News Analysis: A dichotomy may exist between “Rates of Return” vs. “Total Return” on invested capital. For example, a smaller field might give the producer a bigger share of the recurring cash flow, yet be of much shorter duration due to amount of petroleum recoverable.
A large field, like the aforementioned, would give a greater total dollar return due to its volume.
Of course, in the equation for an oil production company’s prospective bid, must be added: The on-going anticipated market price of the probable quality and quantity of the crude over the duration of the contract; The cost of the off-shore drilling rig, labor, insurance, etc. are also important elements.
Reference: http://tinyurl.com/mjv7w2j