Company d has a drilling prospect x near cushing oklahoma


Question: Company D has a drilling prospect X near Cushing Oklahoma which it must drill now or never. Company D confidently estimates that drilling and completing the well will produce 100,000 barrels of oil at a present value cost of $5 million. The discounted value of a strip of oil futures now is $5.5 million $. The CEO of Company D has information that leads her to confidently predict that the discounted price of oil will be lower than the futures market now indicates and that the oil produced from the oil well will be realize only $4 million. What should she do?

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Finance Basics: Company d has a drilling prospect x near cushing oklahoma
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