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 $4.45 per gigajoule (GJ) for the life of the reserve.Accounting and Finance Assignment Help
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.
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 (600 words + 20% tolerance) and written in a manner that can be understood by a person with a basic understanding of financial analytical tools. Accounting and Finance Assignment Help