ComboCurve: Depreciation, Depletion, & Amortization (DD&A)

ComboCurve: Depreciation, Depletion, & Amortization (DD&A)

In this article we will be covering DD&A models in ComboCurve.

Note: The DD&A tab is not listed in the scenario page for selection like other assumptions, but only within the econ editing tabs.

Another note: To enable output of AFIT (After Federal (and State) Income Tax calculations in CC, you must select "Income Tax" = "yes" in General Options for that model applied to the current scenario. General Options is also where you can apply a 15% Percentage Depletion in lieu of Cost Depletion, (NOL) Carry Forward (yes/no), State and Federal Income Tax multipliers as time-series. See the article on the General Options section for these items.

Depreciation Modeling


Note: To switch between Depreciation and Depletion models, select them under the 'Model Type' dropdown

Depreciation Models apply tax recovery schemes over time in economic variables and are named/numbered as Project or Unique for reference by selection in the Investment (CAPEX) tab.  Tangible and Intangible amounts are entered and tax-treated independently via that applied model.  Only one Model Type may be selected at a time for application on an Investment line in CAPEX so it is recommended to name the models with the type selected like "Depletion: UOP-mp", etc.  The type of investment selected will dictate the Model type applied. 
  1. Model Type: Choose to create a model for CAPEX items to either be Depreciated, Depleted or expensed.
    1. Expensed items such as same-zone workovers which are written off in the first year, can have no DD&A model applied or just a depreciation model with 100% in year 1
    2. Depreciated items such as Drilling can have separate schedules applied on the tangible or intangible portions as defined in the CAPEX model.  Several built-in schedules can be populated and edited.
    3. Depleted items such as initial purchase price can be deducted against income for taxation by several methods
  1. Depreciation Model Type
    1. Pre-built Depreciation Model - Note MACRS stands for the preferred amortization method used for scheduled depreciation: "Modified, Accelerated Cost Recovery System".  
      1. MACRS 3, 5, 7, 10, 15, 20 Year schedules are available for pre-filled percentages in one extra increment (ie, 7-year = 8 periods) due to the "half-year convention" which starts the schedule on July 1 of the first year of deduction.  MACRS 7 Year is most common in oil and gas applications.
      2. Custom allows entry of your own schedule with any number of rows.  Ensure the total Cumulative percentages for Tan and Intan always add up to 100%
    2. % Tangible Fed Tax Credit - Immediate tax credit (CAPEX times credit %).  This is independent of any other deduction (applied "on the top")
    3. Bonus Depreciation - In addition to any schedule percentages below, take a percentage of the total as a time-0 deduction.  Note: The remaining scheduled factors should still add up to 100% as they are percentages of the remaining AFTER Bonus Depreciation methods.
      1. TCJA Bonus Depreciation - Default "No" will allow only manual Bonus Depr entry.  "Yes" applies Bonus Depr from this Tax Cuts and Jobs Act schedule by investment year:
        1. 2010-11: 100%
        2. 2012-17: 50%
        3. 2018-22: 100%
        4. 2023: 80%
        5. 2024: 60%
        6. 2025: 40%
        7. 2026: 20%
        8. 2027+: 0%. 
        9. Don't double-dip with manual Bonus entry.  TCJA is intended to be stand-alone, not double-dipped with manual Bonus Depr entry.  The Pre-built Depr Models are the % factors applied on the remaining amount after all bonus.
      2. % Tangible Bonus Depreciation and % Intangible Bonus Depreciation - If TCJA is not used, allows manual selection of an immediate deduction.
    4. Depreciation - The Tangible and Intangible schedules reflected here from the Pre-built Depreciation Model above.

Depletion Modeling



Depletion Model Type - Depleted items such as initial purchase price can be deducted against income for taxation by several methods and applied separately for the amounts located in tangible (for modeling purposes only since tangible items are never depleted) and intangible.  Be mindful when 15% Percentage Depletion is selected in General Options as the greater of that or the applied method below will be used in CC calculations.
    1. % Tangible or % Intangible Immediate Deduction - Amount of CAPEX to take as a depletion deduction at spend date.  Any remaining amount will be deducted via the method below.
    2. Tangible Cost or Intangible Cost Depletion Model
      1. UOP (Major Phase) - Units of Production which is the current monthly production of the major phase divided by EUR times the running balance of the basis.
      2. UOP (BOE) - Units of Production which is the current monthly production of the well using the BOE factor divided by EUR times the running balance of the basis.
      3. Deduct at Economic Limit - For items that can't be written off until plugging, sale, etc.
      4. No Depletion - Do not deduct any depletion for this particular item.
      5. Expense at FPD - Deduct 100% of the entire amount in the year the expenditure is made.
    3. Note: Tangible, Depletable does not exist in reality as an asset class. However, it can be used as a separate bucket to deduct differently via a tan/intan split model to tax-treat each via separate method.
Note: Run Scenario - Economics Runs auto-select some AFIT items when AFIT "Income Tax" = "yes" is selected in General Options but many more (45) items may be output on the "Columns" selection of the Run Scenario screen.




    • Related Articles

    • ComboCurve: Capex

      The Capex econ model allows you to apply capital costs in your economic run. Currently, there are two ways of viewing Capex: advanced view and standard view. When creating a new capex model, you can click on "STANDARD VIEW" and "ADVANCED VIEW" in the ...

    • ComboCurve: Scenario Tooltip Overview Article

      Scenario Tooltip Overview Article Scenario Page (Overview of Main Screen) Top Left Hamburger Icon - to navigate to all CC sections Green Scenario Name - Quick navigation to the project landing page Top Right Guy Icon - Change name, password or log ...

    • ComboCurve: General Options

      ComboCurve: General Options In this article we will discuss the General Options model within ComboCurve. Main Settings Aggregation Date - This is the main date setting as a starting point to begin reporting cash flows. No economic reporting will ...

    • ComboCurve: 7/19/2023 - Version 34 - Release

      In this video, we look at the new features released in version 34 of the platform. Some of these new features include custom CSV economic reports, advanced view functionality in the pricing, differentials, and stream properties assumptions, a ...

    • ComboCurve: Data Dictionary

      Click here to download the Data Dictionary.