Essay UUMBA730: Accounting and Economics in Oil and Gas – Pipson Oil and Gas Company – Economics Assignment Help

Assignment Task:

Question 1 

Restoring a Well to Production 

• A well is abandoned after it can no longer flow naturally. 

• Review of a proposal is prepared for recompletion costing $750,000. 

• The recompletion includes jobs such as fracture stimulation and gas lift installation. The operating team is very confident that well can return back to profitable outputs. 

• Estimated future production is also given.

Given the table below, the management of the company requires from you to calculate: 

•  The total profit 
•  Payout time, and 
•  The cost of discovery and development of reserves 

Question 2 

Pipson Oil and Gas Company has four potential projects with a preliminary cost of $2,000,000. However, the company is restricted to evaluate and select one of those four available projects due to capital investment shortage. The Chief Finance Officer of the organisation has provided the following table with the future cash flows and discount rates:

Question 3 

$ $ Cash Flow from Operating Activities Net Income 134,000 Add (deduct) Items not affecting cash Depreciation Expenses 21,000 Accounts Receivable 10000 Prepaid Expenses (6000) Accounts Payable 35,000 60,000 Net Cash Flow from operating activities 194,000 Cash Flow from investments Land purchase (70,000) Building purchase (200,000) Equipment purchase (68,000) Cash for investment activities 338,000 Cash Flow from franchising activities Bonds 150,000 Payments of Cash dividends (18,000) Cash provided by finance activities 132,000 

Net Decrease in Cash (12,000) 

Given the table above you are required to answer ALL the following questions: 

a) What information a company can get from the Statement of Cash Flow? Please analyze using numerical support from the table.

b) What useful information is obtained from carrying out a Comparative Analysis (on Cash Flow Statement)?

c) How is managerial planning facilitated by analyzing the Cash Flow Statement?

d) What Investing Activities (of a Cash Flow Statement) should be examined? 

Question 4 

Petroleum Economics has always played a vital role in the oil and gas industry since the very first drilling operations. Discuss the importance of petroleum economics and the impact on the hydrocarbons industry.