Provide a detailed financial analysis of each well type

Assignment Help Corporate Finance
Reference no: EM131489825 , Length: word count:600

Capital Budgeting Report and Analysis

Outline

Primitive Energy owns several coal seam gas reserves in south-west Queensland. As a relatively minor player in the Queensland Liquefied Natural Gas (LNG) market, Primitive does not have the capacity to transfer and process the gas for sale to domestic or international buyers. Instead, Primitive simply extracts the gas and then sells it immediately (at the well-head, which is at the surface) to one of the major gas companies operating in the area. Recently, Primitive entered into a contract to sell gas from one of its reserves for the fixed price of $4.50 per gigajoule (GJ) for the life of the reserve.

With this contract in place, Primitive's management are currently trying to determine whether they should extract the gas through conventional ‘Vertical' drilling or the recently developed ‘Horizontal' drilling. As indicated in Figure 1, the Vertical drilling approach drills to the coal seam while the Horizontal approach drills down to and then across the coal seam.

1153_Figure.jpg

Figure 1: Vertical and Horizontal Drilling

Additional points of note are summarised in Table 1.

Table 1: Summary Points for Vertical and Horizontal Drilling

Vertical: Smaller capital outlay, however, more wells are generally required due to smaller drainage area (the portion of the reserve that a well can access). Preliminary designs indicate project requires 100 Vertical wells.

Horizontal: Higher capital outlay given length of drilling, technology and difficulty. Greater access to gas reserves and larger spacing between wells, which means fewer wells required. Preliminary designs indicate that project requires 50 Horizontal wells.

Specific detail on each of the well types including: capital outlay, production, maintenance, depreciation, state royalties, well drilling and capping schedule and other related information required for analysis is presented in the ‘Well Drilling Information' spreadsheet.

Task

Provide a detailed financial analysis of each well type and an accompanying report that explains and justifies methodology, recommends a well type and highlights limitations with the analysis and recommendations. To complete this task, the manager has requested the following:

- The financial analysis is to be completed in Excel. The file is to be easily adjustable for different scenarios and all inputs must be in the one sheet called ‘Assumptions' with the analysis of each well conducted on a separate sheet.

- The report is to be short and written in a manner that can be understood by a person with a basic understanding of financial analytical tools. It should have the following sections,

o Summary: Brief outline of task, methodology and recommendation.

o Methodology: Explains and justifies the selected evaluation metric.

o Recommendations: Recommends a preferred drilling approach and provides insight into why one drilling approach creates more value than another.

o Limitations: Highlights the key limitations with the analysis and recommends additional analysis to alleviate these limitations where appropriate.

Attachment:- Assignment.rar

Reference no: EM131489825

Questions Cloud

Number of unpaired electrons in an octahedral : What is the number of unpaired electrons in an octahedral, high-spin Co(III) complex?
Select five places you would recruit for a customer service : Select at least five places you would recruit for a customer service assistant and at least five places you would recruit for production line workers.
Ph of a sodium acetate-acetic acid buffer : The pH of a sodium acetate-acetic acid buffer is 4.90. Calculate the ratio [CH3COO- ] / [CH3COOH ].
Identify the purpose of a balanced budget amendment : Explain why politicians insert "pork" items into other legislation.
Provide a detailed financial analysis of each well type : Provide a detailed financial analysis of each well type and an accompanying report that explains and justifies methodology.
What is the vapor pressure : What is the vapor pressure of this solution at 30°C? (The vapor pressure of water is 31.8 mmHg at 30°C.)
Identify the categories of federal and local spending : Identify the categories of federal, state, and local spending by using a graphic organizer like the one below.
Consider the following general reaction : Consider the following general reaction (acetic acid + water in equilibrium with hydronium + acetate):
Discuss relationship of the federal deficit to federal debt : List the three major categories of spending by local governments.

Reviews

len1489825

5/9/2017 7:10:23 AM

Grammar, punctuation, and syntax are mostly correct; Writing style is appropriate for audience and task; Report is an original piece of work Report addresses most key aspects of the task and has a logical structure; Grammar, punctuation and syntax are mostly correct, though expression may lack some clarity; Writing style is appropriate for audience and task; Report is an original piece of work Report addresses some aspects of the task adequately and has logical structure; Errors in grammar, punctuation, and syntax are present and expression lacks clarity in parts; Writing style is appropriate for audience and/or task; Report is an original piece of work Report fails to communicate an effective response to the task; Significant errors in grammar, punctuation, syntax or clarity; Style not appropriate for audience or task; Report is not an original piece of work

len1489825

5/9/2017 7:09:45 AM

Higher Order Thinking Skills[HO 2.2: Exercise independent judgement in applying knowledge and skills for effective planning, problem solving and decision making in diverse contexts] Provide sound recommendations based on correct interpretation of analysis results Recommendations are coherent, correctly derived from analysis, and are explained in detail in the context of relevant key limitations Recommendations are coherent, correctly derived from analysis, and explained in detail; Most key limitations have been identified and adequately explained Recommendations correctly derived from analysis, though may lack some coherence and detail; Most key limitations have been identified but lack coherence. Recommendations are present though link to underlying analysis may be unclear; Identifies limitations that are not relevant and may not adequately explain these limitations or key relevant limitations. Report fails to include recommendations addressing the task, or recommendations not supported by analysis; Identifies largely irrelevant limitations.

len1489825

5/9/2017 7:09:39 AM

Demonstrated ability to use Excel effectively All references are correct; Layout and formatting of spreadsheet are logical and professional. Uses correct filename. References, layout, formatting and filename are largely correct and professional, though a minor error may be present References, layout, formatting and filename are largely correct and professional, though a few minor errors may be present References, layout, formatting and filename are largely correct and professional, though several errors may be present Spreadsheet not provided or contains major errors; Spreadsheet layout and formatting contain major errors or are not appropriate

len1489825

5/9/2017 7:09:31 AM

Technical and Technological Skills[KS 1.2: Apply technical and technological skills appropriate and effective for real world business purposes and contexts] Correct implementation of methodology All steps of chosen methodology correctly applied; Correct answer derived from the data or only a minor calculation error Methodology applied but containing an error; An error in calculations may be present Methodology appliedbut two errors in calculation and/or methodology are present Numerous errors are present in methodology and/or calculations Methodology not implemented or is applied incorrectly; Major calculation errors are present

len1489825

5/9/2017 7:09:19 AM

Knowledge[KS 1.1: Demonstrate and apply integrated discipline knowledge across the broad field of business with depth in one or more core business disciplines] Select and describe your choice of methodology appropriate for the task Methodology chosen is appropriate to task and described in full detail; Full justification of choice is provided Methodology chosen is appropriate to task and described in adequate detail; Good justification of choice is provided Methodology chosen is appropriate to task though description lacks detail in parts; Adequate justification of choice is provided Methodology chosen is appropriate to task but description is incorrect or generally lacks detail; Attempt made to justify choice Chosen methodology is not appropriate for task; Limited and incorrect description of methodology or justification of choice is provided

Write a Review

Corporate Finance Questions & Answers

  Impact of the global economic crisis on business environment

This paper reviews the article of ‘the impact of the global economic crisis on the business environment' that is written by Roman & Sargu (2011).

  Explain the short and the long-run effects on real output

Explain the short and the long-run effects on real output, price, and unemployment

  Examine the requirements for measuring assets

Examine the needs for measuring assets at fair value in accounting standards

  Financial analysis report driven by rigorous ratio analysis

Financial analysis report driven by rigorous ratio analysis

  Calculate the value of the merged company

Calculate the value of the merged company, the gains (losses) to each group of shareholders, NPV of the deal under different payment methods. Synergy remains the same regardless of payment method.

  Stock market project

Select five companies for the purpose of tracking the stock market, preparing research on the companies, and preparing company reports.

  Write paper on financial analysis and business analysis

Write paper on financial analysis and business analysis

  Intermediate finance

Presence of the taxes increase or decrease the value of the firm

  Average price-earnings ratio

What is the value per share of the company's stock

  Determine the financial consequences

Show by calculation the net present value for the three alternatives (no education, network design certification, mba). Also, according to NPV suggest which alternative you advise your friend to choose

  Prepare a spread sheet model

Prepare a spread sheet model for the client that determines NPV/IRR with and without tax.

  Principles and tools for financial decision-making

Principles and tools for financial decision-making. Analyse the concept of corporate capital structure and compute cost of capital.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd