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Is a new oil field worth developing?
The prompt
Dunewell Petroleum (a fictional company) can develop an onshore field with 100 million recoverable barrels. Development capex is USD 1,200 million. Lifting cost is USD 9 per barrel and transport is USD 3 per barrel. The government takes a royalty of 20 percent of the oil price. The field would produce 10 million barrels a year. What is the full-cycle breakeven oil price, and what is the yearly cash margin at USD 70 per barrel? Ignore income tax and the timing of cash for now.
Your interviewer will share data as you ask for it. Ask clarifying questions, state a hypothesis, then lay out your structure out loud before you calculate.
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