Petrofac Ltd, the international provider of oil and gas building facilities, has entered into an agreement with
Question:
Petrofac Ltd, the international provider of oil and gas building facilities, has entered into an agreement with a number of Kenyan oil exploration firms to support development of oil wells in the Turkana region after a very large oil well was found there in 2012. The cost of setting up new facilities is £12 million and the well is expected to have a life of 5 years. Oil is currently fetching £84 per barrel in the international markets and production and extraction costs stand at 85 per cent of the oil price. The appropriate discount rate for this project is 18 per cent. What is the break-even number of barrels that can be sold?
Step by Step Answer:
Corporate Finance
ISBN: 9780077173630
3rd Edition
Authors: David Hillier, Stephen A. Ross, Randolph W. Westerfield, Bradford D. Jordan, Jeffrey F. Jaffe