The objective of this study is to present costs of producing petroleum (oil, condensate, and associated gas) in the Gulf of Mexico. It includes a financial analysis of an offshore operation.

To prepare the financial analysis, 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, 7 oil fields in the Gulf of Mexico ranging from 7 to 75 mi from shore and in water 20-130 ft deep were selected for study. A net-profit or loss statement was prepared for each field, and a discounted cash-flow rate of return was calculated.

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Discounted cash-flow rates of return for the 7 fields ranged from 1.1 to 19.5%. Under the 2 specified conditions set up for the model (a 20-year and a 30-year oil depletion model), the rates of return are 17.2 and 13.7%, respectively.

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