Vol. 23 (1973), Pages 210-220
Offshore Petroleum Economics
L. K. Weaver (1), H. F. Pierce (1), C. J. Jirik (1)
Discounted cash flow rates of return for seven offshore fields range from 1.1 to 19.5 percent. Under the two specified conditions (a 20-year and a 30-year oil depletion model), the rates of return are 17.2 and 13.7 percent, respectively.
To prepare a financial analysis of an offshore operation, a model was derived to show the costs necessary to explore, acquire, develop, produce and abandon a 5,000-acre block and the estimated income from the sale of the hydrocarbons produced. To establish cost and income guidelines for the model, a group of seven oilfields in the Gulf of Mexico ranging from seven to 75 miles from shore and in water 20 to 130 feet deep was selected for study. A net profit or loss statement was prepared for each field and a discounted cash flow rate of return was calculated.