A method of calculation of heat loss from a production well to the surrounding formation has been developed and implemented into a wellbore flow simulator WELCARD-III which is a new version of WELCARD-II (Takahashi et a1., 1998). A comparison between computational results using WELCARD-III and the measured values of borehole temperature and pressure during production in the Kakkonda and the Mori geothermal fields in Japan was carried out and the computational error was within 5%, including cases with dissolved CO₂ gas. The influence of parameters such as heat loss, temperature and pressure at the feed point and total mass flow rate on appearance depth of annular-mist flow was investigated. The summary of the results are as follows:<BR>1) As heat loss becomes larger, the flashing point and the depth at which annular-mist flow appears become shallower. This is due to the decrease in fluid temperature.<BR>2) As feed point temperature becomes higher, the flashing point and the depth at which annular-mist flow appears become deeper. The distance, furthermore, between the flashing point and the appearance depth of annular-mist flow becomes longer. This is due to the increase in saturated pressure.<BR>3) The feed point pressure shows little influence on the depth of annular-mist flow appearance.<BR>4) As total mass flow rate becomes larger, the flashing point and the depth at which annular-mist flow appears become deeper. The distance, however, between the flashing point and the depth at which annular-mist flow occurs becomes shorter. This is due to the increase in pressure loss.