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A proposed drilling prospect has been evaluated. A well will be drilled on 160-acre prospect area. The company does not yet lease additional acreage of
A proposed drilling prospect has been evaluated. A well will be drilled on 160-acre prospect area. The company does not yet lease additional acreage of 60 acres, adjacent to the prospect. Evaluation is based on the condition that the company will be able to lease the remaining 60 acres. Basic data and economic analysis (net present value at 10% that would be realized from the prospect for each option, net of taxes, royalties, lease operating expense and costs of the well) of each option for the prospect are given in Table 3-4. The company has identified the following three options for participation in the deal, given that the company has acquired the remaining 60 acres. (after Newendorp). 4 Table 3-4 Basic data for Example 3-3
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