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Estimated Well Life Span

For each well auctioned, the program will estimate the life of the well. When the revenues can no longer pay the operating expenses, the well is likely to be abandoned.

Where:
qt = flowrate (m³/OF Day( at time t
P = average oil price = $600
OC = Operating cost ($/OF Day( = $10,000

Substituting, we get

Where:
qi = initial oil flowrate
D = decline rate (% reduction in flowrate / OF Day)
RR = Royalty Rate

Rearranging:

Solving for't':

This gives us an approximate time, in OF Days, that an Atlantis oil well will no longer be profitable because operating expenses have exceeded post-royalty revenue of that well.

This estimated life calculation is passed on to two further calculations: It will be used to (1) calculate the estimated total production (m3), and (2) the abandonment expense rate (AER) ($/OF Day).

 
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