Abstract
This two-part series is designed provide an advanced simulation modeling exercise within reach of the average MBA student on a topic of great interest. The A case provides this. The B case allows an even more challenging experience for the more sophisticated members of the class. Birch Oil has been offered a farm-out deal to drill a well in Terrebonne Parish, Louisiana. They also have the option, if the well is successful to drill a second well a year later. The A case focuses on the decision of whether or not to accept the deal, which requires that they value the embedded option. The B case allows Birch the additional option of waiting an extra year 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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