Subject category:
Case Method and Specialist Management Disciplines
Published by:
Darden Business Publishing
Version: 30 March 2011
Revision date: 3-Nov-2011
Abstract
Birch Resources has been offered a 'farm-out' deal to drill a well in Terrebonne Parish, Louisiana. It also has the option, if the well is successful, to drill a second well two years later. The A case focuses on the decision of whether or not to accept the deal, which requires the company to value the embedded option. The B case allows Birch the additional option of waiting an extra two years to decide whether or not to drill the second well. Valuing the deal now requires a far more complex and interesting model.
Industry:
Subject category:
Case Method and Specialist Management Disciplines
Published by:
Darden Business Publishing
Version: 30 March 2011
Revision date: 31-Aug-2011
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Abstract
Birch Resources has been offered a 'farm-out' deal to drill a well in Terrebonne Parish, Louisiana. It also has the option, if the well is successful, to drill a second well two years later. The A case focuses on the decision of whether or not to accept the deal, which requires the company to value the embedded option. The B case allows Birch the additional option of waiting an extra two years to decide whether or not to drill the second well. Valuing the deal now requires a far more complex and interesting model.
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Industry:
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Subject category:
Case Method and Specialist Management Disciplines
Published by:
Darden Business Publishing
Version: 30 March 2011
Revision date: 31-Aug-2011