Paraphrase Word by Word – 2-3 Hours . Urgent. Should not be any plagiarism involved.

Runninghead: CASE STUDY ASSIGNMENT

1

CASE STUDY ASSIGNMENT 6

Case Study Assignment

Student name:

Institutional affiliation:

Date of submission:

CASE STUDY 1: Northern Gushers

a) Introduction, summary and concerns

The oil industry has become one of the most unpredictable industries in the world. Oil drilling companies face a lot of challenges attached to the varied demands and compliance in oil production (Hall, 2016). Oil is one of the main environmental pollutants and thus this poses one of the key problems to oil drilling companies. The activity of oil drilling comes with changes in cash flows which mean multiple rates of returns for the company. This makes it difficult for the company to calculate for the correct profit projection over the lease period. The leased tract also diminishes each year, further necessitating the drilling company to account for this diminishment in their profit projection. The fact that the barrel prices also keep fluctuating is another concern for the oil drilling company. For most of these companies, the problem majorly lies in calculating for projected revenues, total projected costs and thus, the profit margins for this particular venture.

b) Calculations

Calculating total revenue:

Total barrels for the 16 wells: 20000*16=320,000 barrels

Total revenue for 16 wells: 320,000* $30 = $9,600,000 per year.

Revenue for 20 years: 9,600,000*20 =$192,000,000

Calculating total costs

Drilling +production facility cost: ($2,000,000+$1,750,000)*16=$60,000,000

Transfer for production cost: $320,000*5.25= $1,680,000

Shipment to the market cost: $320,000*3.75=$1,200,000

Capital required each year 🙁 20/7)*1,250,000=$3,571,428.57

Abandonment (at the final year) cost: 10% of $60,000,000=$6,000,000

Incremental annual costs: $200,000*16=$3,200,000

Total cost: $75,771,428.57

Profit margin: $192,000,000-$75,771,428.57=$116,228,571.43

Addition of the 17th well:

Profit with addition of 17th well: $116,228,571.43 + (2,000*19*30) =$117368571.43

c) Recommendation

From the calculations above, some costs remain constant with regardless of the number of wells put into operation. This is because costs related to drilling and production, transfer for production, shipment to the market, capital; abandonment and incremental costs are not based on the number of wells drilled. The addition of the 17th well has a significant impact on the profit margin from $116,228,571.43 to $117368571.43. Thus, it is an economically sound decision to add the 17th, 18th and even the 19th well for the company to enjoy massive profits due to economies of scale.

CASE STUDY 2: The Great White Hall

a) Introduction, summary and concerns

Contributing to the community through building projects for hundreds of community members, if not the whole community. This brings on the demand to account for the views of community members who are mostly involved in evaluating different proposals (GhoseA, 2017). The major problem with many proposals is the lack of clear evaluation criteria. Thus, many of these proposals are based on personal views and could be dangerously misleading. Some respondents are also make unreasonable assumption in weighing the benefit-cost ratios of projects which tends to further complicate evaluation of alternatives. Further, proposals come in different designs. How to select the best design can be a challenge for some people. The focus for these proposals, however, lies in calculating comparable benefit –cost ratios, and selecting a package of facilities for the proposal, which is based on the resultant ratios.

b) Calculations

Tightfisted Proposal:

Cost of the proposal: construction + Annual operation=$2500000 + $120000(gym) + $190000(city offices) = $2810000

Annual benefit = $60*200*52=$624000

B/C of the proposal =624000/2810000 = 0.2221

Major project proposal:

Cost of the proposal: construction + Annual operation = $4800000 + $110000 (gym) +$165000 (city offices) +$450000 (library) + $65000 (theatre) = $5590000

Annual benefit = $60*200*52 (gym) + $500000 (library) + $16*450*52 (theatre). $624000 + $500000 + $374000 = $1498400

B/C of the proposal = 1498400/5590000 = 0.2681

Energy Breakthrough proposal:

Cost of the proposal: construction + Annual operation =$3900000 + $65000 (gym) +$100000 (city offices) + $15000 (theatre) = $4080000

Annual benefit = $60*200*52 (gym) + $16*450*52 (theatre). $624000+ $374000 = $998000

B/C of the proposal = 998000/4080000 = 0.2446

c) Recommendation

The above calculations in b) above show comparable ratios of the three proposals. The higher ratio from the calculation is translated to have a higher benefit. The major project proposal therefore has the greatest benefit based on its profit-cost ratio. The contractor whose construction cost is $4.8 million is thus highly recommended for the Flatland Views because of the projected benefits from the facilities from that particular contractor. This package includes gym, library and a theatre.

References

Hall, C. (2016). Predicting peak oil.

Ghose, R. (2017). 1.29 Defining public participation GIS. Comprehensive Geographic Information Systems, 431.