Rate of oil production from the rig declines

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Reference no: EM131622899

Wyatt Oil is considering drilling a new oil well that is initially expected to produce oil at a rate of 10 million barrels per year. Wyatt has a long-term contract that allows them to sell the oil at a profit of $2.50 per barrel. The initial cost of the drilling rig is $175,000,000. If the rate of oil production from the rig declines by 3% per year and the discount rate is 9% per year, then the NPV of this new oil well is closest to:

A) -$333,333,000

B) $28,128,000

C) $33,333,000

D) $39,340,000

E) None of the above

Reference no: EM131622899

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