ABSTRACT
Economic analysis of the expenditures and revenues for oil operations requires recognition of two important facts: (1) physical assets decrease in value with time, i.e., they depreciate, and (2) oil resources, like other natural resources, cannot be renewed over the years, and they are continuously depleted. Depreciation, or amortization, is described as the systematic allocation of the cost of an asset from the balance sheet to a depreciation expense on the income statement over the useful life of an asset.
