A small oil and gas operator must make a decision about whether to drill in a specific location for oil. After significant geological research, the operator has narrowed the possible results to four possible scenarios, one of which was a dry hole (no petroleum), and provided his best approximation of their various chances.
Appraising the prospect demands making long term estimates of both the speed of decrease in oil production from the formation that is future and the likely price of crude oil over the coming two to three decades. Since drilling expenses occur in the first year or two the second of these was required, as petroleum was created over decades, but revenues from the wells was generated. The cases discussed problems associated with the future international supply of, and demand for, oil, to help students frame the problem of future petroleum costs.
Pinkley's Prospect case study solution
PUBLICATION DATE: December 01, 2011 PRODUCT #: NA0154-PDF-ENG
This is just an excerpt. This case is about FINANCE & ACCOUNTING
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