...following questions about MW Petroleum Corp. This assignment is worth a maximum of 100 points. 1. (10 points.) Apart from any quantitative analysis, are there any reasons to anticipate that Apache Corporation’s acquisition of MW Petroleum might be a positive net present value activity for Apache, for Amoco? Explain. This looks like an attractive deal for both parties. Amoco does many things well, but managing smaller, marginally productive oil and gas fields apparently isn’t one of them. This is a chance to unload some properties that because of their high cost structure, Amoco can’t manage profitably. Apache, on the other hand, has low costs and is an efficient operator of small- to mediumsized properties. The company has grown significantly in recent years by acquiring less wellrun properties and applying its “rationalize and reconfigure” strategy. The MW Petroleum properties appear to offer the opportunity to continue this strategy. If Amoco can strike a price wherein Apache shares some of its operating savings with Amoco, both parties can generate positive net present values from the transaction. Acquisition of MW Petroleum may also reduce the volatility of Apache’s cash flows by making them less dependent on gas. Although this may not benefit shareholders directly, it will likely enable management to sleep better and might increase Apache’s borrowing capacity, thereby benefiting shareholders indirectly. 2. (10 points.) Whose projections appear in the case exhibits? From Apache’s...
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...MW corp By michael_manly | Studymode.com Draft MW Petroleum Corporation (A) Background: In late 1990, the group of Amoco Corporation and Apache Corporation had begun talking regarding the possible acquisition of MW Petroleum from Amoco to Apache. MW Petroleum Corporation is a wholly owned subsidiary of Amoco Corporation which has its own reserves, management team and with full ownership in geologic and engineering data. MW Petroleum, a free-standing exploration company that was even as large as some of independent oil companies. It operated exploration and development for well, approximately working interests in 9,500 wells in 300 production areas. The growth of MW was very attractive to the other investors, which company grows 30% per year since mid-1980s, due to large acquisition. If the acquisition will push through, this will be one of the largest acquisition in that period because MW size was two times large compare to Apache’s current operation. Amoco Corporation Amoco Corporation was formerly Standard Oil Company (Indiana) was built in 1889 located at Whiting, Indiana, United States. The company was acquired by American Oil Company which founded in Baltimore in 1910 and incorporated in 1922. In 1998, Amoco merged with BP which one of the biggest oil company in England. The company contributes to the modern industry, their innovation was breaks into two parts, the gasoline tanker truck which used to designed to carry liquefied loads, dry bulk cargo or gases on...
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...Dt WĞƚƌŽůĞƵŵ ŽƌƉ͘ ; Ϳ ;ϲ ƋƵĞƐƚŝŽŶƐͿ ^ƵŐŐĞƐƚĞĚ YƵĞƐƚŝŽŶƐ ϭ͘Ͳ ǀĂůƵĂƚĞ ŵŽĐŽ͛Ɛ ĂŶĚ ƉĂĐŚĞ͛Ɛ ĐŽƌƉŽƌĂƚĞ ŽďũĞĐƚŝǀĞƐ ĂŶĚ ƐƚƌĂƚĞŐŝĞƐ͘ /Ɛ ŝƚ ƌĞĂƐŽŶĂďůĞ ƚŽ ĞdžƉĞĐƚ ƚŚĂƚ ƚŚĞ Dt ƉƌŽƉĞƌƚŝĞƐ ĂƌĞ ŵŽƌĞ ǀĂůƵĂďůĞ ƚŽ ƉĂĐŚĞ ƚŚĂŶ ƚŽ ŵŽĐŽ͍ tŚĂƚ ƐŽƵƌĐĞƐ ŽĨ ǀĂůƵĞ ŵŽƐƚ ƉůĂƵƐŝďůĞ ĂĐĐŽƵŶƚ ĨŽƌ ƚŚĞ ĚŝĨĨĞƌĞŶĐĞ ďĞƚǁĞĞŶ ďƵLJĞƌ ĂŶĚ ƐĞůůĞƌ͍ Ϯ͘Ͳ ŽĞƐ ƚŚŝƐ ĚĞĂů ŵĂŬĞ ƐĞŶƐĞ͍ tŚLJ͍ ZĞĂƐŽŶƐ ƚŽ ƉĞƌĨŽƌŵ ǀĂůƵĂƚŝŽŶ ϯ͘Ͳ ^ƚƌƵĐƚƵƌĞ ĂŶĚ ĞdžĞĐƵƚĞ Ă ĚŝƐĐŽƵŶƚĞĚ ĐĂƐŚ ĨůŽǁ ǀĂůƵĂƚŝŽŶ ŽĨ Ăůů ƚŚĞ Dt ƌĞƐĞƌǀĞƐ ƵƐŝŶŐ Ws͘ ,Žǁ ŵƵĐŚ ĂƌĞ ƚŚĞ ƌĞƐĞƌǀĞƐ ǁŽƌƚŚ͍ /Ɛ LJŽƵƌ ĞƐƚŝŵĂƚĞ ŵŽƌĞ ůŝŬĞůLJ ƚŽ ďĞ ďŝĂƐĞĚ ŚŝŐŚ Žƌ ůŽǁ͍ tŚĂƚ ĂƌĞ ƚŚĞ ƐŽƵƌĐĞƐ ŽĨ ďŝĂƐ͍ /Ŷ ŽƌĚĞƌ ƚŽ ƐŽůǀĞ ƚŚŝƐ ƋƵĞƐƚŝŽŶ ƉůĞĂƐĞ ĐŽŶƐŝĚĞƌ͗ ĂͿ hƐĞ ĂŐŐƌĞŐĂƚĞ ƉƌŽũĞĐƚŝŽŶƐ ; džŚŝďŝƚ ϳͿ ĂŶĚ ĂŶLJ ŽƚŚĞƌ ƵƐĞĨƵů ŝŶĨŽƌŵĂƚŝŽŶ ďͿ ŚĞĐŬ ĂƐƐƵŵƉƚŝŽŶƐ ŝŶ ĐĂƐŚ ĨůŽǁ͗ ǁŚŽƐĞ ƉƌŽũĞĐƚŝŽŶƐ͍ ĐͿ ŽŵƉƵƚĞ ĚŝƐĐŽƵŶƚ ƌĂƚĞ ;ƌĞͿ ĚͿ ŽŵƉƵƚĞ ǀĂůƵĞ ŽĨ ƚŚĞ ĂůůͲĞƋƵŝƚLJ Ĩŝƌŵ ĞͿ ^ŝĚĞ ĞĨĨĞĐƚƐ͗ /d^ ;ŝŶƚĞƌĞƐƚ ƚĂdž ƐŚŝĞůĚͿ͘ ŽŶƐŝĚĞƌ ƐƚĂƌƚŝŶŐ ĚĞďƚ ĐĂƉĂĐŝƚLJ ĂŶĚ ĚĞĐĂLJ ƌĂƚĞ ŽĨ ĚĞďƚ ĐĂƉĂĐŝƚLJ ;ŶĞŐĂƚŝǀĞ ŐͿ ĨͿ WƌĞƐĞŶƚ ǀĂůƵĞ ŽĨ ƚĂdž ƐŚŝĞůĚƐ ŐͿ KƚŚĞƌ ;ĞdžƉůŽƌĂƚŝŽŶ ŽƉƉŽƌƚƵŶŝƚŝĞƐͿ͘ KŶůLJ ĨŽƌ ƚŚĞŽƌĞƚŝĐĂů ĚŝƐĐƵƐƐŝŽŶ ϰ͘Ͳ ,Žǁ ǁŽƵůĚ LJŽƵ ƐƚƌƵĐƚƵƌĞ ĂŶ ĂŶĂůLJƐŝƐ ŽĨ Dt ĂƐ Ă ƉŽƌƚĨŽůŝŽ ŽĨ ĂƐƐĞƚƐͲŝŶͲƉůĂĐĞ ĂŶĚ ŽƉƚŝŽŶƐ͍ ^ƉĞĐŝĨŝĐĂůůLJ͕ ǁŚŝĐŚ ƉĂƌƚƐ ŽĨ ƚŚĞ ďƵƐŝŶĞƐƐ ƐŚŽƵůĚ ďĞ ƌĞŐĂƌĚĞĚ ĂƐ ĂƐƐĞƚƐͲŝŶͲƉůĂĐĞ ĂŶĚ ǁŚŝĐŚ ĂƐ ŽƉƚŝŽŶƐ͍ ^ƉĞĐŝĨŝĐĂůůLJ͕ ǁŚŝĐŚ ƉĂƌƚƐ ŽĨ ƚŚĞ ďƵƐŝŶĞƐƐ ƐŚŽƵůĚ ďĞ ƌĞŐĂƌĚĞĚ ĂƐ ĂƐƐĞƚƐͲŝŶͲƉůĂĐĞ ĂŶĚ ǁŚŝĐŚ ĂƐ ŽƉƚŝŽŶƐ͍ tŚĂƚ ŬŝŶĚ ŽĨ ŽƉƚŝŽŶƐ ĂƌĞ ƉƌĞƐĞŶƚ͍ ^ŚŽƵůĚ ƚŚŝƐ ĂƉƉƌŽĂĐŚ LJŝĞůĚ Ă ŚŝŐŚĞƌ Žƌ ůŽǁĞƌ ǀĂůƵĞ ƚŚĂŶ ƚŚĞ ĂůůͲ Ws ĂƉƉƌŽĂĐŚ LJŽƵ ĞŵƉůŽLJĞĚ ĂďŽǀĞ͍ ...
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...questions about MW Petroleum Corp. This assignment is worth a maximum of 100 points. 1. (10 points.) Apart from any quantitative analysis, are there any reasons to anticipate that Apache Corporation’s acquisition of MW Petroleum might be a positive net present value activity for Apache, for Amoco? Explain. This looks like an attractive deal for both parties. Amoco does many things well, but managing smaller, marginally productive oil and gas fields apparently isn’t one of them. This is a chance to unload some properties that because of their high cost structure, Amoco can’t manage profitably. Apache, on the other hand, has low costs and is an efficient operator of small- to medium-sized properties. The company has grown significantly in recent years by acquiring less well-run properties and applying its “rationalize and reconfigure” strategy. The MW Petroleum properties appear to offer the opportunity to continue this strategy. If Amoco can strike a price wherein Apache shares some of its operating savings with Amoco, both parties can generate positive net present values from the transaction. Acquisition of MW Petroleum may also reduce the volatility of Apache’s cash flows by making them less dependent on gas. Although this may not benefit shareholders directly, it will likely enable management to sleep better and might increase Apache’s borrowing capacity, thereby benefiting shareholders indirectly. 2. (10 points.) Whose projections appear in the case exhibits...
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...value and yet certain issues will always arise. This case attempts to tackle two approaches in real asset valuation: Discounted Cash Flow (DCF) analysis and the issues surrounding such, as well as the Black-Scholes Model for Real Options. Questions to be addressed in the study are: 1. Evaluate Amoco’s and Apache’s corporate objectives and strategies. Is it reasonable to expect that the MW properties are more valuable to Apache than to Amoco? What sources of value most plausibly account for the difference between buyer and seller? 2. Structure and execute a DCF valuation of all the MW reserves. How much are the reserves worth? Is your estimate more likely to be biased high or low? What are the sources of bias? 3. How would you structure an analysis of MW as a portfolio of assets in place and options? Specifically, which parts of the business should be regarded as assets in place and which as options? What kinds of options are present? Should this approach yield a higher or lower value that the DCF approach? 4. Execute the analysis you structured in Question 3, beginning with assets in place. How risky are the assets that underlie the options; i.e. how would you estimate SD for each? How much is the whole portfolio worth? 5. Assuming a sale goes through, how does Apache exercise each of the various options? When should it do so? BACKGROUND In a case prepared by Barbara Wall at the Harvard Business School, entitled MW Petroleum...
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...following questions about MW Petroleum Corp. This assignment is worth a maximum of 100 points. 1. (10 points.) Apart from any quantitative analysis, are there any reasons to anticipate that Apache Corporation’s acquisition of MW Petroleum might be a positive net present value activity for Apache, for Amoco? Explain. This looks like an attractive deal for both parties. Amoco does many things well, but managing smaller, marginally productive oil and gas fields apparently isn’t one of them. This is a chance to unload some properties that because of their high cost structure, Amoco can’t manage profitably. Apache, on the other hand, has low costs and is an efficient operator of small- to mediumsized properties. The company has grown significantly in recent years by acquiring less wellrun properties and applying its “rationalize and reconfigure” strategy. The MW Petroleum properties appear to offer the opportunity to continue this strategy. If Amoco can strike a price wherein Apache shares some of its operating savings with Amoco, both parties can generate positive net present values from the transaction. Acquisition of MW Petroleum may also reduce the volatility of Apache’s cash flows by making them less dependent on gas. Although this may not benefit shareholders directly, it will likely enable management to sleep better and might increase Apache’s borrowing capacity, thereby benefiting shareholders indirectly. 2. (10 points.) Whose projections appear in the case exhibits? From Apache’s...
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...Harvard Business School 9 - 2 9 5 -029 Rev. November 21, 1994 MW Petroleum Corporation (A) In late 1990, executives, engineers, and financial advisors working for Amoco Corporation and Apache Corporation began serious discussions about the sale to Apache of MW Petroleum Corporation, a wholly-owned subsidiary of Amoco Production Company. Amoco had transferred to MW certain of its own assets that it regarded as non-strategic. MW's size, location, and operations were all very attractive to Apache, which had grown nearly 30% per year since the mid-1980s, largely through acquisitions. The transaction being discussed with Amoco would be Apache's largest to date. It would more than double the size of Apache's current operations, as well as its reserves of oil and natural gas. By the end of January 1991, Apache's executives and advisors were sufficiently familiar with the properties in MW to begin refining their estimates of operating and financial performance in order to structure a formal offer. Apache's chief financial officer, Mr. Wayne Murdy, knew that financing would be a challenge, given the size of the proposed transaction. In fact, the availability of external financing, bank debt in particular, was likely to impose some practical limits on both the amount and form of consideration that Apache could offer to Amoco. It was essential that Apache carefully evaluate MW, both the whole and its parts, and study the likely patterns of cash flows so that some...
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...REAL OPTION VALUATION: MW PETROLEUM I. Company background and description on each of 4 projects In 1991, Amoco Corporations, a conglomerate of petroleum and chemical corporations, decided to divest some of their smaller properties and when further cuts were needed, they looked to divest the middle section of assets in its marginal curve. As a result, they formed MW Petroleum, a free-standing exploration company that was even as large as some of independent oil companies. It operated exploration and development for well, approximately working interests in 9,500 wells in 300 production areas. Amoco then prepared to sell MW Petroleum to a mid-size independent petroleum company. Apache Corporation was interested in buying most portions of MW and was the only buyer that appears to be a good fit in the market at that time. Apache, with revenue of $270 million, believed that achieving high profit could be realized by acquiring marginal properties and operating well with expertise. Therefore, the deal was likely to be a win-win situation for both parties, if they could reach a reasonable price to accept. The asking price from Amoco was $1 billion. Was it a reasonable price? We will discuss this number, and find a conclusion to this question through our document. II. Valuation Methodology Generally, the Discounted Cash Flow method is the most popular valuation methodology for financial analysts. It uses the concept of time value of money; the future cash flows are estimated...
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...November 21, 1994 Educational material supplied by The Case Centre Copyright encoded A76HM-JUJ9K-PJMN9I Order reference F261237 In late 1990, executives, engineers, and financial advisors working for Amoco Corporation and Apache Corporation began serious discussions about the sale to Apache of MW Petroleum Corporation, a wholly-owned subsidiary of Amoco Production Company. Amoco had transferred to MW certain of its own assets that it regarded as non-strategic. MW's size, location, and operations were all very attractive to Apache, which had grown nearly 30% per year since the mid-1980s, largely through acquisitions. The transaction being discussed with Amoco would be Apache's largest to date. It would more than double the size of Apache's current operations, as well as its reserves of oil and natural gas. By the end of January 1991, Apache's executives and advisors were sufficiently familiar with the properties in MW to begin refining their estimates of operating and financial performance in order to structure a formal offer. Apache's chief financial officer, Mr. Wayne Murdy, knew that financing would be a challenge, given the size of the proposed transaction. In fact, the availability of external financing, bank debt in particular, was likely to impose some practical limits on both the amount and form of consideration that Apache could offer to Amoco. It was essential that Apache carefully evaluate MW, both the whole and its parts, and study the likely patterns...
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...second revenue stream from sale of electricity. Recently-developed liquid-phase synthesis reactors are especially attractive for ‘‘oncethrough’’ processing. Both ‘‘recycle’’ and ‘‘once-through’’ plant configurations are evaluated in this paper. Because synthesis catalysts are poisoned by sulfur, essentially all sulfur must be removed upstream. Upstream removal of CO2 from the synthesis gas is also desirable to maximize synthesis productivity, and it provides an opportunity for partial decarbonization of the process, whereby the removed CO2 can be captured for underground storage. The analysis here suggests that co-capture and co-storage of CO2 and H2S (if this is proven technically feasible) could have important favorable impacts in some cases on liquid fuel production costs. Furthermore, the lifecycle CO2 emissions from production and use...
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...FI 8320, Spring 2005 Cases and Readings in Corporate Finance [pic] [pic] [pic] [pic] Instructor Professor David C. Nachman Office: RCB 1239 Phone: 651-1696 email: dnachman@gsu.edu Office Hours: W 10:00 am – 2:00 pm, or by appointment Prerequisites FI 8000 CSP: 1, 2, 6 Course Description This course focuses on financial policy-making through case analyses, contemporary readings from the professional literature, and problem solving. The emphasis in the course is on investment and financing decisions and their impact on firm value and on capital market imperfections and their impact on the raising of corporate capital. The course also provides an opportunity for the study of additional topics of special current significance such as capital structure and dividend policy, corporate restructuring and the market for corporate control, real options, risk management, international capital budgeting and financing, financial planning and working capital management, project financing, reorganizations and advanced equity valuation. Course Material Required text material • (BMA) R. A. Brealey, S. C. Myers and F. Allen, Principles of Corporate Finance, 8th ed., McGraw- Hill/Irwin, Inc., 2006. •(RP) Reading Packet •(CP) Case Packet The required text (BMA) and the materials that make up the Case Packet (CP) are available at the GSU Book Store. The Reading Packet (RP) is available at ERes. Contents of (CP) and (RP) (with ERes access instructions) follow...
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...FI 4320, Spring 2005 Cases and Readings in Corporate Finance [pic] [pic] [pic] [pic] Instructor Professor David C. Nachman Office: RCB 1239 Phone: 651-1696 email: dnachman@gsu.edu Office Hours: W 10:00 am – 2:00 pm, or by appointment Prerequisites FI 4000 CSP: 1, 2, 4, 6 Course Description This course focuses on financial policy-making through case analyses, contemporary readings from the professional literature, and problem solving. The emphasis in the course is on investment and financing decisions and their impact on firm value and on capital market imperfections and their impact on the raising of corporate capital. The course also provides an opportunity for the study of additional topics of special current significance such as capital structure and dividend policy, corporate restructuring and the market for corporate control, real options, risk management, international capital budgeting and financing, financial planning and working capital management, project financing, reorganizations and advanced equity valuation. Course Material Required text material • (BMA) R. A. Brealey, S. C. Myers and F. Allen, Principles of Corporate Finance, 8th ed., McGraw- Hill/Irwin, Inc., 2006. •(RP) Reading Packet •(CP) Case Packet The required text (BMA) and the materials that make up the Case Packet (CP) are available at the GSU Book Store. The Reading Packet (RP) is available at ERes. Contents of (CP) and (RP) (with ERes access instructions)...
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...Question 1 The rationale of an Apache acquisition of MW Petroleum is plausible, yet there are outstanding concerns. By completing a deal, Apache stands to benefit from several aspects. First, MW isa large company which has more than double Apache’s reserves and it includesproperties that are well-suited to Apache’s operating capabilities. Moreover, on behalf of MW, Amoco operated fields accounting for approximately 80% of MW’s production. Such high operating percentage would promise Apache significant cost-saving opportunities. The acquisition would more than double Apache’s reserves, it would shift Apache’s oil-to-gas ratio from 20-80 to 40-60, and would further diversify Apache geographically. Shifting the oil-to-gas ratio is important because gas prices were highly volatile during this time period while oil was less volatile and, therefore, more predictable. Apache’s revenue stream was high levered and the company’s acquisition driven growth strategy would be more difficult when there is an instability of gas prices. With an acquisition, Apache could also recognize several synergies that would make the deal even more attractive. The properties of MW would diversify Apache geographically and make it more stable in the US market.These include acquired technical data (further exploration possibilities) and several production optimization techniques. Apache would have access to Amoco’s data, which could lead to undiscovered reserves despite that both parties agreed that...
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...Finance 725 Spring 2006 J. E. Hodder Corporation Finance Course Schedule Tuesday, January 17: Introduction Thursday, January 19: Clarkson Lumber Company Reading: Note on Financial Analysis a. How is the company's financial performance? (Examine appropriate financial ratios.) b. Why has Clarkson Lumber borrowed increasing amounts despite its consistent profitability? c. How has Mr. Clarkson met the financing needs of the company during the period 1993 through 1995? Has the financial strength of Clarkson Lumber improved or deteriorated? d. How attractive is it to take trade discounts? Tuesday, January 24: Clarkson Lumber Company (continued) Reading: a. Note on Financial Forecasting b. Note on Bank Loans a. How much of a loan will Mr. Clarkson need to finance the expected expansion in sales to $5.5 million in 1996 and to take all the trade discounts? (Prepare a projected income statement for 1996 and a pro forma balance sheet as of December 31, 1996.) b. As Mr. Clarkson’s financial adviser, would you urge him to go ahead with, or to reconsider, his anticipated expansion and plans for additional debt financing? c. As the banker, would you approve Mr. Clarkson’s loan request; and if so, what conditions would you put on the loan? Thursday, January 26: SureCut Shears, Inc. ...
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...Chapter 14 Energy Energy is considered to be the lifeline of economic development. For a developing economy with a high population growth rate, it is important to keep a balance between energy supply and emerging needs. If corrective measures are not effectively anticipated significant constraints start emerging for development activities. The rise in global energy demand has raised questions regarding energy security and increased the focus on diversification, generation and efficient allocation. The answer lies in the attainment of optimal energy mix through fuel substitution by promoting energy efficiency and renewable energy and interregional co-operation. However, oil and natural gas will continue to be the world’s top two energy sources through 2040; accounting for about 60 percent of global demand. Gas being the fastest growing major fuel source over this period is expected to grow at 1.6 percent per year from 2010 to 2040 as estimated by “The Outlook for Energy: A View to 2040” is given in Figure-14.1. Figure 14.1: Global energy demand by fuel type (Quadrillion BTUs) 250 Quadrillions British Thermal Units 2010 200 150 100 2040 2040 2010 From its peak in 2025, coal will decline by more than 10 percent of total Hydro/Geo 2010 2040 Latin America and China are the biggest users of hydro power, which makes up over 80 percent of total Hydro/Geo supplies 2040 50 0 2010 2010 2040 2010 2040 2010 2040 Source: The Outlook for Energy: Aview...
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