Question 3 (5 marks) Qistina Petroleum is considering drilling one well on either the River lease or the Code lease in Sulawesi. Qistina does not have sufficient funds to drill both wells and must decide which of the two wells to drill. Information relating to each of the wells follows: Drilling cost Completion cost Selling price ($/bbl) Lifting cost ($/bbl) State severance tax Royalty interest percentage River Well Code Well $ 500,000 350,000 120 24 $ 400,000 650,000 120 24 6% 12% 1,000 bbl 6% 12% 750 bbl Estimated monthly production REQUIRED: Using the payback method, determine which well Yost should drill. Answers: