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Quebec Lowlands Economics
Questerre NPV model shown in Corporate Presentations
First Production (year) 2011
First year average rate (cf/d) 2,975,000 Initial 30 Day Rate (mcf/e) 5,000,000
Reserves (cf) n/a First year decline 0.81
Operating costs (mcf) 1.00
Royalty Rate 0.13 0.10 0.10
Tax Rate 0.35
Price per mcf (3.55 + 0.5) -> 4.05(US) -> 4.05 (CDN) 4.05
Capital Cost of one well plus pipeline costs) 10,000,000
2011 2012 2013 2014 2015 2016 2017 2018 2019
First year average rate (cf/d) 2,975,000 1,770,125 1,053,224 626,669 372,868 221,856 132,005 78,543 46,733
Gas Revenue 4,397,794 2,616,687 1,556,929 926,373 551,192 327,959 195,136 116,106 69,083
Operating Costs 1,085,875 646,096 384,427 228,734 136,097 80,978 48,182 28,668 17,058
Royalty 439,779 261,669 155,693 92,637 55,119 32,796 19,514 11,611 6,908
Income Before Tax 2,872,139 1,708,923 1,016,809 605,001 359,976 214,186 127,440 75,827 45,117
Income Tax 0 0 0 0 0 0 0 0 0
Cash Flow 2,872,139 1,708,923 1,016,809 605,001 359,976 214,186 127,440 75,827 45,117
NPV(10) after tax -2,215,332
NPV(10) is the net value of the gas flows after Income Tax (minus the cost of the well)
The first average rate (cf/d) is calculated (5,000,000 (initial 30 Day Rate) + 950,000 (end rate) / 2 = 2,975,000
No IRR was calculated since NPV is negative.
NPV is negative which means well should not be drilled until gas prices increase and the capital cost of each well decreases.
I believe that Forest Oil decreased their capital cost in a Canadian project from 10 million to about 4 milllion
after 10 wells.
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