Discounting Oil and Gas Income
Basis of the Manual
Introduction
Discounting
Discounted Cash Flow Appraisal
Discount Rate Components
Using the Three Techniques
Market Surveys
Developing a Discount Rate From Sales
Weighted Average Cost of Capital
Summary
Appendix 1: Discounted Cash Flow Method (Working Interest Portion Only)
Appendix 2: Estimation of Weighted Average Cost of Capital (WACC)
Appendix 3: Standard Deviation
Appendix 4: Property Specific Risk Factors
References
Appendix 4
Property Specific Risk Factors
Basis of the Manual
Introduction
Discounting
Discounted Cash Flow Appraisal
Discount Rate Components
Using the Three Techniques
Market Surveys
Developing a Discount Rate From Sales
Weighted Average Cost of Capital
Summary
Appendix 1: Discounted Cash Flow Method (Working Interest Portion Only)
Appendix 2: Estimation of Weighted Average Cost of Capital (WACC)
Appendix 3: Standard Deviation
Appendix 4: Property Specific Risk Factors
References
Appendix 4
Property Specific Risk Factors
A. One well lease B. Oil lease with high water production C. Lease near the end of its economic life D. Gas well reservoir under partial or active water drive (recovery uncertain) E. Curtailed gas well F. Rapidly declining lease G. Lease with less than six (6) months production history H. Secondary Recovery Project in early stages before fill-up I. Offshore oil or gas lease J. Unusually high operating expenses (ex: paraffin problems, sour gas, etc.) K. The appraiser should add to the base discount rate (WACC) for any other property specific factors that increase the investor's risk.