Case Interview Questions #00414: The client Chesapeake Energy (NYSE: CHK) is the second largest producer of natural gas in the United States and the most active driller of new wells. Headquartered in Oklahoma City, Oklahoma, the company’s operations are focused on the development of onshore unconventional and conventional natural gas in the US.
Recently, the client Chesapeake Energy is considering adding capacity. They need to decide whether to drill and build a new well for natural gas, which would involve a major capital investment. Should the client pursue this venture or not?
Additional Information: (to be provided to you if asked)
- The capital investment for the new natural gas well would cost USD $300 million.
- The new well has a 10-year useful life, and would produce 3 units of natural gas a year.
- Natural gas is a relatively plentiful but finite natural resource that cannot be easily replaced.
- Natural gas is a large domestic industry in the US. Natural gas can be used for automobile fuel, but is primarily used for heating and industrial purposes.
- Natural gas price and U.S. demand in the last 10 years will be given to you upon request: