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A series of simple charts have been designed to aid the exploration geologist in prospect evaluation by "rule of thumb." The charts include example oil and gas condensate wells having typical Gulf Coast flow rates, pay thicknesses and reserves. The evaluation methods considered are: payout time, return per dollar invested, net worth, present worth, average annual rate of return, and profit-to-risk ratio. The charts make it possible for the geologist to see how a few factors control profitability. They allow direct comparison of evaluation methods. This gives the geologist a better economic understanding and an improved perspective of how a prospect fits into an over-all exploration program.
The charts indicate: (1) average annual rate of return and present worth are good measures of profitability, but both should be related to wildcat risk; (2) profit-to-risk figures often misrepresent the actual risk; (3) large flow rates are as important as large reserves; (4) there is a need for increased flow rates where reserves are large. In lieu of increased flow rates, incentives are needed to encourage independent and major oil companies to seek larger discoveries per well. One such incentive would be larger depletion allowances for big discoveries.
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