Depletion > Master File Maintenance

The Lease/Property Maintenance is used to maintain individual lease information. Initial population of the lease information can be input on an individual lease basis. However, a labor-saving method of populating the lease/property information would be to run the Start Reporting Cycle and Import Values from G/L ONLY.

Once completed, you will need to review each lease through the Lease/Property Maintenance screens for accuracy and include details such as initial balance forwards, leasehold improvements, and beginning reserves. Note: To aid in the data entry process, a listing of the prior fiscal year's depletion schedule on a lease by lease basis showing lease #, lease type, and ending balances for: Carryovers, Leasehold, Reserves, and Accumulated Depletion will be advisable.

See calculations example for the data used in the following screens.

Data elements sources:

•Lease/Property Maintenance - Beginning of Year reserves

•Lease/Property maintenance – Leasehold Beginning Balance

•Lease/Property maintenance – Accumulated Depletion Beginning Balance

•Import Values from G/L – Current Year MCF and BBL volumes sold

•Import Values from G/L – L/H and A/D Additions / Disposals

•Company Options – factor for converting Mcf to Equivalent Bbls

•Company Options – G/L Accounts (L/H – Accum L/H – Sales Quantities)

Percentage Depletion = (Gross Income less allowable deductions) x Allowable Percentage

Gross Income

Mineral interest income (before severance taxes and marketing costs)

Allowable Deductions

Severance Taxes and Marketing costs (selling expenses)

Operating Expenses

Administrative and financial overhead

Depreciation

Intangible drilling and development costs

Exploration and development expenditures

Allowable Percentage

US Tax Code Defined

Non-Marginal Properties = 15%

Marginal Properties (2010/2011/2012)= 15%

If annual average price of Oil is less than $ 20, rate rises by 1% for each whole dollar less than $ 20, up to a

maximum of 25%.

Regulated (Fixed Price) Gas contracts = 22%

Percentage Depletion Limits

Limited to the first 1,000 barrels of Oil produced per day.

Limited to the lesser of a) 65% of taxable income or b) 100% of taxable income from the property before depletion

allowance.

The 100% net income limitation has been suspended for marginal properties for tax years 2009, 2010 and

2011.

Lease Setup Tab
Property Type	Choose the Property Type, choices are: Fixed Price Gas (22%), Geopressured Brine (10%), Foreign Production (Cost Only), Marginal (based on production or forced), or Non-Marginal. (Note: The system automatically changes the status between marginal and non-marginal based on the number of equivalent BBLs per day of production. This is determined by the Number of active wells, Current year Sales equivalent BBL, and Net Revenue Pct. If less than or equal to 15 BBLs/day, override Stripper or override Heavy, then it is always marginal.)
Net Revenue Percentage	The Net Revenue Percentage for this Property
Number of Active Wells	The number of active wells
Report Group	This field gives you the ability to group certain leases together. For example, all Royalty Interest properties have an R, while Working Interest has a W. This allows you to print reports grouped by Royalty Interest or Working Interest. This field can be changed at any time for user defined reporting.
State	Property State
Leasehold Additions	Any leasehold additions

The Current Amounts Tab are automatically imported from the General Ledger and don't need setting up. If the information is inaccurate, look to the Company Master Maintenance/ G/L Accounts to ensure accurate account numbers. Upon starting a new reporting cycle for the next year, the balances are rolled forward and new current year balances are imported from the General Ledger.

The Balances Tab should only need to be keyed in upon initial setup.

The Computed Values Tab are initially zeroed until the first cycle is initiated. This is the calculated lease-by-lease information that is listed and summarized on the reports. If this information is not correct, you should correct the error and run the Compute Depletion process again.

Numeric values will be displayed utilizing commas and two decimal places.

The Cost or Percent Flag will be updated to reflect how the value was determined when depletion was computed.