Sam owns an oil field with a number of producing wells. In the past, he has started and stopped production of these wells as the price of oil fluctuated over time. Assume the government imposes additional requirements on non-producing wells that are still production capable. These requirements are expected to increase the cost of stopping well production by 30 percent. As a result, Sam should be:
closing wells only if he plans to keep them closed permanently.
keeping all wells open continuously.
opening wells at a lower popen price.
increasing the cost of capital he applies to his well evaluation analysis.
willing to keep wells operating at a lower level of profitability than he has in the past.