1. How much money would you make if there were no costs of extraction? Would this be...
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2. Would you indeed lose money if you leased and extracted immediately? How much money?
3. Continue the scenario analysis by computing the future net payoff implied by each of the future prices of oil. To do this, multiply the price of oil by the number of barrels, then subtract the cost of extraction. If this is negative, you simply won’t develop the field, so change negative values to zero. (At this point, do not subtract the lease cost, because we are assuming that it has already been paid).
4. Find the average future net payoff, less the cost of the lease. How much, on average, would you gain (or lose) by leasing this oil field?
5. How risky is this proposition?
6. Should you lease or not?
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1 You would make 113475000 because if there were no costs of extraction you would immediately extract and sell the 1500000 barrels at 7645 worth 11467...View the full answer
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Jonas Araujo
I have recently received the degree of PhD. In Physics by the Universidade Federal do Maranhão after spending a term in Durham University, as I have been awarded a scholarship from a Brazilian mobility program. During my PhD. I have performed research mainly in Theoretical Physics and published works in distinguished Journals (check my ORCID: https://orcid.org/0000-0002-4324-1184).
During my BSc. I have been awarded a scholarship to study for a year in the University of Evansville, where I have worked in detection-analysis of photon correlations in the the Photonics Laboratory. There I was a tutor in Electromagnetism, Classical Mechanics and Calculus for most of that year (2012).
I am very dedicated, honest and a fast learner, but most of all, I value a job well done.
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