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ConocoPhillips Natural Gas Wellhead Project

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PROBLEM 3-9: ConocoPhillips Natural Gas Wellhead Project;Given;ConocoPhillips's Cost of Capital for project;Project life;15.00%;10;Solution;Solution Legend;1.;0;$(1,200,000);(145,000);Investment;Increase in NWC;MACRS Depr Rate (7 year);Natural Gas Wellhead Price (per MCF);Volume (MCF/day);Days per year;Fee to Producer of Natural Gas;Compression & processing costs (per MCF);1;2;3;Years;5;6;7;8;9;10;0.1429;3.911;900;365;$1.956;0.65;$(1,345,000);NPV;IRR;0.2449;4.056;720;365;$2.028;0.65;0.1749;4.206;576;365;$2.103;0.65;0.1249;4.362;461;365;$2.181;0.65;0.0893;4.523;369;365;$2.262;0.65;0.0893;4.691;295;365;$2.345;0.65;0.0893;4.864;236;365;$2.432;0.65;0.0445;5.044;189;365;$2.522;0.65;5.231;151;365;$2.615;0.65;5.424;121;365;$2.712;0.65;$1,284,895;642,447;213,525;171,480;$257,442;102,977;$154,465;171,480;Cash Flow Calculations;Natural Gas Wellhead Price Revenue;Lease fee expense;Compression & processing costs;Depreciation expense;Net operating Profit;Less: Taxes (40%);Net operating profit after tax (NOPAT);Plus: Depreciation expense;Return of net working capital;Project Free Cash Flow;$1,065,949;532,974;170,820;293,880;$68,274;27,310;$40,965;293,880;$884,311;442,156;136,656;209,880;$95,620;38,248;$57,372;209,880;$733,625;366,812;109,325;149,880;$107,607;43,043;$64,564;149,880;$608,615;304,307;87,460;107,160;$109,688;43,875;$65,813;107,160;$504,907;252,453;69,968;107,160;$75,326;30,130;$45,195;107,160;$418,871;209,435;55,974;107,160;$46,301;18,520;$27,781;107,160;$347,495;173,748;44,779;53,400;$75,568;30,227;$45,341;53,400;$288,282;144,141;35,824;$108,317;43,327;$64,990;-;$239,159;119,579;28,659;$90,921;36,368;$54,552;145,000;$199,552;$325,945;$334,845;$267,252;$(207,373);9.75%;2a-c. Scenario Summary;Most Likely;Current Values;Best Case;Case;Worst Case;Changing Cells;NG Price;Production Rate;Result Cells;NPV;IRR;Notes: Current Values column represents values of changing cells at time Scenario Summary Report was created.;3. Breakeven Sensitivity Analsyis;Students should use Goal Seek in Excel to answer this question.;a.;Breakeven nautral gas price for an NPV = 0;$4.61;b.;Breakeven natural gas volume in Year 1 for an;NPV = 0;c.;Breakeven investment for an NPV = 0;4;1133.05;$(992,627);4. Analysis;$214,444;$172,973;$152,355;$134,941;$98,741;$64,990;= Value given in problem;= Formula/Calculation/Analysis required;= Qualitative analysis or Short answer required;= Goal Seek or Solver cell;= Crystal Ball Input;= Crystal Ball Output;PROBLEM 3-9: ConocoPhillips Natural Gas Wellhead Project;Given;Price;ConocoPhillips's Cost of Capital for project;Project life;Solution;Solution Legend;1.;0;Investment;Increase in NWC;MACRS Depr Rate (7 year);Natural Gas Wellhead Price (per MCF);Volume (MCF/day);Days per year;Fee to Producer of Natural Gas;Compression & processing costs (per MCF);Cash Flow Calculations;Natural Gas Wellhead Price Revenue;Lease fee expense;Compression & processing costs;Depreciation expense;Net operating Profit;Less: Taxes (40%);Net operating profit after tax (NOPAT);Plus: Depreciation expense;Return of net working capital;Project Free Cash Flow;NPV;IRR;1;2;0.1429;3;0.2449;4;0.1749;0.1249;Years;5;0.0893;6;0.0893;7;0.0893;8;0.0445;9;10;= Value given in problem;= Formula/Calculation/Analysis required;= Qualitative analysis or Short answer required;= Goal Seek or Solver cell;= Crystal Ball Input;= Crystal Ball Output;Best Case;1200000;8;1200;Page 3;Most Likely Case;1200000;6;900;Page 4;Worst Case;1200000;3;700;Page 5;Breakeven - Natural Gas Price;1200000;4.978281356;900;Page 6;Breakeben - Natural Gas Volume;1200000;6;704.351749;Page 7;Breakeven - Initial Investment;1573795;6;900;Page 8;Variable;Investment;WACC;Compression and Processing Costs;Price 1;Price 2;Volume 1;NWC;Volume 2;Volume 3;Price 9;Price 10;Volume 9;Volume 10;Downside;$(419,446);$(471,471);$(473,719);$(536,089);$(527,951);$(524,948);$(498,436);$(520,201);$(516,899);$(510,818);$(510,372);$(510,207);$(509,947);NPV;Upside;$(599,257);$(544,311);$(544,984);$(482,614);$(490,752);$(493,755);$(520,267);$(498,502);$(501,804);$(507,885);$(508,331);$(508,496);$(508,756);Range;$179,810;$72,839;$71,266;$53,474;$37,199;$31,193;$21,832;$21,700;$15,095;$2,933;$2,040;$1,711;$1,190;Downside;$1,080,000;13.50%;0.59;$2.81;$2.81;810;130,500;648;518;$2.81;$2.81;136;109;Input;Upside;Base Case;$1,320,000 $1,200,000;16.50%;15.00%;0.72;0.65;$3.43;$3.12;$3.43;$3.12;990;900;159,500;145,000;792;720;634;576;$3.43;$3.12;$3.43;$3.12;166;151;133;121;Breakeven nautral gas price for an NPV = 0;PROBLEM 3-9: ConocoPhillips Natural Gas Wellhead Project;Given;ConocoPhillips's Cost of Capital for project;Project life;15.00%;10;Solution;Solution Legend;1.;Investment;Increase in NWC;MACRS Depr Rate (7 year);Natural Gas Wellhead Price (per MCF);Volume (MCF/day);Days per year;Fee to Producer of Natural Gas;Compression & processing costs (per MCF);Cash Flow Calculations;Natural Gas Wellhead Price Revenue;Lease fee expense;Compression & processing costs;Depreciation expense;Net operating Profit;Less: Taxes (40%);Net operating profit after tax (NOPAT);Plus: Depreciation expense;Return of net working capital;Project Free Cash Flow;NPV;IRR;0;$(1,200,000);(145,000);1;2;3;4;Years;5;6;7;8;9;10;0.1429;4.612;900;365;$2.306;0.65;0.1749;4.960;576;365;$2.480;0.65;0.1249;5.144;461;365;$2.572;0.65;0.0893;5.334;369;365;$2.667;0.65;0.0893;5.531;295;365;$2.766;0.65;0.0893;5.736;236;365;$2.868;0.65;0.0445;5.948;189;365;$2.974;0.65;6.168;151;365;$3.084;0.65;6.396;121;365;$3.198;0.65;$1,515,158;757,579;213,525;171,480;$372,574;149,030;$223,544;171,480;$(1,345,000);0.2449;4.783;720;365;$2.392;0.65;$1,256,975;628,488;170,820;293,880;$163,788;65,515;$98,273;293,880;$1,042,787;521,393;136,656;209,880;$174,857;69,943;$104,914;209,880;$865,096;432,548;109,325;149,880;$173,343;69,337;$104,006;149,880;$717,683;358,842;87,460;107,160;$164,222;65,689;$98,533;107,160;$595,390;297,695;69,968;107,160;$120,567;48,227;$72,340;107,160;$493,936;246,968;55,974;107,160;$83,834;33,533;$50,300;107,160;$409,769;204,885;44,779;53,400;$106,705;42,682;$64,023;53,400;$339,944;169,972;35,824;$134,149;53,659;$80,489;-;$282,018;141,009;28,659;$112,350;44,940;$67,410;145,000;$212,410;$395,024;$392,153;$314,794;$253,886;$205,693;$179,500;$157,460;$117,423;$80,489;6;7;8;9;$15.00%;Breakeven natural gas volume in;Year 1 for an NPV = 0;PROBLEM 3-9: ConocoPhillips Natural Gas Wellhead Project;Given;ConocoPhillips's Cost of Capital for project;Project life;15.00%;10;Solution;1.;Investment;Increase in NWC;MACRS Depr Rate (7 year);Natural Gas Wellhead Price (per MCF);Volume (MCF/day);Days per year;Fee to Producer of Natural Gas;Compression & processing costs (per MCF);Cash Flow Calculations;Natural Gas Wellhead Price Revenue;Lease fee expense;Compression & processing costs;Depreciation expense;Net operating Profit;Less: Taxes (40%);Net operating profit after tax (NOPAT);Plus: Depreciation expense;Return of net working capital;Project Free Cash Flow;NPV;IRR;0;$(1,200,000);(145,000);1;2;3;4;Years;5;10;0.1429;3.911;1,133;365;$1.956;0.65;0.1749;4.206;725;365;$2.103;0.65;0.1249;4.362;580;365;$2.181;0.65;0.0893;4.523;464;365;$2.262;0.65;0.0893;4.691;371;365;$2.345;0.65;0.0893;4.864;297;365;$2.432;0.65;0.0445;5.044;238;365;$2.522;0.65;5.231;190;365;$2.615;0.65;5.424;152;365;$2.712;0.65;$1,617,612;808,806;268,816;171,480;$368,510;147,404;$221,106;171,480;$(1,345,000);0.2449;4.056;906;365;$2.028;0.65;$1,341,971;670,986;215,053;293,880;$162,053;64,821;$97,232;293,880;$1,113,299;556,650;172,042;209,880;$174,727;69,891;$104,836;209,880;$923,593;461,797;137,634;149,880;$174,283;69,713;$104,570;149,880;$766,213;383,106;110,107;107,160;$165,839;66,336;$99,504;107,160;$635,650;317,825;88,086;107,160;$122,579;49,032;$73,548;107,160;$527,335;263,668;70,469;107,160;$86,039;34,416;$51,623;107,160;$437,477;218,739;56,375;53,400;$108,964;43,586;$65,378;53,400;$362,931;181,466;45,100;$136,366;54,546;$81,819;-;$301,088;150,544;36,080;$114,464;45,786;$68,678;145,000;$213,678;$392,586;$391,112;$314,716;$254,450;$206,664;$180,708;$158,783;$118,778;$81,819;6;7;8;9;$15.00%;Breakeven investment for an NPV =;0;PROBLEM 3-9: ConocoPhillips Natural Gas Wellhead Project;Given;ConocoPhillips's Cost of Capital for project;Project life;15.00%;10;Solution;1.;Investment;Increase in NWC;MACRS Depr Rate (7 year);Natural Gas Wellhead Price (per MCF);Volume (MCF/day);Days per year;Fee to Producer of Natural Gas;Compression & processing costs (per MCF);Cash Flow Calculations;Natural Gas Wellhead Price Revenue;Lease fee expense;Compression & processing costs;Depreciation expense;Net operating Profit;Less: Taxes (40%);Net operating profit after tax (NOPAT);Plus: Depreciation expense;Return of net working capital;Project Free Cash Flow;NPV;IRR;0;$(992,627);(145,000);1;2;c.;Breakeven investment for an NPV = 0;4;Years;5;10;0.1429;3.911;900;365;$1.956;0.65;0.1749;4.206;576;365;$2.103;0.65;0.1249;4.362;461;365;$2.181;0.65;0.0893;4.523;369;365;$2.262;0.65;0.0893;4.691;295;365;$2.345;0.65;0.0893;4.864;236;365;$2.432;0.65;0.0445;5.044;189;365;$2.522;0.65;5.231;151;365;$2.615;0.65;5.424;121;365;$2.712;0.65;$1,284,895;642,447;213,525;171,480;$257,442;102,977;$154,465;171,480;$(1,137,627);0.2449;4.056;720;365;$2.028;0.65;$1,065,949;532,974;170,820;293,880;$68,274;27,310;$40,965;293,880;$884,311;442,156;136,656;209,880;$95,620;38,248;$57,372;209,880;$733,625;366,812;109,325;149,880;$107,607;43,043;$64,564;149,880;$608,615;304,307;87,460;107,160;$109,688;43,875;$65,813;107,160;$504,907;252,453;69,968;107,160;$75,326;30,130;$45,195;107,160;$418,871;209,435;55,974;107,160;$46,301;18,520;$27,781;107,160;$347,495;173,748;44,779;53,400;$75,568;30,227;$45,341;53,400;$288,282;144,141;35,824;$108,317;43,327;$64,990;-;$239,159;119,579;28,659;$90,921;36,368;$54,552;145,000;$199,552;$325,945;$334,845;$15.00%;3. Breakeven Sensitivity Analsyis;Students should use Goal Seek in Excel to answer this question.;a.;Breakeven nautral gas price for an NPV = 0;$4.61;b.;Breakeven natural gas volume in Year 1 for an;NPV = 0;3;1133.05;$(992,627);$267,252;$214,444;$172,973;$152,355;$134,941;$98,741;$64,990;= Value given in problem;= Formula/Calculation/Analysis required;= Qualitative analysis or Short answer required;= Goal Seek or Solver cell;= Crystal Ball Input;= Crystal Ball Output;View Full Attachment;Additional Requirements;Min Pages: 1;Level of Detail: Show all work

 

Paper#28750 | Written in 18-Jul-2015

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