256 VALUATION, DEPRECIATION AND THE RATE-BASE 
except in cases where it can be clearly demonstrated that deposits 
economically available do exist. 
Methods of Valuing Oil Properties 
In the Appalachian oil fields, oil properties have been valued 
on the basis of the daily production of the wells measured after 
the output has reached a settled stage. The valuation is so 
fixed as to permit the purchaser to recover his capital in 5 to 
10 years and to obtain a reasonable return on his investment. 
It is stated that the average sale price of producing lands varied 
from $800 to $1000 per barrel-day a few years ago. 
In Illinois, many properties changed hands during the early 
stages of the operations at a rate that would insure the return 
or amortization of capital within 18 months. This was before 
the life of the wells had been given a practical test. 
Two large valuations of oil properties have been made in 
California since 19oo and the methods that were adopted are 
of particular interest to the valuation engineer. 
In 1910 the Kern River oil-field was valued because of the in- 
tended consolidation of several separate holdings within the field. 
Because of the object of the investigation only values bearing 
comparison with one another were required. The values of all 
the properties involved were expressed in terms of the value of 
a certain selected tract of oil land located in the approximate 
center of the field. Concentric circles drawn about the center 
of the field were used to express the relative value of individual 
tracts as affected by their distance from the center of greatest 
productivity. A measurement of the productivity of all the 
producing wells was made covering a month’s time, thus deter- 
mining the production at that time and experiments were con- 
ducted on samples of the oil-bearing strata to determine the 
amount of oil that could be recovered from a known volume. 
The results were used as a measure of the extractable oil which 
could be pumped from the oil strata, the volume and area of 
which could be estimated. A safety factor was introduced by 
assuming that only one-half of the‘oil measures would be pro-