CMA CMA Production & Operations Analysis 2 — Questions and Answers
Question 1: In coal mining operations analysis, what does 'strip ratio' (or stripping ratio) measure?
- The ratio of overburden (waste rock) volume that must be removed to expose one unit of coal (Correct answer)
- The ratio of coal extracted to total coal in place in a surface mine
- The ratio of truck hauls required per ton of coal produced
- The ratio of mined coal that meets product quality specifications
Correct answer: The ratio of overburden (waste rock) volume that must be removed to expose one unit of coal
The strip ratio expresses how many cubic yards or tons of overburden must be removed to mine one ton of coal, directly determining surface mining economics and profitability.
Question 2: What production ratio metric is used to assess the economic importance of associated natural gas versus crude oil in a combined oil and gas operation?
- Gas-to-oil ratio (GOR) (Correct answer)
- Net revenue interest ratio
- Production replacement ratio
- Reserve-to-production (R/P) ratio
Correct answer: Gas-to-oil ratio (GOR)
The gas-to-oil ratio (GOR) measures the volume of gas produced per barrel of oil, which is used to determine liquid richness, reservoir characteristics, and relative value of gas versus oil production.
Question 3: In mineral production analysis, what does 'water cut' indicate and why does a high water cut matter?
- The percentage of produced fluid that is water, which increases operating costs and indicates reservoir depletion (Correct answer)
- The percentage of water used in hydraulic fracturing operations
- The ratio of water disposal volume to produced mineral volume
- The amount of water rights required per ton of mineral extracted
Correct answer: The percentage of produced fluid that is water, which increases operating costs and indicates reservoir depletion
Water cut is the fraction of total produced fluid that is water; as it rises, it increases disposal and lifting costs while reducing the proportion of saleable oil, negatively affecting well economics.
Question 4: Which type of enhanced oil recovery (EOR) method injects CO2 into a reservoir to improve oil displacement efficiency?
- CO2 miscible flood (Correct answer)
- Waterflood
- Steamflood
- Polymer flood
Correct answer: CO2 miscible flood
CO2 miscible flooding injects carbon dioxide that mixes with the crude oil, swelling it and reducing its viscosity to improve displacement and increase recovery factors beyond primary production.
Question 5: What is the significance of the 'reserve-to-production (R/P) ratio' for mineral assets?
- It estimates how many years of production remain at current production rates (Correct answer)
- It measures the ratio of proved to probable reserve quantities
- It calculates the ratio of reserves to total mineral rights acreage
- It determines the ratio of royalty income to production costs
Correct answer: It estimates how many years of production remain at current production rates
The R/P ratio divides total remaining proved reserves by annual production rate, yielding the estimated number of years before those reserves are exhausted at the current pace.
Question 6: Why is 'base decline' distinguished from 'gross production' in field-level production analysis?
- Base decline is the production lost from existing wells due to natural depletion, while gross production includes new well additions offsetting that decline (Correct answer)
- Base decline measures sub-economic production; gross production includes all wells regardless of economics
- Base decline refers to production at the wellhead; gross production is after surface processing losses
- Base decline is total production minus royalty payments; gross production is before royalty deductions
Correct answer: Base decline is the production lost from existing wells due to natural depletion, while gross production includes new well additions offsetting that decline
Base decline quantifies how much production is naturally falling from existing wells, which must be offset by new drilling to maintain or grow total gross production, affecting capital planning.
CMA CMA Production & Operations Analysis 2
In coal mining operations analysis, what does 'strip ratio' (or stripping ratio) measure?