Economic Evaluation
Abstract
This chapter opens with an introduction on basic concepts in economic evaluation of unconventional resources including net cash flow (NCF), royalty, working interest (WI), and net revenue interest (NRI). Next, operating expenses and capital expenditure are discussed. Various production taxes are outlined including severance tax and ad valorem tax. A complete example of calculating net operating expenses and revenue is also presented. NCF and tax models are also discussed with detailed step-by-step calculations and examples. Next, the concept of discount rate and capital budgeting in relation to project evaluation and decision-making is heavily discussed. Finally, this chapter ends with a practical example ...
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