FUNDAMENTALS OF
OIL GAS&
ACCOUNTING
6th edition
Solutions
Manual
Charlotte J. Wright
,Solution Manual For
Fundamentals of Oil and Gas Accounting
6ed
Charlotte J. Wright
Copyright 2016
Any unauthorized copying or reproduction of this solution manual is strictly prohibited by
law.
,CHAPTER 1—A PROFILE OF PETROLEUM OPERATIONS: SOLUTIONS
1. Fault trap - an impervious rock strata is offset or sheared off to overlay a porous layer of rock
containing oil and gas.
Anticline and salt dome - different rock layers have been folded to form a dome or anticline.
Porosity - the percent volume of pore space in a rock and is the measure of the reservoir
rock’s storage capacity.
Permeability - the measure of the ease in which liquid flows through a rock and therefore how
well the pores are connected.
2. Day-rate contract - a type of drilling contract in which payment is based on the number of
days drilled.
Footage-rate contract - a type of drilling contract in which payment is based on the number of
feet drilled.
Turnkey contract - a type of drilling contract in which payment is a fixed sum of money based
on drilling to a certain depth or stage of completion.
Horizontal drilling - a drilling method that achieves a horizontal direction in order to penetrate
a greater portion of a reservoir or a number of small reservoirs.
3. Petroleum reservoir - a porous, permeable sedimentary rock containing commercial quantities
of oil and gas.
Primary recovery - the initial recovery of oil and gas by either natural energy drives or by
pumping.
Secondary recovery - the second attempt to recover oil and gas after the initial pressure or
pumping activities have been used. Usually an artificial drive (water) is induced into the
formation to replace the natural drive.
Tertiary recovery - the use of enhanced recovery methods to produce oil and gas. This is the
third attempt to remove the oil and gas from the reservoir.
4. Steps in finding oil and gas:
a. broad G&G studies
b. leasing the mineral interest
c. detailed G&G studies
d. selecting the drillsite
e. drilling the well
5. Definitions:
Economic interest in oil and gas - any interest in the minerals in place.
Mineral rights - the ownership right to minerals in place conveyed by deed. The mineral rights
owner may or may not be different from the surface interest owner.
Mineral interest - any interest in the minerals in place.
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, Royalty interest - the interest retained by the mineral rights owner when the mineral rights are
leased to another party.
Working interest - the operating interest under an oil and gas lease. The owner of the working
interest has exclusive right to recover the minerals on the land.
Overriding royalty interest - a nonworking interest created from the working interest. An ORI
receives a portion of the gross revenue that would otherwise have gone to the working interest
(from which it was created). An ORI free of developing and producing costs.
Production payment interest - a nonworking interest similar to an ORI but limited to a certain
sum of money or amount of oil or gas.
6. When a formation lacks sufficient permeability it is often referred to as a “tight” formation.
Hydraulic fracturing (also known as "fracking" or "fracing") is a process wherein water,
chemicals and sand are pumped into a well. The pressure from the injection of these fluids
opens cracks or fractures in the reservoir rock which allows the crude oil or natural gas to flow
into the wellbore. The sand then props the cracks or fractures open and the liquid injectants
are reproduced along with the crude oil or natural gas. When used in conjunction with
horizontal drilling, hydraulic fracturing enables oil and gas producers to produce tight
formations that otherwise would not be feasible.
7. Conventional reservoirs are characterized by rock that is porous and permeable, have a cap or
some form of trap, and have a drive that moves oil or gas through the reservoir rock enabling
it to accumulate in quantities that can be economically produced. Unconventional reservoirs
have lower permeability and are typically the actual source rock for the hydrocarbons
contained in their pore spaces. Since the oil or gas is distributed throughout the pores of the
reservoir rock without natural permeability channels, it is difficult if not impossible to produce
through vertically drilled wells. Use of hydraulic fracturing and horizontal drilling are
typically necessary in order to produce oil and gas from unconventional reservoirs.
8. a. Lease bonus - the initial amount paid to the mineral rights owner as an inducement to sign
the lease contract.
b. Royalty provision - a provision in the lease agreement that provides the amount of royalty
to be paid to the royalty interest owner. A royalty is a percentage of the oil and gas
produced from the lease or a percentage of the proceeds from the sale of the oil and gas.
c. Primary term - the initial term of the lease during which the lease can be held by
producing oil and gas, drilling a well, or paying delay rentals.
d. Delay rental provision - allows the lessee to refrain from drilling during the primary term
by paying a yearly amount called a delay rental payment.
e. Shut-in royalty payments - the lessee may be required to pay a royalty to the lessor if the
well is capable of producing but is shut-in.
f. Paid-up lease – a lease where the lessor has paid not only a bonus but also all delay rentals
that would otherwise have been paid over the primary term.
See the book for other less common provisions.
1-2
OIL GAS&
ACCOUNTING
6th edition
Solutions
Manual
Charlotte J. Wright
,Solution Manual For
Fundamentals of Oil and Gas Accounting
6ed
Charlotte J. Wright
Copyright 2016
Any unauthorized copying or reproduction of this solution manual is strictly prohibited by
law.
,CHAPTER 1—A PROFILE OF PETROLEUM OPERATIONS: SOLUTIONS
1. Fault trap - an impervious rock strata is offset or sheared off to overlay a porous layer of rock
containing oil and gas.
Anticline and salt dome - different rock layers have been folded to form a dome or anticline.
Porosity - the percent volume of pore space in a rock and is the measure of the reservoir
rock’s storage capacity.
Permeability - the measure of the ease in which liquid flows through a rock and therefore how
well the pores are connected.
2. Day-rate contract - a type of drilling contract in which payment is based on the number of
days drilled.
Footage-rate contract - a type of drilling contract in which payment is based on the number of
feet drilled.
Turnkey contract - a type of drilling contract in which payment is a fixed sum of money based
on drilling to a certain depth or stage of completion.
Horizontal drilling - a drilling method that achieves a horizontal direction in order to penetrate
a greater portion of a reservoir or a number of small reservoirs.
3. Petroleum reservoir - a porous, permeable sedimentary rock containing commercial quantities
of oil and gas.
Primary recovery - the initial recovery of oil and gas by either natural energy drives or by
pumping.
Secondary recovery - the second attempt to recover oil and gas after the initial pressure or
pumping activities have been used. Usually an artificial drive (water) is induced into the
formation to replace the natural drive.
Tertiary recovery - the use of enhanced recovery methods to produce oil and gas. This is the
third attempt to remove the oil and gas from the reservoir.
4. Steps in finding oil and gas:
a. broad G&G studies
b. leasing the mineral interest
c. detailed G&G studies
d. selecting the drillsite
e. drilling the well
5. Definitions:
Economic interest in oil and gas - any interest in the minerals in place.
Mineral rights - the ownership right to minerals in place conveyed by deed. The mineral rights
owner may or may not be different from the surface interest owner.
Mineral interest - any interest in the minerals in place.
1-1
, Royalty interest - the interest retained by the mineral rights owner when the mineral rights are
leased to another party.
Working interest - the operating interest under an oil and gas lease. The owner of the working
interest has exclusive right to recover the minerals on the land.
Overriding royalty interest - a nonworking interest created from the working interest. An ORI
receives a portion of the gross revenue that would otherwise have gone to the working interest
(from which it was created). An ORI free of developing and producing costs.
Production payment interest - a nonworking interest similar to an ORI but limited to a certain
sum of money or amount of oil or gas.
6. When a formation lacks sufficient permeability it is often referred to as a “tight” formation.
Hydraulic fracturing (also known as "fracking" or "fracing") is a process wherein water,
chemicals and sand are pumped into a well. The pressure from the injection of these fluids
opens cracks or fractures in the reservoir rock which allows the crude oil or natural gas to flow
into the wellbore. The sand then props the cracks or fractures open and the liquid injectants
are reproduced along with the crude oil or natural gas. When used in conjunction with
horizontal drilling, hydraulic fracturing enables oil and gas producers to produce tight
formations that otherwise would not be feasible.
7. Conventional reservoirs are characterized by rock that is porous and permeable, have a cap or
some form of trap, and have a drive that moves oil or gas through the reservoir rock enabling
it to accumulate in quantities that can be economically produced. Unconventional reservoirs
have lower permeability and are typically the actual source rock for the hydrocarbons
contained in their pore spaces. Since the oil or gas is distributed throughout the pores of the
reservoir rock without natural permeability channels, it is difficult if not impossible to produce
through vertically drilled wells. Use of hydraulic fracturing and horizontal drilling are
typically necessary in order to produce oil and gas from unconventional reservoirs.
8. a. Lease bonus - the initial amount paid to the mineral rights owner as an inducement to sign
the lease contract.
b. Royalty provision - a provision in the lease agreement that provides the amount of royalty
to be paid to the royalty interest owner. A royalty is a percentage of the oil and gas
produced from the lease or a percentage of the proceeds from the sale of the oil and gas.
c. Primary term - the initial term of the lease during which the lease can be held by
producing oil and gas, drilling a well, or paying delay rentals.
d. Delay rental provision - allows the lessee to refrain from drilling during the primary term
by paying a yearly amount called a delay rental payment.
e. Shut-in royalty payments - the lessee may be required to pay a royalty to the lessor if the
well is capable of producing but is shut-in.
f. Paid-up lease – a lease where the lessor has paid not only a bonus but also all delay rentals
that would otherwise have been paid over the primary term.
See the book for other less common provisions.
1-2
