Some Effects of Curtailment on the Potential and Recovery of Petroleum in California

THERE was once a time when a practical oil man would appraise or buy a producing property on the basis of from $200 to $500 per barrel of average daily settled production. Curtailment-has, for the present at least, caused a virtual abandonment of the "barrel -of settled production" as a yardstick of, oil property value and in its place has come the "barrel of allowable production," which, although an artificial thing, is nevertheless now the principal factor governing the rate of ?pay out? or investment return. The potential production of a well, settled or otherwise, is of less importance in determining the present worth of a well than is the rate at which it may be produced. Speaking only of true potential for the moment, it is obvious that of two similar wells having the same potential, the one having the highest rate of allowable production would be worth proportionately more than the one of lesser allowable. The discount factor for deferred return and risk can easily vary the present values of the two wells by as much as 20 per cent when allowable rates are not greatly different.