Practice Test Geeks(SPE) Society of Petroleum Engineers Certification Practice Test
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Project Economics Flashcards

7 cards from real SPE practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

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  1. In economic limit analysis, production from a well should cease when:

    Answer: The lifting cost per barrel equals the net wellhead revenue per barrel

    The economic limit is reached when incremental revenue from production exactly equals incremental lifting costs, making further production uneconomic.

  2. Which statement best describes the difference between proved developed (PD) and proved undeveloped (PUD) reserves in an economic context?

    Answer: PUD reserves require future capital expenditure for development; PD do not

    PUD reserves require future drilling or development expenditures, making them less valuable in PV terms compared to already-producing PD reserves.

  3. A company uses a 12% discount rate. A project costing $10M today returns $15M in 4 years. What is the approximate NPV?

    Answer: -$0.45M

    NPV = -10 + 15/(1.12)^4 = -10 + 15/1.574 = -10 + 9.53 = -$0.47M ≈ -$0.45M.

  4. What does a 'waterfall' cash flow structure in a joint venture typically determine?

    Answer: The order in which stakeholders receive cash distributions after costs are recovered

    A waterfall structure defines the sequential priority of cash flow distributions among partners, lenders, and other stakeholders after costs and obligations are met.

  5. Which factor most significantly differentiates a concession/license system from a production sharing contract (PSC) system?

    Answer: Under a concession, the contractor owns the hydrocarbons in-situ; under a PSC, the state retains ownership

    In a concession, the contractor owns the oil in place and pays royalties and taxes; in a PSC, the state owns the resource and the contractor receives a share of production as compensation.

  6. What is the purpose of 'time value of money' adjustments in petroleum project economics?

    Answer: To account for the fact that a dollar received in the future is worth less than a dollar today

    Time value of money reflects the principle that cash flows occurring in the future must be discounted to reflect their lower value compared to cash received today.

  7. A 10% overriding royalty interest (ORRI) on a well producing 1,000 BOPD at $65/bbl means the ORRI holder receives:

    Answer: $6,500/day regardless of production costs

    An ORRI is a burden on the working interest that entitles the holder to a fraction of gross production revenue free of all operating costs.