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Gold/Mining/Energy : Big Dog's Boom Boom Room
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To: JimisJim who wrote (123993)9/2/2009 8:55:57 PM
From: Elroy Jetson  Read Replies (1) of 206092
 
If Petrobras uses hurdle prices, their hurdle price for their risky and expensive offshore wells should be far lower than their more certain and less costly projects, not higher.

Using a price hurdle rate rather than an ROI with a target price:

you might use $42 per barrel for investment in an existing producing platform to keep it in production;

you might use $34 per barrel for a new step-out well to expand a producing field;

you might use $27 per barrel for a risky offshore well outside of a confirmed field. Because the investment is risky you want to know it will pay off at a lower price, or provide you a higher return at a higher price per barrel to pay you for taking the risk.
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