ComboCurve: Expenses

ComboCurve: Expenses

Expenses



Key

Key's allow the user to select which type of expense the would like to model. These key's can be stream specific or a fixed expense. 


Category

Category's allow the user to define the type of expense they are modeling. Categories are only used for stream key expenses. 


Criteria

Criteria defines when the expense will start. We have a number of selections the user can tie a expense to. 

  1. Flat: From As Of Date to Econ Limit
  2. FPD : Begins at the First Production Date
  3. As Of : Begins at the As Of Date applied to the well in the Dates section
  4. Disc Date: Begins at the Discount Date applied to the well in the Dates section
  5. Maj Seg : Begins when main phase of the well starts production
  6. End Hist : Begins when the well switches from actual historical data to forecasted data
  7. Dates : Begins on a scheduled date
  8. Oil, Gas Water Rate or Total Fluid: Begins when production crosses the threshold set for that one product.

Period

Period allows the user to define the duration of the expense. A user may also have multiple periods by right clicking and selecting insert time series below. This allows the user to have a dynamic expenses based on the Criteria selected above. 







Value & Units

Value is the number being applied as an expense. The units of this value are defined under the Unit column.
Note: Negative expenses can model a revenue. 



Description, Shrinkage Condition, Escalation & Cap

Description allows the user to add a note to an expense line. Shrinkage Condition determines which condition the expense is being applied too; this will effect the value of an expense that is tied to a cost per volume. Escalation allows the user to apply an escalation sub model to this expense line item. Cap will cap the value the expense can max out.


Calculation

Calculation allows the user to specify how the expense is being calculated. Lease operating statements often describe how the expense is being expressed. Here is some of the calculation methods we support:

  1. 100% WI: expenses are expressed on a 8/8ths basis
  2. Lease NRI: The expenses are based on the Lease NRI
  3. WI: (default) The share of the expenses are to the WI
  4. NRI: Expenses are based on the NRI
  5. We also support a mix of 1 - WI/NRI/Lease NRI



Affect Econ Limit, Deduct bef Sev Tax, & Deduct bef Ad Val Tax

Affect Econ Limit is used to determine if an expense is going to contributing to the economic cutoff or not (default is yes). Deduct before severance tax allows the user to deduct this expense before severance taxes are calculated (default is no). Deduct before ad valorem tax allows the user to deduct this expense before ad valorem taxes are calculated (default is no). 

Paying WI/Earning WI, Rate Type, Rate Rows Calculation Method, Stop at Econ Limit, & Expense bef FPD

Paying WI/Earing WI allows the user to model carries, This will only affect the net expense, leaving the gross expense unchanged. A 10% carry of an expense would be modeled with a 1.1 value input to the cell. Rate Type allows the user to determine what rate values are used when expenses criteria is used. Monotonic or Non-Monotonic, is how variable production is treated with former not allowing rate changes on subsequent threshold crossings.  For instances when production forecasts have production that variably increases and decreases over time:
  1. Monotonic: If production were to increase, no changes will be made to the value
  2. Non-Monotonic: (default) The values look back up the schedule and vary up or down depending on the production rate
Stop at economic limit allows the user to decide if an expense should continue after the econ limit of the well or continue (default is no). Expense before FPD allows a user to decide if an expense should began before the first production date of the well (default is no). 


Custom Stream Expenses

Users can also define variable expenses for any custom streams that have been created from the project or company level. From the Expenses assumption's Advanced View, all created custom streams will be displayed under the 'Key' dropdown. Custom stream variable expenses cannot be defined from standard view.

After selecting a custom stream in the 'Key' cell, make sure to indicate:
  1. The stream type (Company/Project Custom Stream) in the 'Category' column
  2. The criteria (flat, time series, etc.)
All custom stream pricing will be based on $/Unit measurements, with 'Unit' being defined in the production streams settings at the company level or project level.




Expense Thresholds

There can be a variety of reasons for the use of expense volume thresholds. A great example can be the modeling of water disposal when a SWD is at capacity. For the fist x amount of barrels disposed, the operator might be charged a smaller fee but once that volume capacity has been hit it becomes more expensive to dispose of the remaining water through other means.

Workflow

To model a variable expense using volume thresholds you can fist navigate to the scenario page and click on "Choose Expenses" under the expense column header. Currently, volume thresholds are only available in Advanced View. If you're in Standard View, you can click on "ADVANCED VIEW" on the top right corner of the page. At this point, you can add an expense line by clicking on "+ Key" and then make a selection on the type of variable expense to model. For this workflow, we will use the example in the Use Case section of water disposal. Under Criteria, you can select "Volume Threshold" from the dropdown. The "Period" cell represents the Daily Rate threshold at which the $/bbl value is applied. To add a second line, you can right click on any cell and select "Insert time series below" or use the Ctrl+i shortcut. For this example, we are modelling a water disposal that uses an SWD well up to 1000 bbl/day at a cost of 1 $/bbl and for any additional volumes the cost will increase to 2 $/bll. In the top line period cell, you can input 0 and in the line below 1000 as shown in the screenshot. 



Note: When looking at a monthly cash flow, ComboCurve will display the volumes produced on a monthly resolution. Therefore, you'll need to multiply the daily rates in the volume thresholds modelled by the actual number of days for a given month. For this example, assuming we're looking at the month of January:
  1. monthly rate threshold = 1000 bbl/day * 31 days = 31 Mbbl
Example 1: Well is producing 20 Mbbl for the month of January
  1. Total water disposal cost: 20 Mbbl *1000 * 1 = 20,000 $




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