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What is the value of this opportunity

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Reference no: EM132969071

Question - SE Oil has an opportunity to acquire a field that will produce 1 million barrels of oil. Oil is currently trading at around $24 per barrel, but when the oil is produced it can be worth as high as $28.80 or $20. The forward price for oil one year hence is currently $25.20. If SE Oil acquires the property, it will face a non-recourse debt obligation of $12 million payable at the end of the year. Extraction costs of $14/barrel will be incurred at the end of the first year. What is the value of this opportunity?

Reference no: EM132969071

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