How do I define depreciation?

Since many depreciation calculations are dependent on when money is spent and when the asset is placed in service, PetroVR can calculate the depreciation schedule for all assets defined in Plan.

Depreciation calculations are optional. The Depreciation Tab in PetroVR Econ contains a switch to turn depreciation on. Since the development model calculates depreciation, a forecast of capital expense escalation is required in the model and is input on the same screen.

All depreciation types except "expensed" have an option to specify a percentage split between tangible and intangible costs (default is 100% tangible). All intangible costs are expensed in the first year the item can be depreciated unless the capitalization of 30% of IDC (intangible drilling and development costs) is enabled, as described later.

To define depreciation, do the following:

  • Check Allow Depreciation in the Depreciation Tab of PetroVR Econ.
  • If appropriate, check "depreciation remainder on project abandonment".
  • Select default start type (a) When Completed: An asset is not depreciated before it is in operation. (b) As Built: An asset is depreciated during construction. (c) In Service: If the asset is a well or a production facility, depreciation starts when the asset starts producing. Any other asset type starts depreciation when production starts. Note that this Control Center specified selection becomes an option listed as Global in the Start Depreciation input for each Well or Facility Resource.
  • Select the preferred grouping for depreciation settings. "Assets, User Cost Categories, Cost Categories.
  • Input CapEx escalation factors in the CapEx Escalation input array to be used in calculating depreciation. Right-click in the array area for options. The CapEx schedule is multiplied by the escalation array prior to the depreciation calculation.
  • By default one depreciation output set named "tax" exists. You can create additional sets.
  • Add assets to the table and enter well depreciation type, tangible percentage, and start depreciation details in the table. You can use the Filter option to view assets by type.
  • Calculate PetroVR Plan and you will have access to the depreciation line items in the Current Results dialog.