Rock Energy, an Oil & Gas company, is evaluating the purchase of one of three oil fields in Latin America. After purchasing the rights to extract oil from one of these fields, Rock Energy will outsource the drilling activity. You have been brought in to identify the best investment for Rock Energy.
How would you evaluate the three oil fields, and which oil field should Rock Energy purchase?
Hi Alex!
1. Clarify the objective of the client (it's mostly earning money, so I'll assume profits)
2. Clarify how the client would earn money from an oil field (probably the money they get for the crude oil minus the cost of getting it off the ground, net of any initial investment cost)
3. Compare the cash flows for all three options
Cheers, Sidi
Hello,
First of all I would identify what are all the factors and characteristics that you have to consider in order to understand the quantity of oild that you can obtain, the timing and the costs. Then I would compare the three oil fields considering these KPIs and the price.
Best,
Luca
Hello!
On top of the layed-out approaches, given that is stated that there are 3 different oil fields, I would include a part of "oppportunity cost" of pursuing that specific one and not the others, on top some "exploration of the others".
Same applies to outsource vs. doing it in house.
Even if it´s not stated directly in the case, going the extra mile in terms of structure is alwways a plus.
Hope it helps!
Cheers,
Clara
