Tales from the Short-Side
The ceiling test requires the Company to use tax effected discounted cash flows using a present value technique. The sales prices used for the ceiling test were $103.52 per barrel for oil and $4.54 per thousand cubic feet of natural gas. Based on the calculations under the first step of the ceiling test, the Company determined that its oil and gas interests are recoverable.
Just a little tidbit in the footnotes of a random annual report I was reading. As of today WTI crude is hanging at ~$90/barrel, and Henry Hub’s natgas price can be obtained for around $3.39/Mcf and dropping.
Caveat Emptor!
