Units-of-production DD&A
A cost pool over reserves, times production.
By Surojit Chakraverti, founder of L3VLUP and an investor running a long-short healthcare and technology equities strategy.
On this subject: units-of-production dd&a.Updated 5 November 2026
Part of project finance and infrastructure models, with the models, labs and guides around it.
What it does
Depreciation that follows the barrels rather than the calendar. Under successful efforts, the net capitalised cost of the wells plus this year’s development spending, divided by proved developed reserves (opening plus those converted this year), gives a rate per boe; times production it is DD&A. The pool is consumed as the reserves are produced, so a producer whose wells cost more per boe of EUR carries a higher DD&A rate. Development spending over the reserves it converts is the development cost per boe, and the netback over it is the recycle ratio.
Where it lives
The same schedule in each model that carries it, with the rows to open. Open a model in the browser, go to the sheet, and click the lines.
- Assumptions, rows 60–64: Net capitalised cost of oil and gas properties, FY0, Tax rate, Net debt, FY0, Interest rate on net debt…
- Cash Flow, rows 6–11: Opening net capitalised cost, Add: development spending, PD reserves: opening + converted this year, DD&A rate…
- Cash Flow, rows 31–32: Development cost per boe, Recycle ratio
What a reviewer looks for
- Straight-line depreciation on oil and gas properties.
- Development costs spread over proved undeveloped reserves they have not yet been spent on.
- DD&A per boe compared between a successful-efforts and a full-cost company without adjusting.
Learn it, then build it
Vocabulary: Depreciation & Amortisation (D&A), Recycle Ratio.