EFB210: FINANCE 1, Semester 1 2020 Capital Budgeting Report and Analysis ___________________________________________________________________________________ General Information Marks: 25 Weight: 25% Format: Report and Analysis Due: 17 May 2020 (end of day, 11:59:59pm) Submission: Submit report and Excel analysis files by uploading your files to the Finance 1 Assignment portal in Blackboard. Note that when saving and submitting the report and analysis files, please ensure that: - You upload the correct files and that the files are not corrupted in any way. As markers, we can only mark what is provided to us at the time of submission. - Each filename must include your name and student number, and the file extensions must be either .docx (report) or .xlsx (analysis). o For example, if Johnny Depp was studying Finance 1, he would save his report and analysis as:  Johnny Depp 1234567 Report.docx  Johnny Depp 1234567 Analysis.xlsx o Please note that file types that cannot be opened in Word or Excel, e.g. .numbers files, are not accepted. o Part of the assignment’s CRA relates to correct filenames. __________________________________________________________________________________ Outline Primitive Energy owns several coal seam gas reserves in south-west Queensland. As a relatively minor player in the Queensland Liquefied Natural Gas (LNG) market, Primitive does not have the capacity to transfer and process the gas for sale to domestic or international buyers. Instead, Primitive simply extracts the gas and then sells it immediately (at the well-head, which is at the surface) to one of the major gas companies operating in the area. Recently, Primitive entered into a contract to sell gas from one of its reserves for the fixed price of $4.45 per gigajoule (GJ) for the life of the reserve. With this contract in place, Primitive’s management are currently trying to determine whether they should extract the gas through conventional ‘Vertical’ drilling or the recently developed ‘Horizontal’ drilling. As indicated in Figure 1, the Vertical drilling approach drills to the coal seam while the Horizontal approach drills down to and then across the coal seam. Figure 1: Vertical and Horizontal Drilling Source: http://geology.com/articles/horizontal-drilling/ (modified) Additional points of note are summarised in Table 1. Table 1: Summary Points for Vertical and Horizontal Drilling Vertical: Smaller capital outlay, however, more wells are generally required due to smaller drainage area (the portion of the reserve that a well can access). Preliminary designs indicate project requires 100 Vertical wells. Horizontal: Higher capital outlay given length of drilling, technology and difficulty. Greater access to gas reserves and larger spacing between wells, which means fewer wells required. Preliminary designs indicate that project requires 50 Horizontal wells..

1. EFB210: FINANCE 1, Semester 1 2020
Capital Budgeting Report and Analysis
_____________________________________________________
______________________________
General Information
Marks: 25
Weight: 25%
Format: Report and Analysis
Due: 17 May 2020 (end of day, 11:59:59pm)
Submission: Submit report and Excel analysis files by
uploading your files to the Finance 1
Assignment portal in Blackboard. Note that when saving and
submitting the report
and analysis files, please ensure that:
- You upload the correct files and that the files are not
corrupted in any way. As
markers, we can only mark what is provided to us at the time of
submission.

2. - Each filename must include your name and student number,
and the file
extensions must be either .docx (report) or .xlsx (analysis).
o For example, if Johnny Depp was studying Finance 1, he
would save his
report and analysis as:
o Please note that file types that cannot be opened in Word or
Excel,
e.g. .numbers files, are not accepted.
o Part of the assignment’s CRA relates to correct filenames.
_____________________________________________________
_____________________________
Outline
Primitive Energy owns several coal seam gas reserves in south-
west Queensland. As a relatively
minor player in the Queensland Liquefied Natural Gas (LNG)

3. market, Primitive does not have the
capacity to transfer and process the gas for sale to domestic or
international buyers. Instead,
Primitive simply extracts the gas and then sells it immediately
(at the well-head, which is at the
surface) to one of the major gas companies operating in the
area. Recently, Primitive entered into a
contract to sell gas from one of its reserves for the fixed price
of $4.45 per gigajoule (GJ) for the life
of the reserve.
With this contract in place, Primitive’s management are
currently trying to determine whether they
should extract the gas through conventional ‘Vertical’ drilling
or the recently developed ‘Horizontal’
drilling. As indicated in Figure 1, the Vertical drilling approach
drills to the coal seam while the
Horizontal approach drills down to and then across the coal
seam.
Figure 1: Vertical and Horizontal Drilling
Source: http://geology.com/articles/horizontal-drilling/
(modified)
Additional points of note are summarised in Table 1.

4. Table 1: Summary Points for Vertical and Horizontal Drilling
Vertical: Smaller capital outlay, however, more wells are
generally required due to
smaller drainage area (the portion of the reserve that a well can
access).
Preliminary designs indicate project requires 100 Vertical wells.
Horizontal:
Higher capital outlay given length of drilling, technology and
difficulty.
Greater access to gas reserves and larger spacing between wells,
which
means fewer wells required. Preliminary designs indicate that
project
requires 50 Horizontal wells.
Specific detail on each of the well types including: capital
outlay, production, maintenance,
depreciation, state royalties, well drilling and capping schedule
and other related information
required for analysis is presented in the ‘Well Drilling
Information’ spreadsheet.
http://geology.com/articles/horizontal-drilling/
Task

5. Provide a detailed financial analysis of each well type and an
accompanying report that explains and
justifies methodology, recommends a well type and highlights
limitations with the analysis and
recommendations. To complete this task, the manager has
requested the following:
- The financial analysis is to be completed in Excel. The file is
to be easily adjustable for different
scenarios and all inputs must be in the one sheet called
‘Assumptions’ with the analysis of each
well conducted on a separate sheet.
- The report is to be short (600 words + 20% tolerance) and
written in a manner that can be
understood by a person with a basic understanding of financial
analytical tools. It should have
the following sections,
o Summary: Brief outline of task, methodology and
recommendation.
o Methodology: Explains and justifies the selected evaluation
metric.
o Recommendations: Recommends a preferred drilling approach

6. and provides insight into
why one drilling approach creates more value than another.
o Limitations: Highlights the key limitations with the analysis
and recommends
additional analysis to alleviate these limitations where
appropriate.
Psychological Science
23(6) 578 –581
© The Author(s) 2012
Reprints and permission:
sagepub.com/journalsPermissions.nav
DOI: 10.1177/0956797611436349
http://pss.sagepub.com
In 2012, nearly $530 billion will be spent on advertising
around the world (Oser, 2011). This staggering amount is pro-
jected to increase by 5% yearly, with some businesses spend-
ing up to 30% of their annual revenue on advertising. Whether
promoting consumer products, political candidates, or sound
health and investment behavior, persuasive communications
constitute a major domain of activity, and a substantial compo-
nent of the global economy. Psychological science plays a
prominent role in this field by identifying strategies to improve
the effectiveness of persuasive campaigns (Cialdini, 2007;
Petty & Cacioppo, 1996).
One such strategy, message tailoring, involves adapting per-
suasive messages to recipients’ characteristics. For example,

7. regulatory fit occurs when a message is framed to match the
recipient’s motivational orientation by focusing either on pro-
moting gains (e.g., “Product X builds healthy teeth!”) or pre-
venting losses (e.g., “Product X prevents cavities!”; Higgins,
2000). Messages that are congruent with an individual’s motiva-
tional orientation are processed more fluently and evaluated
more positively than incongruent messages are (Cesario, Grant,
& Higgins, 2004; Higgins, Idson, Freitas, Spiegel, & Molden,
2003; Lee & Aaker, 2004). These effects have been observed
across a diverse set of domains, including dental hygiene, smok-
ing cessation, and consumer purchases (Cesario, Higgins, &
Scholer, 2008; Kim, 2006; Labroo & Lee, 2006; Sherman,
Mann, & Updegraff, 2006).
Although message-person congruence effects have been
examined in relation to a variety of psychological characteris-
tics (Dijkstra, 2008), they have not yet been systematically
related to a comprehensive model of personality traits. Such
integration, however, would advance the message-framing lit-
erature by opening the door to exploring new ways to make
persuasive messages more personalized and effective. Exam-
ining message-person congruence effects within a comprehen-
sive model of personality would allow for a multidimensional
assessment of recipients’ characteristics with a single mea-
surement instrument. In contrast, most of the existing research
on message-person congruence effects has involved the use of
single psychological constructs, each requiring its own assess-
ment device. Existing research has examined congruence
effects primarily by separating message recipients into one of
two psychological categories (e.g., promotion- vs. prevention-
focused individuals or locomotion- vs. assessment-focused
Corresponding Author:
Jacob B. Hirsh, University of Toronto, Rotman School of
Management,

8. 105 St. George St., Toronto, Ontario M5S 3E6, Canada
E-mail: [email protected]
Personalized Persuasion: Tailoring
Persuasive Appeals to Recipients’
Personality Traits
Jacob B. Hirsh1, Sonia K. Kang1,2, and Galen V.
Bodenhausen3,4
1Rotman School of Management, University of Toronto;
2Department of Management, University of Toronto
Mississauga; 3Kellogg School of Management, Northwestern
University; and 4Department of Psychology, Northwestern
University
Abstract
Persuasive messages are more effective when they are custom-
tailored to reflect the interests and concerns of the intended
audience. Much of the message-framing literature has focused
on the advantages of using either gain or loss frames, depending
on the motivational orientation of the target group. In the
current study, we extended this research to examine whether
a persuasive appeal’s effectiveness can be increased by aligning
the message framing with the recipient’s personality profile.
For a single product, we constructed five advertisements, each
designed to target one of the five major trait domains of
human personality. In a sample of 324 survey respondents,
advertisements were evaluated more positively the more they
cohered with participants’ dispositional motives. These results
suggest that adapting persuasive messages to the personality
traits of the target audience can be an effective way of
increasing the messages’ impact, and highlight the potential
value of
personality-based communication strategies.
Keywords

9. attitudes, individual differences, personality, preferences
Received 10/3/11; Revision accepted 12/22/11
Research Report
http://crossmark.crossref.org/dialog/?doi=10.1177%2F09567976
11436349&domain=pdf&date_stamp=2012-04-30
Personalized Persuasion 579
individuals; Avnet & Higgins, 2003; Higgins et al., 2003). Uti-
lizing a model of personality based on dimensional variation
rather than categorical typologies could allow for more fine-
grained personalization of persuasive messages based on an
individual’s relative standing on a given trait dimension.
In the current study, we explored these possibilities by
examining whether message-person congruence effects can be
obtained by framing persuasive messages in terms of the
widely used Big Five personality dimensions (Goldberg,
1990). Each of the five personality dimensions reflects varia-
tion in a distinct motivational system: Extraverts are especially
sensitive to rewards and social attention (Lucas, Diener, Grob,
Suh, & Shao, 2000); agreeable individuals value communal
goals and interpersonal harmony (Graziano & Eisenberg,
1997); conscientious individuals value achievement, order,
and efficiency (Roberts, Chernyshenko, Stark, & Goldberg,
2005); neurotic individuals are especially sensitive to threats
and uncertainty (Carver, Sutton, & Scheier, 2000; Hirsh &
Inzlicht, 2008); and open individuals value creativity, innova-
tion, and intellectual stimulation (McCrae & Costa, 1997). We
hypothesized that a persuasive message would be more effec-
tive when framed to be congruent with the recipient’s person-

10. ality profile.
Method
A sample of American participants (N = 324) was recruited via
Amazon’s Mechanical Turk (203 females, 121 males; mean
age = 35.86 years, SD = 12.85; 79.0% Caucasian, 8.3% African
American, 4.9% Hispanic, 3.4% East Asian, 4.4% other).
We constructed five advertisements featuring a picture of a
cell phone and a few lines of text; the text was manipulated so
that each advertisement highlighted the motivational concerns
associated with one of the five major personality dimensions
(e.g., for extraversion: “With XPhone, you’ll always be where
the excitement is”; for neuroticism: “Stay safe and secure with
the XPhone”; see the Supplemental Material available online
for details). Participants rated the effectiveness of each adver-
tisement (5-point Likert scale ranging from strongly disagree
to strongly agree) by responding to the following six items: “I
find this advertisement to be persuasive,” “This is an effective
advertisement,” “I would purchase this product after seeing
this advertisement,” “Overall, I like this advertisement,” “This
advertisement has made me more interested in the product,”
and “I am interested in learning more about this product after
seeing this advertisement.” Responses to these items were
averaged together to form an overall rating of each advertise-
ment (α = .94).
Participants’ personality was then assessed with the Big
Five Aspect Scales (DeYoung, Quilty, & Peterson, 2007), a
valid and reliable measure (mean α = .83).
Results
Ratings of the five advertisements were highly intercorrelated
(average r = .56), which indicated shared variance across the
ratings due to differences in overall scale usage. To control for

11. this variance, we regressed the ratings for each advertisement
on the ratings for the four other advertisements, saving the
residuals. These residuals captured the variance in effective-
ness ratings uniquely associated with each advertisement and
were used in subsequent analyses.
To examine congruence effects, we regressed the residual-
ized ratings for each of the different advertisements on partici-
pants’ scores for each of the five personality traits (see Table
1).
In each case, an advertisement’s rated effectiveness increased
with participants’ scores on the targeted personality dimension.
Moreover, scores on the nontargeted dimensions did not
predict effectiveness ratings (i.e., the relationship between per-
sonality and effectiveness was unique to the targeted
personality
dimensions).
A secondary analysis tested whether the effectiveness rat-
ings were more highly correlated with scores on the matched
personality traits than with scores on the nonmatched traits.
Within each advertisement, the correlations with nonmatched
traits were averaged together and compared with the correla-
tion with the matched trait. The correlations with matched
traits were significantly larger than the correlations with non-
matched ones for the advertisements targeting four of the five
traits—extraversion: r
difference
= .23, t(321) = 2.96, p < .01;
Table 1. Results of the Regression Analysis: Scores on the Big
Five Traits as Predictors of Respondents’ Ratings of the
Advertisements’ Effectiveness
Advertisement framing

12. Predictor Extraversion Agreeableness Conscientiousness
Neuroticism Openness/intellect
Extraversion 0.17** −0.08 0.01 0.10 −0.01
Agreeableness −0.10 0.19** −0.02 0.00 −0.03
Conscientiousness −0.03 −0.08 0.13* 0.10 −0.01
Neuroticism 0.00 −0.07 −0.03 0.13* 0.04
Openness/intellect −0.11 0.00 −0.06 −0.07 0.13*
Note: The values in the table are standardized regression
coefficients.
*p < .05. **p < .01.
580 Hirsh et al.
agreeableness: r
difference
= .25, t(321) = 3.20, p < .01; conscien-
tiousness: r
difference
= .16, t(321) = 1.98, p < .05; and openness/
intellect: r
difference
= .14, t(321) = 1.77, p < .05. Although the
difference was nonsignificant for the advertisement targeting
neuroticism, it was in the predicted direction, r
difference
= .10,

13. t(321) = 1.56, p = .10. These results suggest that advertise-
ments targeting neuroticism may have somewhat less specific
effects than advertisements targeting the other Big Five
dimensions.
Discussion
These results mark the first demonstration of effective mes-
sage tailoring using a comprehensive model of recipients’
personality traits. Respondents judged an advertisement
emphasizing a particular motivational concern as more effec-
tive when that concern was congruent with their own personal-
ity characteristics. Message-person congruence effects were
thus observed by manipulating the framing of an appeal to
target a broad variety of motives, including desires for excite-
ment and social rewards (extraversion), connection with fam-
ily and community (agreeableness), efficiency and goal pursuit
(conscientiousness), safety and security (neuroticism), and
creativity and intellectual stimulation (openness/intellect).
The Big Five personality traits may thus provide a useful
framework for simultaneously assessing multiple dimensions
of a target audience’s psychological characteristics within a
single assessment instrument.
One provocative implication of these results is that they sug-
gest a pathway toward optimal message tailoring. Tailored mes-
sages are considerably more effective than one-size-fits-all
campaigns (Noar, Benac, & Harris, 2007), and the effectiveness
of tailoring increases with greater customization and adaptation
to the unique features of the recipient (Dijkstra, 2008). The cur-
rent results suggest that tailoring a message to an individual’s
personality profile may further increase the effectiveness of
per-
suasive campaigns. Such strategies are becoming increasingly
practical. Electronic retailers already use a variety of personal
information, such as purchase or site-visit history, to tailor their

14. online offers to individual consumers (e.g., Taylor, 2004).
These
same kinds of informational cues could be used to discern an
individual’s personality and frame subsequent messages accord-
ingly. Indeed, it has been established that reliable inferences
about personality can be obtained from an individual’s
Facebook profile (Back et al., 2010), e-mail address (Back,
Schmukle, & Egloff, 2008), and language use (Hirsh &
Peterson,
2009; Yarkoni, 2010), and the same may well be true for other
lingering signatures of online behavior.
Although message-person congruence led to more positive
evaluations of advertisements in our study, we should also
point out that there may be some circumstances in which con-
gruence could result in more negative evaluations. In particu-
lar, congruently framed messages may produce their effects by
increasing the attention that they are given (Kreuter, Bull,
Clark, & Oswald, 1999). This increased attention often appears
to be associated with a more positive evaluation, but may also
result in more negative evaluations when the message itself is
of low quality (Updegraff, Sherman, Luyster, & Mann, 2007).
Such findings suggest that the quality of a message may have
increased importance when the message is personalized.
Overall, these results confirm that tailoring messages to the
personality of the audience can be an effective communication
strategy. Although the effect sizes for all the traits were mod-
est, they are similar to those reported in previous message-
framing research. Additionally, even small differences in
effectiveness can have substantial impacts when advertise-
ments are used on a large scale. To the extent that persuasive
messages are tailored to multiple trait domains simultane-
ously, the benefits may be even more pronounced. The current
study focused on evaluations of product advertisements, and an

15. important goal for future research will be to examine the gener-
alizability of the reported effects to other persuasive appeals,
such as health-promotion, environmental-sustainability, and
political campaigns. Tailoring messages to match recipients’
personality characteristics appears to be a promising technique
worthy of greater study.
Declaration of Conflicting Interests
The authors declared that they had no conflicts of interest with
respect to their authorship or the publication of this article.
Supplemental Material
Additional supporting information may be found at
http://pss.sagepub
.com/content/by/supplemental-data
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AssumptionsGas Drilling Information SheetGeneral Information
Information NotesTotal Reserve Size (gigajoules -
GJs)250,000,000Price per gigajoule of production 4.45^1State
Royalties10.00%^2, ^3Tax30.00%^4Required Rate of
Return11.00%discount rate Vertical Well Drilling

20. InformationInformation Notes01234567891011121314Capital
expenditure ($s per well)3,000,000^5Well life (years)10^6Well
salvage ($s per well)- 0Well capping and rehabilitation expense
($s per well)300,000^7times the total number of wellsWell
production profile (GJs per
well)^7517,231744,250486,064288,770156,06176,72234,31113,
9585,1651,739total production per well100Well depreciation
methodstraightline^7, ^82,324,271232,427,071.69Well
operating costs ($s per GJ)1^7, ^9Working Capital - 0^10Wells
drilled in given years and their operating life^7, ^11Wells
drilled at the beginning of Year
12020202020202020202020Wells drilled at the beginning of
Year 22020202020202020202020Wells drilled at the beginning
of Year 32020202020202020202020Wells drilled at the
beginning of Year 42020202020202020202020Wells drilled at
the beginning of Year 52020202020202020202020Wells in
operation2040608010010010010010010080604020Wells
capped-20-20-20-20-20Horizontal Well Drilling
InformationInformation
Notes0123456789101112131415161718192021Capital
expenditure ($s per well)5,000,000^5Well life (years)17^6Well
salvage ($s per well)- 0times the total number of wellsWell
capping and rehabilitation expense ($s per well)300,000^7total
production per well50Well production profile (GJs per
well)^7680,9221,136,6921,068,150731,671463,089288,688181,
135115,28974,63049,15432,92322,40615,47710,8407,6915,5234
,0104,888,290244,414,502.05Well depreciation
methodstraightline^7, ^8Well operating costs ($s per GJ)1^7,
^9Working Capital - 0^10Wells drilled in given years and wells
in operation profile^7, ^11Wells drilled at the beginning of
Year 1101010101010101010101010101010101010Wells drilled
at the beginning of Year
2101010101010101010101010101010101010Wells drilled at the
beginning of Year
3101010101010101010101010101010101010Wells drilled at the
beginning of Year

21. 4101010101010101010101010101010101010Wells drilled at the
beginning of Year
5101010101010101010101010101010101010Wells in
operation102030405050505050505050505050505040302010Wel
ls capped-10-10-10-10-10Notes^1 Contract specifies that this is
a fixed price of gas at the wellhead over the life of project.^2 in
a given year, State Royalties ($) = State Royalties (%) x
(Revenue - Allowed Extraction Costs). Allowable Extraction
Costs include operating expenses and depreciation but exlcudes
the well capping and rehibilitation expense.^3 State Royalties
are tax deductible.^4 Tax is paid in the year of income. Note
that it is assumed that any tax loses in any year will offset tax
gains within the Primitive Energy tax consolidated group.^5
Capital expenditure on wells is recorded at the start of year in
which the well is drilled.^6 Wells must operate for stated life to
ensure well pressure is sufficiently low for well capping.^7 All
revenues and operating expenses are assumed to occur at the
end of given year.^8 Straight Line depreciation method
(depreciating down to zero over the life of the well).^9 Wages
and other operating expenses are all captured by the operating
cost per GJ.^10 Given the nature of the project, supply and
servicing contracts, project has no working capital
requirements.^11 Wells drilled in years as indicated. Capital
expenditure recorded at the beginning of the year. For example,
the beginning of Year 1 corresponds to the 0 column.
Vertical DCFGeneral Information Information Total Reserve
Size (gigajoules - GJs)250,000,000NotesPrice per gigajoule of
production 4.45^1 Contract specifies that this is a fixed price of
gas at the wellhead over the life of project.State
Royalties10.00%^2 in a given year, State Royalties ($) = State
Royalties (%) x (Revenue - Allowed Extraction Costs).
Allowable Extraction Costs include operating expenses and
depreciation but exlcudes the well capping and rehibilitation
expense.Tax30.00%^3 State Royalties are tax
deductible.Required Rate of Return11.00%^4 Tax is paid in the
year of income. Note that it is assumed that any tax loses in any

22. year will offset tax gains within the Primitive Energy tax
consolidated group.No. of wells100^5 Capital expenditure on
wells is recorded at the start of year in which the well is
drilled.Per year20^6 Wells must operate for stated life to ensure
well pressure is sufficiently low for well capping.Well Life
(years010^7 All revenues and operating expenses are assumed
to occur at the end of given year.Depr' methodStraight line ^8
Straight Line depreciation method (depreciating down to zero
over the life of the well).Dep' rate 10%^9 Wages and other
operating expenses are all captured by the operating cost per
GJ.Salvage Value 0^10 Given the nature of the project, supply
and servicing contracts, project has no working capital
requirements.working Capital0^11 Wells drilled in years as
indicated. Capital expenditure recorded at the beginning of the
year. For example, the beginning of Year 1 corresponds to the 0
column.Capital Expenditure per well3,000,000Capital
Expenditure for 100
wells300,000,000Year01234567891011Revenue46,033,602132,4
76,417129,779,162102,802,15069,447,09234,141,24015,268,20
16,211,2622,298,556773,773Operating Costs- 517,231-
744,250- 486,064- 288,770- 156,061- 76,722- 34,311-
13,958- 5,165- 1,739Well Capping and Rehabilition exp-
6,000,000- 12,000,000- 18,000,000- 24,000,000-
30,000,000- 30,000,000- 30,000,000- 30,000,000-
30,000,000-
30,000,000EBITDA39,516,371119,732,168111,293,09778,513,3
8039,291,0314,064,518- 14,766,110- 23,802,696-
27,706,609- 29,227,965Depreciation- 6,000,000-
12,000,000- 18,000,000- 24,000,000- 30,000,000-
30,000,000- 30,000,000- 30,000,000- 30,000,000-
30,000,0000Gain/Loss on
Sale0EBIT33,516,371107,732,16893,293,09754,513,3809,291,0
31- 25,935,482- 44,766,110- 53,802,696- 57,706,609-
59,227,965State
Royalties3,951,63711,973,21711,129,3107,851,3383,929,10340
6,452- 1,476,611- 2,380,270- 2,770,661- 2,922,797Tax-

23. 11,240,402- 35,911,615- 31,326,722- 18,709,415-
3,966,0407,658,70913,872,81616,854,89018,143,18118,645,229
NOPAT26,227,60683,793,76973,095,68543,655,3029,254,094-
17,870,321- 32,369,904- 39,328,076- 42,334,089-
43,505,533Add back Dep'. And
Gain/Loss6,000,00012,000,00018,000,00024,000,00030,000,000
30,000,00030,000,00030,000,00030,000,00030000000CF from
Ops.32,227,60695,793,76991,095,68567,655,30239,254,09412,1
29,679- 2,369,904- 9,328,076- 12,334,089-
13,505,533Cap.Ex- 60,000,000- 60,000,000- 60,000,000-
60,000,000- 60,000,000- 0- 0- 0- 0- 0- 0-
300,000,000Salvage 0Change in Working Capital00CFt-
60,000,000-
27,772,39435,793,76931,095,6857,655,30239,254,09412,129,67
9- 2,369,904- 9,328,076- 12,334,089- 13,505,533Discount
Factor1.00000.90090.81160.73120.65870.59350.53460.48170.4
3390.39090.3522PV of CFt- 60,000,000-
25,020,17529,051,02622,736,8975,042,78523,295,3946,485,022
- 1,141,484- 4,047,699- 4,821,701- 4,756,439NPV-
13,176,376Vertical Well Drilling InformationInformation
Notes01234567891011121314Capital expenditure ($s per
well)3,000,000^5Well life (years)10^6Well salvage ($s per
well)- 0Well capping and rehabilitation expense ($s per
well)300,000^7times the total number of wellsWell production
profile (GJs per
well)^7517,231744,250486,064288,770156,06176,72234,31113,
9585,1651,739total production per well100Well depreciation
methodstraightline^7, ^82,324,271232,427,071.69Well
operating costs ($s per GJ)1^7, ^9Working Capital - 0^10Wells
drilled in given years and their operating life^7, ^11Wells
drilled at the beginning of Year
12020202020202020202020Wells drilled at the beginning of
Year 22020202020202020202020Wells drilled at the beginning
of Year 32020202020202020202020Wells drilled at the
beginning of Year 42020202020202020202020Wells drilled at
the beginning of Year 52020202020202020202020Wells in

24. operation2040608010010010010010010080604020Wells
capped-20-20-20-20-20
Horizontal DCFGeneral Information Information Total Reserve
Size (gigajoules - GJs)250,000,000NotesPrice per gigajoule of
production 4.45^1 Contract specifies that this is a fixed price of
gas at the wellhead over the life of project.State
Royalties10.00%^2 in a given year, State Royalties ($) = State
Royalties (%) x (Revenue - Allowed Extraction Costs).
Allowable Extraction Costs include operating expenses and
depreciation but exlcudes the well capping and rehibilitation
expense.Tax30.00%^3 State Royalties are tax
deductible.Required Rate of Return11.00%^4 Tax is paid in the
year of income. Note that it is assumed that any tax loses in any
year will offset tax gains within the Primitive Energy tax
consolidated group.No. of wells50^5 Capital expenditure on
wells is recorded at the start of year in which the well is
drilled.Well Life (years)17^6 Wells must operate for stated life
to ensure well pressure is sufficiently low for well
capping.Depr' methodStraight line ^7 All revenues and
operating expenses are assumed to occur at the end of given
year.Dep' rate 6%^8 Straight Line depreciation method
(depreciating down to zero over the life of the well).Salvage
Value 0^9 Wages and other operating expenses are all captured
by the operating cost per GJ.working Capital0^10 Given the
nature of the project, supply and servicing contracts, project has
no working capital requirements.Capital Expenditure per
well5,000,000^11 Wells drilled in years as indicated. Capital
expenditure recorded at the beginning of the year. For example,
the beginning of Year 1 corresponds to the 0 column.Capital
Expenditure for 50
wells250,000,000Year0123456789101112131415161718Revenu
e30,301,025101,165,589142,598,073130,237,387103,037,28864,
233,02440,302,43825,651,82616,605,17810,936,7347,325,3754,
985,2333,443,6172,411,9811,711,3451,228,879892,327Operatin
g Costs- 680,922- 1,136,692- 1,068,150- 731,671-
463,089- 288,688- 181,135- 115,289- 74,630- 49,154-

25. 32,923- 22,406- 15,477- 10,840- 7,691- 5,523-
4,010Well Capping and Rehabilition exp- 3,000,000-
6,000,000- 9,000,000- 12,000,000- 15,000,000-
15,000,000- 15,000,000- 15,000,000- 15,000,000-
15,000,000- 15,000,000- 15,000,000- 15,000,000-
15,000,000- 15,000,000- 15,000,000-
15,000,000EBITDA26,620,10494,028,897132,529,922117,505,7
1787,574,19948,944,33625,121,30410,536,5371,530,548-
4,112,420- 7,707,548- 10,037,172- 11,571,860-
12,598,859- 13,296,347- 13,776,644-
14,111,683Depreciation- 2,941,176- 5,882,353- 8,823,529-
11,764,706- 14,705,882- 14,705,882- 14,705,882-
14,705,882- 14,705,882- 14,705,882- 14,705,882-
14,705,882- 14,705,882- 14,705,882- 14,705,882-
14,705,882- 14,705,8820Gain/Loss on Sale-
0EBIT23,678,92788,146,544123,706,393105,741,01172,868,316
34,238,45410,415,421- 4,169,345- 13,175,335- 18,818,303-
22,413,431- 24,743,054- 26,277,742- 27,304,741-
28,002,229- 28,482,526- 28,817,565State
Royalties2,667,8939,414,65413,270,63911,774,1018,786,8324,9
23,8452,541,5421,083,065182,467- 381,830- 741,343-
974,305- 1,127,774- 1,230,474- 1,300,223- 1,348,253-
1,381,757Tax- 7,904,046- 29,268,360- 41,093,110-
35,254,534- 24,496,544- 11,748,690-
3,887,089925,8843,897,8605,760,0406,946,4327,715,2088,221,
6558,560,5658,790,7368,949,2349,059,797NOPAT18,442,77468
,292,83995,883,92382,260,57857,158,60427,413,6099,069,874-
2,160,396- 9,095,008- 13,440,093- 16,208,342-
18,002,152- 19,183,861- 19,974,651- 20,511,716-
20,881,545- 21,139,525Add back Dep'. And
Gain/Loss2,941,1765,882,3538,823,52911,764,70614,705,88214
,705,88214,705,88214,705,88214,705,88214,705,88214,705,882
14,705,88214,705,88214,705,88214,705,88214,705,88214,705,8
82CF from
Ops.21,383,95074,175,192104,707,45294,025,28471,864,48642,
119,49223,775,75712,545,4875,610,8751,265,789- 1,502,459-

26. 3,296,270- 4,477,979- 5,268,769- 5,805,834- 6,175,663-
6,433,643Cap.Ex- 50,000,000- 50,000,000- 50,000,000-
50,000,000- 50,000,0000000000000000Salvage 0Change in
Working Capital00CFt- 50,000,000-
28,616,05024,175,19254,707,45244,025,28471,864,48642,119,4
9223,775,75712,545,4875,610,8751,265,789- 1,502,459-
3,296,270- 4,477,979- 5,268,769- 5,805,834- 6,175,663-
6,433,643Discount
Factor1.00000.90090.81160.73120.65870.59350.53460.48170.4
3390.39090.35220.31730.28580.25750.23200.20900.18830.1696
PV of CFt- 50,000,000-
25,780,22519,621,12840,001,61729,000,81842,648,07522,518,8
0011,451,7935,443,8192,193,430445,791- 476,705- 942,208-
1,153,143- 1,222,327- 1,213,445- 1,162,829-
1,091,356NPV90,283,034Horizontal Well Drilling
InformationInformation
Notes0123456789101112131415161718192021Capital
expenditure ($s per well)5,000,000^5Well life (years)17^6Well
salvage ($s per well)- 0times the total number of wellsWell
capping and rehabilitation expense ($s per well)300,000^7total
production per well50Well production profile (GJs per
well)^7680,9221,136,6921,068,150731,671463,089288,688181,
135115,28974,63049,15432,92322,40615,47710,8407,6915,5234
,0104,888,290244,414,502.05Well depreciation
methodstraightline^7, ^8Well operating costs ($s per GJ)1^7,
^9Working Capital - 0^10Wells drilled in given years and wells
in operation profile^7, ^11Wells drilled at the beginning of
Year 1101010101010101010101010101010101010Wells drilled
at the beginning of Year
2101010101010101010101010101010101010Wells drilled at the
beginning of Year
3101010101010101010101010101010101010Wells drilled at the
beginning of Year
4101010101010101010101010101010101010Wells drilled at the
beginning of Year
5101010101010101010101010101010101010Wells in

27. operation102030405050505050505050505050505040302010Wel
ls capped-10-10-10-10-10