Exercise: Calculate Cash Flow The following offshore oil development project is being proposed. What would be your approach to address the opportunity? Production Data : First Oil beginning of Year 3 Annual Oil Production Technical Costs Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 5 15 15 10 2.5 1.0 0.5 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Platform 30 30 Facilities 15 30 Tangible Drilling 10 15 10 4 Intangible Drilling 20 32 15 5 Fixed Opex 8 14 Variable Opex 15 15 15 15 15 Oil Price forecast Terms and Conditions US$ 0.40/bbl produced : US$ 20/bbl, expected to remain constant thereafter : Royalty 25% Tax rate 20%, Tax losses not allowed Capital Allowance - Straight line at 25% p.a., Only start after First Oil production