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    Midland Energy Resources

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    Savage
    The document provides financial information for Midland Energy Resources across multiple years and business segments. It includes income statements, balance sheets, business segment details, stock and dividend data, comparable companies, and weighted average cost of capital calculations. The key figures are revenues of $251 million in 2006, net income of $18.9 million in 2006, total assets of $262 million in 2006, and a weighted average cost of capital of 8.56%.

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    Midland Energy Resources

    Uploaded by

    Savage
    354 views21 pages
    The document provides financial information for Midland Energy Resources across multiple years and business segments. It includes income statements, balance sheets, business segment details, stock and dividend data, comparable companies, and weighted average cost of capital calculations. The key figures are revenues of $251 million in 2006, net income of $18.9 million in 2006, total assets of $262 million in 2006, and a weighted average cost of capital of 8.56%.

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    Evaluation of Midland

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    The document provides financial information for Midland Energy Resources across multiple years and business segments. It includes income statements, balance sheets, business segment details, stock and dividend data, comparable companies, and weighted average cost of capital calculations. The key figures are revenues of $251 million in 2006, net income of $18.9 million in 2006, total assets of $262 million in 2006, and a weighted average cost of capital of 8.56%.

    Copyright:

    © All Rights Reserved
    Download as XLS, PDF, TXT or read online from Scribd
    Download as xls, pdf, or txt
    354 views21 pages

    Midland Energy Resources

    Uploaded by

    Savage
    The document provides financial information for Midland Energy Resources across multiple years and business segments. It includes income statements, balance sheets, business segment details, stock and dividend data, comparable companies, and weighted average cost of capital calculations. The key figures are revenues of $251 million in 2006, net income of $18.9 million in 2006, total assets of $262 million in 2006, and a weighted average cost of capital of 8.56%.

    Copyright:

    © All Rights Reserved
    Download as XLS, PDF, TXT or read online from Scribd
    Download as xls, pdf, or txt
    of 21

    MIDLAND ENERGY RESOURCES

    Project:
    Analysis:
    Draft:
    Footer:

    MIDLAND ENERGY RESOURCES


    Income Statement
    N
    Harvard Business Publishing

    Income Statement

    Harvard Business Publishing

    MIDLAND ENERGY RESOURCES

    Income Statement

    Operating Results
    Operating Results:
    Operating Revenues
    Plus: Other Income
    Total Revenue & Other Income
    Less: Crude Oil & Product Purchases
    Less: Production & Manufacturing
    Less: Selling, General & Administrative
    Less: Depreciation & Depletion
    Less: Exploration Expense
    Less: Sales Based Taxes
    Less: Other Taxes & Duties
    Operating Income
    Less: Interest Expense
    Less: Other Non-Operating Expenses
    Income Before Taxes
    Less: Taxes
    Net Income

    2004
    201,425
    1,239
    202,664
    94,672
    15,793
    9,417
    6,642
    747
    18,539
    27,849
    29,005
    10,568
    528
    17,910
    7,414
    10,496

    2005
    249,246
    2,817
    252,062
    125,949
    18,237
    9,793
    6,972
    656
    20,905
    28,257
    41,294
    8,028
    543
    32,723
    12,830
    19,893

    2006
    248,518
    3,524
    252,042
    124,131
    20,079
    9,706
    7,763
    803
    20,659
    26,658
    42,243
    11,081
    715
    30,447
    11,747
    18,701

    NOPAT

    25,945

    Tax Rate
    41.40%

    39.21%

    38.58%

    Harvard Business Publishing

    MIDLAND ENERGY RESOURCES

    Project:
    Analysis:
    Draft:
    Footer:

    MIDLAND ENERGY RESOURCES


    Balance Sheet
    N
    Harvard Business Publishing

    Balance Sheet

    Harvard Business Publishing

    MIDLAND ENERGY RESOURCES

    Assets:
    Cash & Cash equivalents
    Restricted Cash
    Notes Receivable
    Inventory
    Prepaid Expenses
    Total Current Assets

    2005
    16,707
    3,131
    18,689
    6,338
    2,218
    47,083

    2006
    19,206
    3,131
    19,681
    7,286
    2,226
    51,528

    30,140
    156,630
    10,818
    244,671

    34,205
    167,350
    9,294
    262,378

    Liabilities & Owners' Equity:


    Accounts Payable & Accrued Liabilities
    Current Portion of Long Term Debt
    Taxes Payable
    Total Current Liabilities

    24,562
    26,534
    5,723
    56,819

    26,576
    20,767
    5,462
    52,805

    Long Term Debt


    Post Retirement Benefit Obligations
    Accrued Liabilities
    Deferred Taxes
    Other Long Term Liabilities

    82,414
    6,950
    4,375
    14,197
    2,423

    81,078
    9,473
    4,839
    14,179
    2,725

    Total Shareholders' Equity


    Total Liabilities & Owners' Equity

    77,493
    244,671

    97,280
    262,378

    Investments & Advances


    Net Property, Plant & Equipment
    Other Assets
    Total Assets

    Balance Sheet

    Debt
    D/V
    79,508
    STICK TO EXHIBIT 5
    Equity
    97,280

    Net Dbet
    79,508
    Alternativ 57,687
    Cash
    EV
    176,788
    EV
    The amount of money you will pay to acquire the company
    D/V
    E/V

    0.4497
    0.55026

    Harvard Business Publishing

    MIDLAND ENERGY RESOURCES

    Project:
    Analysis:
    Draft:
    Footer:

    MIDLAND ENERGY RESOURCES


    Business Segments
    N
    Harvard Business Publishing

    Business Segments

    Harvard Business Publishing

    MIDLAND ENERGY RESOURCES

    Business Segments

    Exploration & Production:


    Operating Revenue
    After-Tax Earnings

    2004
    15,931
    6,781

    2005
    20,870
    13,349

    2006
    22,357
    12,556

    Capital Expenditures
    Depreciation
    Total Assets

    6,000
    4,444
    76,866

    7,180
    4,790
    125,042

    7,940
    5,525
    140,100

    2004
    166,280
    2,320

    2005
    206,719
    4,382

    2006
    202,971
    4,047

    Capital Expenditures
    Depreciation
    Total Assets

    1,455
    1,620
    60,688

    1,550
    1,591
    91,629

    1,683
    1,596
    93,829

    Petrochemicals:
    Operating Revenue
    After-Tax Earnings

    2004
    19,215
    1,394

    2005
    21,657
    2,162

    2006
    23,189
    2,097

    Capital Expenditures
    Depreciation
    Total Assets

    305
    578
    19,943

    330
    591
    28,000

    436
    642
    28,450

    Refining & Marketing:


    Operating Revenue
    After-Tax Earnings

    Harvard Business Publishing

    MIDLAND ENERGY RESOURCES

    Project:
    Analysis:
    Draft:
    Footer:

    MIDLAND ENERGY RESOURCES


    Stock & Dividend Data
    N
    Harvard Business Publishing

    Stock & Divide

    Harvard Business P

    MIDLAND ENERGY RESOURCES


    Stock Prices:
    Fourth Quarter
    Third Quarter
    Second Quarter
    First Quarter
    Dividends Per Share:
    Fourth Quarter
    Third Quarter
    Second Quarter
    First Quarter
    Annual Dividend
    Selected Financial Data:
    Net Income
    Shares Outstanding
    EPS
    Payout Ratio
    DPS

    2001
    $27.16
    $27.90
    $28.33
    $24.13

    2002
    $31.29
    $30.41
    $27.80
    $26.85

    2003
    $32.59
    $29.42
    $32.45
    $31.57

    Stock & Divide


    2004
    $34.37
    $35.78
    $36.98
    $31.28

    2005
    $38.32
    $40.29
    $37.52
    $34.58

    2006
    $44.11
    $39.75
    $46.32
    $38.81

    $0.28
    $0.28
    $0.28
    $0.28
    $1.11

    $0.29
    $0.29
    $0.29
    $0.29
    $1.14

    $0.30
    $0.29
    $0.29
    $0.29
    $1.17

    $0.31
    $0.31
    $0.31
    $0.31
    $1.24

    $0.34
    $0.34
    $0.34
    $0.34
    $1.35

    $0.36
    $0.36
    $0.36
    $0.36
    $1.46

    15,303
    2,049
    7.47
    14.8%
    1.11

    11,448
    2,025
    5.65
    20.2%
    1.14

    11,848
    2,035
    5.82
    19.9%
    1.16

    10,496
    2,055
    5.11
    24.2%
    1.24

    19,893
    2,945
    6.75
    20.0%
    1.35

    18,701
    2,951
    6.34
    23.0%
    1.46

    Note: Results have not been adjusted for a divestiture at the end of 2001 and an acquisition at the beginning of 2005.

    6-Year compound growth in Stock Price


    5-Year Compound growth in Dividends
    Average Payout Ratio
    5-year compound growth in Net Income

    10.58%
    5.69%
    20.35%
    4.1%

    Net Income
    Current Stock Price
    44.11 Average Payout Ratio
    Implied 2007 Dividend
    1.54
    Gordon Growth Model Implied cost of equity

    19,466
    3,961
    1.34

    7.13%

    Harvard Business P

    Stock & Dividend Data

    Harvard Business Publishing

    Stock & Dividend Data

    Assuming they stic to number of shares outstanding

    Harvard Business Publishing

    MIDLAND ENERGY RESOURCES

    Project:
    Analysis:
    Draft:
    Footer:

    MIDLAND ENERGY RESOURCES


    Comparable Companies
    N
    Harvard Business Publishing

    Comparable Companies

    Harvard Business Publishing

    MIDLAND ENERGY RESOURCES

    Exploration & Production:


    Jackson Energy, Inc.
    Wide Palin Petroleum
    Corsicana Energy Corp.
    Worthington Petroleum
    Average
    Refining & Marketing:
    Bexar Energy, Inc.
    Kirk Corp.
    White Point Energy
    Petrarch Fuel Services
    Arkana Petroleum Corp.
    Beaumont Energy, Inc.
    Dameron Fuel Services
    Average
    Midland Energy Resources

    Equity
    Market Value
    57,931
    46,089
    42,263
    27,591

    Net
    Debt
    6,480
    39,375
    6,442
    13,098

    60,356
    15,567
    9,204
    2,460
    18,363
    32,662
    48,796

    134,114

    Comparable Companies

    D/E
    11.2%
    85.4%
    15.2%
    47.5%
    39.8%

    Equity
    Beta
    0.89
    1.21
    1.11
    1.39
    1.15

    LTM
    LTM
    Revenue Earnings
    18,512
    4,981
    17,827
    8,495
    14,505
    4,467
    12,820
    3,506

    6,200
    3,017
    1,925
    (296)
    5,931
    6,743
    24,525

    10.3%
    19.4%
    20.9%
    -12.0%
    32.3%
    20.6%
    50.3%
    20.3%

    1.70
    0.94
    1.78
    0.24
    1.25
    1.04
    1.42
    1.20

    160,708
    67,751
    31,682
    18,874
    49,117
    59,989
    58,750

    9,560
    1,713
    1,402
    112
    3,353
    1,467
    4,646

    79,508

    59.3%

    1.25

    251,003

    18,888

    Harvard Business Publishing

    Table 1
    Credit
    Business Segment:

    Debt/

    Spread to

    Rating

    Value

    Treasury

    Consolidated

    A+

    42.2%

    1.62%

    Exploration & Production

    A+

    46.0%

    1.60%

    Refining & Marketing

    BBB

    31.0%

    1.80%

    Petrochemicals

    AA-

    40.0%

    1.35%

    Target

    Note: Debt/Value is based on market values.

    Table 2

    Tax
    Maturity:

    Rate:

    1-Year

    4.54%

    10-Year

    4.66%

    30-Year

    4.98%

    Beta
    1.25
    Re = Rf + B(EMRP)
    11.230%
    Rd
    6.60%

    In 2006 Midland used an equity market risk premium of 5.0%,


    EMRP Past

    EMRP Pr

    6.00%

    5%

    38.58%

    D/V
    E/V

    42.20%
    57.80%

    D/E
    D/V
    E/V

    WACC Firm Level

    Debt Value

    0.592842
    37.22%
    62.78%
    Given in the case

    8.56%

    EVA = NOPAT - (rwacc)(Invested Capital)


    NOPAT
    25,945
    rwacc
    8.56%
    Equity
    134,114
    Debt
    79,508

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