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Is a new oil field worth developing?

You run the case. Read the prompt, answer questions from the notes below, and share data only when the candidate asks for it or gets stuck. Score at the end.

Case timer

00:00

Target length:

1. Read the prompt aloud

Read it slowly, then pause. Let the candidate ask questions before they structure.

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.

2. Answers to clarifying questions

This case has no scripted clarifying answers. Answer from the prompt, and say "assume what you think is reasonable" if the prompt does not cover it.

3. A model structure

Compare the candidate's structure with this one. A different split can be just as good if it is clean and fits the problem.

Breakeven price = cost per barrel divided by the share of the price the company keeps
- Development cost per barrel = capex divided by recoverable barrels
- Total cost per barrel = development + lifting + transport
- Company keeps (1 minus royalty rate) of each dollar of price
- Cash margin = price after royalty minus running costs

4. The working, step by step

Each step shows how a strong candidate works it out. Share a new fact from it only when the candidate asks or is stuck, and let them do the math: the result in the dark box is what they should reach.

Step 1: Development cost per barrel
What a strong candidate does: USD 1,200 million spread over 100 million barrels.
Development cost (USD per barrel): 1,200 ÷ 100 = 12
Step 2: Total cost per barrel
What a strong candidate does: Development 12, lifting 9, transport 3.
Total cost (USD per barrel): 12 + 9 + 3 = 24
Step 3: Breakeven price
What a strong candidate does: The company keeps 80 percent of the price, so the price must be 24 divided by 0.8.
Full-cycle breakeven (USD per barrel): 24 ÷ (1 - 0.2) = 30
Step 4: Cash margin per barrel at USD 70
What a strong candidate does: Keep 80 percent of 70, then pay lifting and transport. Development capex is already spent, so it is not a cash cost each year.
Cash margin (USD per barrel): 70 × (1 - 0.2) - 9 - 3 = 44
Step 5: Yearly cash margin
What a strong candidate does: 44 dollars on 10 million barrels a year.
Yearly cash margin (USD million): 44 × 10 = 440

The recommendation to listen for

At the end, say: "The CEO walks in. What is your recommendation?"

Dunewell should take the field forward to a full investment case, because its full-cycle breakeven is about USD 30 per barrel, well below USD 70. First, total cost is USD 24 per barrel, including USD 12 of development capex. Second, at USD 70 the field earns a cash margin of USD 44 per barrel, about USD 440 million a year. The risk is that prices stay low for years or capex overruns. As a next step, test the field at a lower price, add income tax, and discount the cash flows to find its NPV.

Risks a strong answer names: Reserves may be smaller than expected; Capex overruns are common on large projects; Fiscal terms can change; Prices can stay low for years.

Score the candidate

Score each criterion from 1 to 5. A 2 or a 4 sits between the descriptions.

This case has no exhibit. Score Exhibit reading on how the candidate used the data you gave them: did they pick out the number that matters and say what it means?

Structuring

1: No clear structure, or a memorized framework that does not fit the problem.
3: A sensible structure, but with some overlap, a gap, or no clear priority.
5: A structure built for this problem, with no overlap and no gaps, a stated hypothesis, and a clear first step.

Math

1: Frequent errors, no units, or needed heavy help to finish.
3: Right answers but slow or messy working, or one error caught late.
5: Accurate and clearly narrated, with units, a sense check, and what the number means.

Exhibit reading

1: Read the chart aloud without finding the number that matters.
3: Found the key number but gave only part of the so-what.
5: Pulled the right number quickly and said what it means for the case.

Synthesis

1: Summarized what was done, with no clear answer.
3: Gave an answer, but with weak reasons or no next step.
5: Answer first, then two or three reasons with numbers, the main risk, and next steps.

Communication

1: Hard to follow: long silences, no signposting.
3: Clear most of the time, with some rambling.
5: Calm and concise, signposted each step, and checked in with the interviewer.

Total

0 out of 25

Score all five criteria to see the band and the feedback template.