Pipson Oil and Gas Company Potential Projects Assignment

Assignment Task

Restoring a Well-to Production

• A well is abandoned after it can no longer flow naturally.
• Review of a proposal is prepared for completion costing $XXX,000.
• The recompletion includes jobs such as fracture stimulation and gas lift installation. The operating team is very confident that well can return back to profitable outputs.
• Estimated future production is also given.

Given the table below, the management of the company requires from you to calculate: The total profit Payout time, and The cost of discovery and development of reserves Pipson Oil and Gas Company has four potential projects with a preliminary cost of $X,000,000. However, the company is restricted from evaluating and select one of those four available projects due to a capital investment shortage. The Chief Finance Officer of the organization has provided

the following table with the future cash flows and discount rates:

• Cash Flows Project A ($) Project B ($) Project C ($) Project D ($)
• Year One 500,000 600,000 1,000,000 300,000
• Year Two 500,000 600,000 800,000 500,000
• Year Three 500,000 600,000 600,000 700,000
• Year Four 500,000 600,000 400,000 900,000
• Year Five 500,000 600,000 X00,000 1,100,000
• Discount Rate 6% 9% XX%

Given the table above, you are required to calculate and suggest to the management of Pipson Oil and Gas Company which project should the company accept and why? Give a brief explanation.

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