Introduction Those of the oil industry, who are concerned with the earning power of oilproducing properties, visualize a valuation report as a rather stereotypedpresentation of data in a form that engineers use to present the results of ananalysical engineering appraisal. Specifically an engineering appraisal is anestimate of future recoverable oil and the cash profit to be derived from theproduction and sale of that oil. It should present with clarity the differencebetween factual material and the opinions formed from the analysis of thatmaterial. In presentation the engineer should keep in mind the purpose of theappraisal and the background of the people to whom the report is addressed. Factors Considered The fundamental features of an engineering appraisal for oil producingproperties are: The type of interest in oil production that is being appraised and thecontents of the documents which create the interest. The acquisition of data on the physical aspects of the oil reservoir and theincome and expenses that are connected with the removal and marketing of theoil and its associated hydrocarbons and the use of such information to forecastthe probable future earnings of the property. There are many types of interest that may exist in a piece of oil producingland. There is a mineral interest; a landowner's interest, an overridingroyalty interest, an operating or lessee interest, sometimes called the workinginterest, a carried working interest, and a participating interest. Each has a distinctive character determined by the wording of the legaldocument or contracts which create and transfer its ownership from party toparty. Careful consideration of all the terms of a lease and their effect onthe earning power of an oil property from a lessor and lessee's point of viewis not feasible. Nor is it proper to attempt a review of the effect manyfeatures of operating agreements and assignments may have on the worth ofvarious interests in oil production. A brief examination of some of the termscommonly found in various contracts concerning oil properties might be ofinterest to engineers.

The solution of subsurface geological problems requires an analysis ofvertical and horizontal dimensional relationships. For many, the ability tovisualize structures in three dimensions is not easily acquired, and for areaswhere the structural conditions are complicated by faulting the need arises forillustrative models. This has led to the many forms of peg models, in which theusual course of construction includes a peg for the well bore, and thesuspension of strings from peg to peg to illustrate the formation correlationbetween wells, thus developing the usual folds and flexures. Such models provedunsatisfactory for the analysis of fault problems. Consideration was then givento the use of transparent materials. A model of the Dominguez oil field was constructed in 1935, which consisted ofa series of glass panels from well to well on which the formations were shownin color. This model, though serving its purpose at the time, proved to beimpractical from the standpoints of cost, breakage hazard, and extremedifficulty in maintenance. The cost of materials was estimated to beapproximately $300, and the construction required the services of one man for aperiod of from 10 to 12 months. Maintenance after actual construction was anadditional expense.Consideration was then given to the use of celluloid, andafter some experimental work it was found that the advantages in its use were:a short construction time,ease of handling the material,sectionsare easily reworked,low cost. Construction It would be of little value to recount here the difficulties encountered in thebuilding of the first celluloid model. The conclusions drawn, however, suggestthe following procedure for those who contemplate the construction of such amodel:Determination of the Scale.-Accurate geological interpretation requires theuse of the same scale horizontally and vertically. It should be emphasized thatthe limited size of the celluloid sheets (20 by 48 in. maximum dimensions), thearea to be studied, the maximum depths to be plotted, and area of possiblefuture development are the controlling factors in adopting a scale to beused.Construction of the Base.-A satisfactory base may be constructed by usingtwo pieces of three-ply wood separated by strips of I by 2-in. material. Thistype of construction prevents warping of the base. The size of the base isdetermined by the dimensions of the area to be studied plus 5 in. on all sides.A map of the same scale as that adopted for the model, indicating the lines ofsection to be used, should be fastened to the base. T.P. 1271

The Falher Formation in the Deep Basin area of lllestei-n Canada contains several tight gas bearing sands overlain by per-meable conglomerates. Because of the low permeability, the gas cannot be drained from the sands by horizontal flow to the well bore. however, draw-down of the conglomerate could cause the gas to move upwards into the con-glomerate and subsequently to the well bore. As this would occur over a rela-tively large area it could provide an effective method of draining the tight sands. Reservoir simulation calculations using a simple model of a homogenous sand over-lain by conglomerate, yield a recovery factor of about 80% for a one section drainage area. With an average drainage area of 3.7 sections per well, leased upon current well spacing, the recovery factor would decrease to 45% visual examination, and porosity measure-ments of core material, suggest that, except for occasional obvious shale breaks, the sands are homogenous. F!owever, log evaluation shows that shaly zones and zones of higher water saturation are present, both of which are less permeable to gas than the clean sands. Correlation of these low nermeability zones between wells was unsuccessful, and their lateral extent is therefore assumed to be less than the current well spacing. A reservoir model containing the low per-meability zones was constructed by statis-tical analysis. Their lateral extenj was assumed to be equal to half the well spacing, and their position in the vertical sequence derived from the results of log analysis of 142 conglomerate/sand inter-vals. Simulations run using these models indi-cated that with the current well density, the recovery factor would probably be about 3S%, btit could be as low as 25%.