RI 2285 Rate-Of-Production Curve And Its Application To The Valuation Of Oil Properties

"The ""rate-of-preduotion curve"" described in the revised Treasury Manual* was devised by the author in May, 1920, and since that time has been use by the oil and gas valuation section of the Treasury Department in determining the rate of production of wells for purposes of taxation. This curve is most useful for estimating the future production of a well, or group of wells, of known daily settled production, where future-production curves and tables based on yearly production records are available. It also provides a means for determining the past year's production of a well of known daily settled production, or conversely, the estimated production on any day for a well of known yearly production.The rate-of-production curve is auxiliary to the production decline curve and is derived from it in estimating the future production of a tract, a production decline curve formed from the records of the tract itself should be used. If such records are not available, and there is no information which leads to the belief that the average production decline of the wells in this tract differs from the average for the pool or district, an average curve for the pool or district may be used.The accompanying chart illustrates a typical rate-of-production curve, with the yearly production decline curve from which it is derived. The production decline curve shown is for an average well in the Augusta district, Butler County, Kansas, and has been constructed from the tables given on page 128 of the revised Treasury Manual.The ordinate (vertical scale on the chart) of any point on a yearly production decline curve represents the production of the well during the year previous to the date shown by the abscissa (horizontal scale). For example, the chart shows that an average well, which produced 100,000 barrels of oil in 1915. produced 92,000 barrels in the year previous to January 19, 1916, produced 53,300 barrels in the year previous to June 1, 1916; produced 49,000 barrels in the year previous to July 1, 1916, 27,000 barrels in 1916, and 10,000 barrels in 1917."