the estimated costs of the 7 remaining development wells.

Capitalised exploration and appraisal costs $62,000,000

Capitalised development costs $874,000,000

7 further development wells $84,000,000

Total proved reserves 326,000,000 barrels

Proved developed reserves 214,000,000 barrels

Production in period 21,000,000 barrels

Required:

Calculate DD&A charge for the accounting period using the prospective method. Assume the

total number of wells to be drilled has not changed.

3.Again we will use the data in the example detailed above.

Capitalised exploration and appraisal costs $62,000,000

Capitalised development costs - facilities $706,000,000

Capitalised development costs wells $168,000,000

7 further development wells $84,000,000

Total proved reserves 326,000,000 barrels

Proved developed reserves 214,000,000 barrels

Production in period 21,000,000 barrels

Required:

Calculate DD&A charge for the accounting period using the prospective method. Assume the

total number of wells to be drilled has not changed.