factor. The shrinkage is usually measured in the laboratory or estimated 

 from the gas-oil ratio of the wells and the gravity of the oil. This shrinkage 

 is a substantial reducing factor where ratios in excess of 2000:1 of solution 

 gas are encountered; the factor may be 50 percent or less. At great depths it 

 takes over two barrels of such reservoir oil to make one barrel of stock-tank oil. 

 The recovery factor is designated as F in the formula. Knowing how much 

 oil or gas is in the reservoir, how much of this is going to be producible — how 

 much will be left in the reservoir when the field is abandoned? This is always 

 an estimate; no one can know. The recovery is influenced by many things, by 

 the amount of gas in solution, the viscosity of the oil, the rate of production, the 

 primary expulsive energy, the price of the oil, and a number of other things. 

 Recovery factors vary widely, but generally are within the following ranges: 

 20 to 40 percent of the oil in place for dissolved-gas-drive fields, 30 to 70 percent 

 for expanding gas cap plus gravity, and 50 to 80 percent for fully effective water 

 drive. 



A HYPOTHETICAL CASE An example always best illustrates the actual 



workings of such a formula, and affords an 

 opportunity to point out the dependence of a valuation on subsurface geology. 

 Assume that one is to evaluate a conventional seven-eighths lease on a 160-acre 

 tract with eight wells which are located midway down the flank of a rather steep 

 Gulf Coast anticline and which are producing oil by effective water drive from 

 a sand at —5000 feet. 



A map is secured showing the location of all the wells on the structure, plus 

 electric logs of all the wells in the field. A structure map is drawn on the top 

 of the producing formation — where several sands produce, a structure map should 

 be drawn on each sand. This procedure involves carefully picking the sand 

 "top" on each well in the field, which is checked against all obtainable core data 

 to verify that what appears to be top of sand is the first productive sand en- 

 countered. After the structure map is drawn, an isopachous map of the pro- 

 ducing sand is prepared. This map is based on "effective sand" — from a minute 

 examination of the detailed section (100' — 5") of the electric log, plus all 

 known coring, core analysis, caliper log, gamma-ray log, drilling-time chart, and 

 any other data obtainable. Shale and/or hard streaks are excluded in order to 

 isopach only the actual producing section. 



After the isopach is drawn, each isopach interval is planimetered to give 

 the actual number of acres situated in that zone of thickness. Thus, the area 

 between the 50- and 45-ft. isopach lines is planimetered and assumed to have 

 a sand thickness of 471/2 ft. Only a single tract of 160 acres is to be valued, 

 and it is found that 48 acres is underlain by 40 ft. of effective sand, 68 acres 

 by 36 ft. of sand, and 44 acres by 32 ft. of sand. Thus, in valuing the 160 acres, 



800 



