This Bureau of Mines report presents a profitability analysis of producing crude oil by waterflooding. Included are the estimated costs of installation of water injection and producing equipment for waterfloods at 2,000 and 4,000 feet and the estimated annual operational expenses for each in west Texas. Using these cost estimates as a base for selecting a range of costs that are indicative of producing crude oil by waterflooding, a simulation technique was derived for determining the profitability under various conditions. Because of the large number of combinations of variables used in this study, a high-speed digital computer was utilized for the calculations. The variables include operational expenses, capitalized costs, price of the oil, annual production, and leasehold acquisition cost. The results obtained from the simulations are presented in the appendix. In addition, a nomographical approach was chosen for presentation of the profitability. Five nomographs are presented that can be used for fast estimation of the discounted cash flow (dcf) rate of return that might be expected from a prospective or active operation under various sets of assumed conditions.