Permian Partners (PP) produces from aging oil fields in west Texas. Production is 1.97 million barrels...

Permian Partners (PP) produces from aging oil fields in west Texas. Production is 1.97 million barrels per year in 2016, but production is declining at 9% per year for the foreseeable future. Costs of production, transportation, and administration add up to $26.70 per barrel. The average oil price was $66.70 per barrel in 2016. PP has 8.7 million shares outstanding. The cost of capital is 11%. All of PP’s net income is distributed as dividends. For simplicity, assume that the company will stay in business forever and that costs per barrel are constant at $26.70. Also, ignore taxes. a. Assume that oil prices are expected to fall to $61.70 per barrel in 2017, $56.70 per barrel in 2018, and $51.70 per barrel in 2019. After 2019, assume a long-term trend of oil-price increases at 7% per year. What is the ending 2016 value of one PP share? Share Value= b-1. What is PP’s EPS/P ratio? b-2. Is it equal to the 11% cost of capital? Yes or no

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Permian Partners (PP) produces from aging oil fields in west Texas. Production is 1.84 million barrels...

Permian Partners (PP) produces from aging oil fields in west Texas. Production is 1.84 million barrels per year in 2018, but production is declining at 5% per year for the foreseeable future. Costs of production, transportation, and administration add up to $25.40 per barrel. The average oil price was $65.40 per barrel in 2018. PP has 7.4 million shares outstanding. The cost of capital is 7%. All of PP’s net income is distributed as dividends. For simplicity, assume that the...

(PLEASE MAKE ANSWER CLEAR) Permian Partners (PP) produces from aging oil fields in west Texas. Production...

(PLEASE MAKE ANSWER CLEAR) Permian Partners (PP) produces from aging oil fields in west Texas. Production is 1.82 million barrels per year in 2016, but production is declining at 9% per year for the foreseeable future. Costs of production, transportation, and administration add up to $25.20 per barrel. The average oil price was $65.20 per barrel in 2016. PP has 7.2 million shares outstanding. The cost of capital is 11%. All of PP’s net income is distributed as dividends. For...

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Consider the problem from Lecture 5 “Fracking in the Permian Basin.” Denote by X oil production...

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An oil producer plans to sell 1 million barrels of crude oil one year from now....

An oil producer plans to sell 1 million barrels of crude oil one year from now. The oil price in one year is normally distributed with the mean of $80 per barrel and the standard deviation of $12 per barrel. What is the probability that the sales revenue is lower than $50 millions A)0.62% B)41.75% C)58.25% D)99.38%

(3) The US produces about 12 million barrels of oil per day and consumes about 22...

(3) The US produces about 12 million barrels of oil per day and consumes about 22 million barrels per day (mbpd). Global production and consumption are about 100 mbpd. About 0.75 mpbd come from federal land, and about 1.75 mbpd come from federal waters (primarily the Gulf of Mexico). The current oil price is about $50, the elasticity of oil supply is 0.1 and the elasticity of oil demand is -0.2. a. Using these numbers, calculate the long-term effect on...

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