Missy Gaines owns the mineral rights in land in Oklahoma, which she leased to Dr
ID: 2429503 • Letter: M
Question
Missy Gaines owns the mineral rights in land in Oklahoma, which she leased to Drill Quick Oil & Gas. In that agreement, Missy received a 25% royalty interest. Later, Drill Quick Oil & Gas entered into a sales contract where it sold 40% of its working interest to Time Wise Company. In 2019, total proved reserves for the property are estimated to be 1,000,000 barrels, and total production during 2019 was 100,000 barrels. Under this agreement, royalty is payable to Missy Gaines in cash.
REQUIRED: Determination of proved reserves to be included in the reserve report.
Explanation / Answer
Proved reserves is the meteric unit that indicated how much of the reseources can be extracted from the given facility. Here proved reserves are $ 1000000 barrles minus extracted reserves of 2019 of $ 100000 barrles that is 900000 barrels