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By P. B. Baxendell

The appraial of producing properties and profitability ntzalysis of a proposed capital expenditure are based on the same principles. In both problems a projection of future cash income is. cornpared to one or more capital expenditures. Several different methods have been in use either to compute a price to obtain a given earning power on the investment or to compute the earning power which will result from a given capital expenditure. One of these, the "Average Annual Rate of Return" method, computes in a simple manner the ratio of the present value of the future earnings after amortization to the present value of the undepreciated balances of the investment over the life of a project. This method, not well known generally, appears to have some rather unique advantages in reducing the computation work required, eliminating trial-and-error solutions, and providing a more accurate answer when applied to oil industry investments subject to the unit-of-production basis of amortization. Its derivation is given and its versatility demonstrated in the solution of certain everyday investment problems. A number of charts, useful in applying this method to profitability analysis and appraisal work, are provided. The current trend in the market values of producing properties is shown. INTRODUCTION Making sound capital expenditure decisions requires an objective means of measuring the productivity of individual investment proposals. Since the best measure of the economic worth of such proposals is their ability to produce profits, it is common practice to grade proposed capital expenditures according to their annual earning power as a percentage of the outstanding capital. The same principles which govern the determination of the rate of return of proposed capital expenditures also apply generally to the problem of determining the appraisal value or purchase price of income-producing oil and gas properties. Both problems are of prime importance in the producing phase of the oil business, where management is faced daily with decisions to drill or not to drill certain development wells, or with the determination of the appraisal value of producing properties. The common feature in both problems is that a projection of future cash income is compared with a known or estimated capital investment to determine itsiearning power or annual rate of return. In the case of development drilling, the cost of the proposed well can usually be estimated with a fair degree of accuracy and the problem consists of finding the rate of return on the invested capital. In the case of appraising producing properties, on the other hand, the desired rate of return is usually known in advance and the problem consists of determining the purchase price which, for the given income projection, results in the fequired rate of return. Certain accounting procedures common to the oil and gas producing business make these two problems and their solutions somewhat different from corresponding problems in other industries, and, in certain ways, simpler. The main difference is in the amortization policy which, for oil and gas production, is frequently on a unit-of-production basis, compared to the amortization on a time basis used in many other industries. The purpose of this paper is to discuss briefly the various methods currently in use for the measurement of productivity of invested capital in producing properties and, in more detail, the derivation and application of what will be called the "Average Annual Rate of Return Method". This rather interesting and not too well known method has some very definite advantages in the solution of many problems common to the oil industry. For the sake of simplicity, federal income tax considerations have been disregarded in the examples used, since they do not affect the principles involved. The use of the production payment route in the sale or purchase of producing properties, which has been amply covered in many other publications, has also not been included in this analysis. METHODS FOK MEASUKING THE EARNING POWER OF INVESTED CAPITAL, Of the many different methods used to measure the earning power of invested capital, four are applicable to oil or gas production ventures. Depending on whether these four methods utilize one or two interest rates, and whether a fixed amortization pattern is used, they may be classified as follows.

By George C. Coupland

Ecstall Mining Limited, a wholly owned subsidiary of Texas Gulf Sulphur Company, is the owner and operator of the Kidd Creek Mine including the concentrator complex located near Timmins, Ontario. Canada, approximately 450 miles north of Toronto. The mine, concentrator and Timmins form a triangular arrangement with a 17-mile rail link connecting the mine and concentrator and both of these facilities 18 and 14 miles respectively by road from Timmins. A core drilling program in the spring of 1964 established the presence of a large massive sulphide orebody which was to become the Kidd Creek Mine. Texas Gulf Sulphur had been conducting an intensive search for base metal in various parts of Northern Ontario and Quebec since 1957. Of several thousand anomalies detected in airborne electromagnetic surveys, several hundred warranted ground inspection, but only one of more than sixty drilled became a commercial orebody, the Kidd Creek Mine. The geophysical exploration work has been well covered in a paper written and presented by Van Donohoo, presently a Vice-President of T.G.S., at the American Mining Congress in San Francisco in October 1969. GEOLOGY The orebody lies within a series of overturned rhyolitic flows and pyroelastics with a major peridotite intrusive to the east. The hangingwall and footwall are composed chiefly of intermediate volcanics, andesite and dacite. The southern end of the orebody appears to terminate abruptly against greywacke while the north end is bifurcated and the structure obscured.

Jan 1, 1970

By L. H. DeWald

During the examination of various commercial brands of copper wire bars, which had exhibited different degrees of adaptability for being drawn into fine gages of wire by the present-day high speed machine, it was found that each brand had a more or less characteristic crystal macrostructure. The extremes of these macrostructures are similar FIG. 1.-EFFECT OF METAL TEMPERATURE IN CASTING ON CRYSTAL MACROSTRUCTURE OF BAR. Reading from left to right, metal temperatures were 1166" C., 1149" C., 1132" C.. 1121" C., 1093" C. to the maximum variation shown in the photomacrographs reproduced in Fig. 1. As the various brands did not differ materially in chemical composition, it was concluded that the differences in structure were the result of variations in casting technique.

Jan 1, 1931

Jan 1, 1969

Jan 1, 1969

Elected Died 1903 * ADAMS, CHARLES C. 1905 1884 *ADDY, MATTHEW 1896 1894 *ALLFN R B 1896 1874 *AMIOT, H 1892 1886 *AMSLER, CARL 1894 1895 *ÅNGSTROM, CARL 1901 1895 *ARMSTRONG, JOHN F 1898 1882 *ARNOLDS, HUGO 1886 1875 *ASHBURNER, CHARLES A 1889 1872 *ASIIBURNER, WILLIAM 1887 1883 *ATKINS, C M , JR 1885 1897 *AYERS, WILLIAM 1898 1885 *BABCOCK, GEO H 1893 1884 *BAILEY, EDWARD 1889 1880 *BAILEY, JACKSON 1887 1900 *BALLOU, FRANKLIN 1903 1886 *BARNES, F W 1892

Jan 1, 1910

Jan 1, 1969

By Arthur Nomann

Recording instruments may be conveniently described under the headings of: (1) geophones, (2) amplifiers, (3) recording cameras, (4) miscellaneous parts. Geophones Geophones or seismometers are actuated by slight earth movements, and generate electrical currents, which are amplified and recorded. In all geophone desigm there is provision for differential movement between parts of the mechanism and the signal voltage is generated as a function of this differential movement. The part that conforms to the movement of the ground is called the support, and the part that remains more nearly stationary with respect to more distant unactuated parts of the earth is called the steady mass. The mechanical period of the geophone is the time required for an oscillation of the steady mass after an initial impulse is given it, and is determined by the effective stiffness of the spring joining the two parts together in relation to the weight of the suspended part. Geophones have been used with frequencies varying all the way from less than 10 cycles per sec. to several hundred cycles per second. Those with a natural frequency of less than, say, 100 cycles

Jan 1, 1940

By Arthur Nomann

Recording instruments may be conveniently described under the headings of: (1) geophones, (2) amplifiers, (3) recording cameras, (4) miscellaneous parts. Geophones Geophones or seismometers are actuated by slight earth movements, and generate electrical currents, which are amplified and recorded. In all geophone desigm there is provision for differential movement between parts of the mechanism and the signal voltage is generated as a function of this differential movement. The part that conforms to the movement of the ground is called the support, and the part that remains more nearly stationary with respect to more distant unactuated parts of the earth is called the steady mass. The mechanical period of the geophone is the time required for an oscillation of the steady mass after an initial impulse is given it, and is determined by the effective stiffness of the spring joining the two parts together in relation to the weight of the suspended part. Geophones have been used with frequencies varying all the way from less than 10 cycles per sec. to several hundred cycles per second. Those with a natural frequency of less than, say, 100 cycles

Jan 1, 1940

Discussion of "The Ordering Transformation in Titanium-Aluminum Alloys Containing up to 25 at. pct Aluminum" by F. A. Crossley, Trans, TMS-AIME, 1968, vol. 242, pp. 726-30. Dr. Blackburn, in his response, pointed out that the c/a ratio of the Ti-26 at. pct A1 alloy quenched from 900°C is 1.6006 and not 1.5965 as plotted in Fig. 19. An error in transcription was made in preparing Table V of Ref. 1 (F. A. Crossley, Trans. TMS-AIME, 1966, vol. 236, p. 1174). The corrected Fig. 19 strengthens rather than weakens the argument that a martensitic transformation occurs in alloys containing from 15 to 18 at. pct Al. A Study of the Factors Which Influence the Rate Minimum Phenomenon During Magnetite Reduction, by P. K. Strangway and H. U. Ross, Trans. TMS-AIME, 1968, vol. 242, pp. 1981-88. Page 1883 Reverse Figs. 5 and 6. Sigma—Its Occurrence, Effect, and Control in Nickel-Base Superalloys, by J. R. Mihalisin, C. G. Bieber, and R. T. Grant, Trans. TMS-AIME, 1968, vol. 242, pp. 2399-2414. Pages 2403, 2407, and 2414 Arrows should appear on Figs. 4 and 9; a sigma is missing from Table IV; line 2, page 2414, change "case" to "cast". These are published correctly in the bound volume. Index, December Issue There were a few omissions in the Author Index. These have been corrected and published properly in the bound volume.

Jan 1, 1970

By Richard Miller

RECENT studies of creep have made it apparent that plastic deforma-tion may occur in metals under stresses less than the elastic limit as deter-mined from short-time tests. In summarizing conclusions drawn from creep tests by various investigators, Tapsell1 said: "It is evident that if a material has a true elastic range, the elastic limit must represent the maximum stress for no creep." The presence of a. definite elastic limit, represented in single crystals by a critical or threshold shearing stress, is claimed by Schmid2, Elam3 and others who have investigated the plastic deformation of single crystals. However, this "law of critical shearing stress" was deter-mined2 from short-time tests, and the measurement of the deformation was made with apparatus primarily designed to observe large amounts of plastic deformation, not to detect elastic changes. Experimental data recently obtained with highly sensitive instru-ments by A. W. Hanson4 on zinc and by Podaschowsky5 on rock salt indicate that the elastic range in single crystals is considerably narrower than formerly was supposed. Moreover, a theoretical possibility of permanent deformation, under the influence of even the smallest shear stress in single crystals above a certain temperature (Td), has been developed by G. I. Taylor6. This evidence seemed to warrant an examination of the elastic limit in large single crystals by means of creep tests. The first metal chosen for examination was zinc.

Jan 1, 1936

By Robert S. Dewey

AS a result of drilling operations during 1943, West Texas again added sufficient new oil reserves to replace the oil produced during the year, but failed to maintain its position in currently available reserves because the deeper discoveries will require years for development. Drilling failed to provide the additional oil necessary to meet the increase in current and anticipated market demand. Although 13.3 per cent of the total footage drilled was in wildcat exploration, the ratio of oil discoveries to total wildcats was less in 1943 than in 1942, but comparable to that in 1941. Of the 732 field wells completed, 270 were at Slaughter, 55 at Wasson, 45 at Mascho and 31 at North Cowden. As of Dec. 31, 1943, there were 361 drilling wells including 71 wildcat and 290 field wells; 19.7 per cent were wildcats. It is anticipated that the percentage of wildcats of the total wells will be higher during 1944 than in either 1942 or 1943. Tables 3 and 4 present a three-year comparison of drilling activity and illustrate the downward trend of development that has been in effect during that time. Because of development lag in the deeper Ordovician fields, several years elapse before 2 sufficient number of wells is completed to give a substantial producing rate. As these new oil reserves cost more to find, and will cost more to produce on a barrel basis than the oil marketed during the year, their reserve replacement value to the industry is less in money. Costs While complete costs for deeper drilling are not yet available for analysis, it is evi- dent from the data on drilling rates to comparable depths, contract prices, and general increases in costs, that the cost of drilling has risen approximately 20 per cent during the year. One representative drilling contractor estimates that the average drilling time on a 5000-ft. field well has increased nearly one third and that out-of-pocket costs have increased a dollar per foot. Three major factors contribute to this increased cost: (I) less experienced labor, (2) deterioration in mechanical equipment and expendable material, and (3) increased contract prices. In the past, when there were more drilling rigs than wells to be drilled, some contractors would cut their drilling profit to keep their personnel and rigs working. As this practice is no longer necessary, the contract prices are adjusted upward to assure a profit. On deep and difficult drilling, contracts are let on a cost plus basis. A number of mechanical difficulties have become evident. Inferior quality of steel used in drill pipe and rock bits has added appreciably to drilling time and cost. Contractors are experiencing delay in obtaining repair work and repair parts for prime movers. As the length of drilling time required an shallow-field wells has not increased in proportion to that on deeper wells, it seems that the medium-sized drilling rig is better adapted mechanically than the heavy one to the work imposed. One of the main deficiencies in the heavy rig equipment is inadequate pump capacity. Drilling Mud The increasing amount of deep drilling has emphasized the importance and relationship of good mud to efficient and suc-

Jan 1, 1944

By Robert S. Dewey

AS a result of drilling operations during 1943, West Texas again added sufficient new oil reserves to replace the oil produced during the year, but failed to maintain its position in currently available reserves because the deeper discoveries will require years for development. Drilling failed to provide the additional oil necessary to meet the increase in current and anticipated market demand. Although 13.3 per cent of the total footage drilled was in wildcat exploration, the ratio of oil discoveries to total wildcats was less in 1943 than in 1942, but comparable to that in 1941. Of the 732 field wells completed, 270 were at Slaughter, 55 at Wasson, 45 at Mascho and 31 at North Cowden. As of Dec. 31, 1943, there were 361 drilling wells including 71 wildcat and 290 field wells; 19.7 per cent were wildcats. It is anticipated that the percentage of wildcats of the total wells will be higher during 1944 than in either 1942 or 1943. Tables 3 and 4 present a three-year comparison of drilling activity and illustrate the downward trend of development that has been in effect during that time. Because of development lag in the deeper Ordovician fields, several years elapse before 2 sufficient number of wells is completed to give a substantial producing rate. As these new oil reserves cost more to find, and will cost more to produce on a barrel basis than the oil marketed during the year, their reserve replacement value to the industry is less in money. Costs While complete costs for deeper drilling are not yet available for analysis, it is evi- dent from the data on drilling rates to comparable depths, contract prices, and general increases in costs, that the cost of drilling has risen approximately 20 per cent during the year. One representative drilling contractor estimates that the average drilling time on a 5000-ft. field well has increased nearly one third and that out-of-pocket costs have increased a dollar per foot. Three major factors contribute to this increased cost: (I) less experienced labor, (2) deterioration in mechanical equipment and expendable material, and (3) increased contract prices. In the past, when there were more drilling rigs than wells to be drilled, some contractors would cut their drilling profit to keep their personnel and rigs working. As this practice is no longer necessary, the contract prices are adjusted upward to assure a profit. On deep and difficult drilling, contracts are let on a cost plus basis. A number of mechanical difficulties have become evident. Inferior quality of steel used in drill pipe and rock bits has added appreciably to drilling time and cost. Contractors are experiencing delay in obtaining repair work and repair parts for prime movers. As the length of drilling time required an shallow-field wells has not increased in proportion to that on deeper wells, it seems that the medium-sized drilling rig is better adapted mechanically than the heavy one to the work imposed. One of the main deficiencies in the heavy rig equipment is inadequate pump capacity. Drilling Mud The increasing amount of deep drilling has emphasized the importance and relationship of good mud to efficient and suc-

Jan 1, 1944

Beyer Barometric Condenser The Ingersoll-Rand Co. is now offering to the trade complete steam­condensing plants for all service conditions. This equipment includes the Beyer barometric condenser, for' which the company has secured the patent rights, Imperial duplex and Ingersoll-Rogler straight-line reciprocating dry vacuum pumps and, where required, Cameron simplex and centrifugal pumps. The Beyer barometric condenser is of the counter-current type, in which air and cooling water flow in opposite directions. The steam inlet is at the bottom of the condensing v el, the water inlet above and the air-removal opening at the top. The sheets of cooling water over owing the pool at the inlet point meet the entering steam. The two are brought into intimate contact by conical baffle plates which assist the water to absorb to its full capacity the latent heat of the steam. The non-condensable air liberated in the condensing action rises through the falling water to the removal point at the top, being cooled to practically the temperature of the incoming water. It is also to be noted that ample opportunity is given for the removal of the air content of the water before

Jan 8, 1916

By R. K. Agarwal

In this paper, a new technique developed to analyze two-dimensional nonhomogeneous models is described. A simple three-layered medium with a circular hole centrally located in the intermediate layer is considered. The layered sheet is loaded uniaxially perpendicular to the stratification. The Young's modulus of the intermediate layer is lower than that of the outer layers. The stress distribution around the circular hole in a stratified medium is significantly different when compared to the case of a continuous homogeneous medium. The distribution depends upon the ratio of the height of the intermediate layer and the hole diameter. A comparison of stress distribution and procedures for preparation and testing of the model are given. The potential of the technique is outlined. In the process of applying the techniques of stress analysis to problems of rock mechanics, the recent discernible trend has been to postulate highly idealized models of physical situations. As new techniques have been developed, more complicated models have been conceived to simulate mote accurately the physical environment to which the analysis results are eventually applied. In this investigation, a new technique is developed to analyze two-dimensional nonhomogeneous models. The technique is used to determine the stress concentration around a circular hole in a soft material overlain and underlain by a hard material. In mining practice, such situations arise commonly in coal deposits and frequently in bedded or vein-type metallic mineral deposits. DEFINITION OF THE PROBLEM A plate, consisting of three layers with a circular hole in the intermediate layer, is loaded uniaxially, Fig. 1. The variable in the experimental investigation is the height of the intermediate layer, H. The diameter of the hole, D, is kept constant. The stress concentration factors around the periphery of the hole, for various values of H/D, are evaluated using the technique of photoelasticity, Table I. TECHNIQUE OF EXPLORATION Photoelastic analyses of composite models have hitherto been limited to the study of lap and butt joints between glued metals and dissimilar materials.1-3 In mining, Haber and Oudenhoven used composite models to study the stress distribution around a circular hole in two-layered media and the behavior of elastic liners in shallow underground openings.4-5 They used the stress freezing technique devised by Dally et a1.6 The procedure used in this investigation is outlined below: Casting of Layer A: Flat sheets of plastic were cast in a silicon-coated mold using Araldite 502 with hardener 951 in the ratio of 100:8 by weight. After

Jan 1, 1969

Jan 1, 1967

By D. N. Dietz

Jan 1, 1969

Jan 1, 1968

Jan 1, 1967

By C. A. Allen

For over three years we have been endeavoring to reduce the number of fatalitics and minor accidents in Utah. The physical condition of the FIG: 1.—Number kiLlEd per million short tons of coal produced in ColoraI)o, New Mexico, utah, Wyoming, and bituminous mines of the United States 1014 to 1920. mines, concentrators, and smelters is good, yet the number of accidents,

Jan 1, 1923