This website uses cookies to ensure you have the best experience. Learn more

Midland Energy Resources Essay

3942 words - 16 pages

4129
JUNE 19, 2009

TIMOTHY A. LUEHRMAN JOEL L. HEILPRIN

Midland Energy Resources, Inc.: Cost of Capital
In late January 2007, Janet Mortensen, senior vice president of project finance for Midland Energy Resources, was preparing her annual cost of capital estimates for Midland and each of its three divisions. Midland was a global energy company with operations in oil and gas exploration and production (E&P), refining and marketing (R&M), and petrochemicals. On a consolidated basis, the firm had 2006 operating revenue and operating income of $248.5 billion and $42.2 billion, respectively. Estimates of the cost of capital were used in many analyses within Midland, including asset ...view middle of the document...

Lately she wondered whether they were actually appropriate for all applications and she was considering appending a sort of “user’s guide” to the 2007 set of calculations.

Midland’s Operations
Midland Energy Resources had been incorporated more than 120 years previously and in 2007 had more than 80,000 employees. Exhibits 1 and 2 present Midland’s most recent consolidated financial statements. Exhibit 3 presents selected business segment data for the period 2004-06.
________________________________________________________________________________________________________________
HBS Professor Timothy A. Luehrman and Illinois Institute of Technology Adjunct Finance Professor Joel L. Heilprin prepared this case specifically for the Harvard Business Publishing Brief Case Collection. Though inspired by real events, the case does not represent a specific situation at an existing company, and any resemblance to actual persons or entities is unintended. Cases are developed solely as the basis for class discussion and are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2009 Harvard Business Publishing. To order copies or request permission to reproduce materials, call 1-800-545-7685 or go to www.hbsp.harvard.edu/educators. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business Publishing. Harvard Business Publishing is an affiliate of Harvard Business School.

4129 | Midland Energy Resources, Inc.: Cost of Capital

Exploration & Production
Midland engaged in all phases of exploration, development, and production, though the last of these, production, dominated the E&P division’s reported operating results. During 2006, Midland extracted approximately 2.10 million barrels of oil per day—a 6.3% increase over 2005 production— and roughly 7.28 billion cubic feet of natural gas per day—an increase of slightly less than 1% over 2005. This represented $22.4 billion of revenue and after-tax earnings of $12.6 billion. E&P was Midland’s most profitable business, and its net margin over the previous five years was among the highest in the industry. Midland expected continued global population and economic growth to result in rising demand for its products for the foreseeable future. Nevertheless, the fraction of production coming from nontraditional sources such as deepwater drilling, heavy oil recovery, liquefied natural gas (LNG), and arctic technology was expected to increase. Further, the geographic composition of output was shifting, marked by increases from places such as the Middle East, Central Asia, Russia, and West Africa. With oil prices at historic highs in early 2007, Midland anticipated continued heavy investment in acquisitions of promising properties, in development of its proved undeveloped reserves, and in expanding production. In particular, continued high prices...

Other Papers Like Midland Energy Resources

Midland Energy Essay

973 words - 4 pages MIDLAND ENERGY Overview: Midland and Midland’s Divisions: E&P, R&M, and Petrochemicals. Midland Energy Resources Inc. is the global energy company with a broad array of products and services. The company has been in business for over 120 years. The company operates within three different operations: 1. Exploration and Production (E&P) is the most profitable segment. With oil prices at historic highs in 2007, Midland

Midland Energy Essay

1228 words - 5 pages [pic] Midland Energy Resources, Inc. Cost of Capital Table of Contents I. Executive Summary II. Introduction III. Cost of Capital IV. Risk & Tax Rate V. Capital Structures VI. WACC VII. Conclusion VIII. References I. Executive Summary Midland Energy Resources is a global energy company with operations in oil and gas exploration and production(E&P) providing a broad array of products

Midland Energy

4003 words - 17 pages 4129 JUNE 19, 2009 TIMOTHY A. LUEHRMAN JOEL L. HEILPRIN Midland Energy Resources, Inc.: Cost of Capital In late January 2007, Janet Mortensen, senior vice president of project finance for Midland Energy Resources, was preparing her annual cost of capital estimates for Midland and each of its three divisions. Midland was a global energy company with operations in oil and gas exploration and production (E&P), refining and marketing (R

Midland Case

1266 words - 6 pages Midland Energy Resources, Inc.: Cost of Capital May 28, 2014 1. For what purposes dose Mortensen estimated Midland’s cost of capital? What would be the potential consequences of a too high estimate compared to the firm’s “true” cost of capital? What about a too low estimate? Estimates of Midland’s cost of capital are used in many analyses, including asset appraisals for both capital budgeting and financial accounting

Midland Energy Resource

1172 words - 5 pages Message Our team has performed thorough analysis surrounding the questions of cost of capital for Midland Energy Resources, Inc. (Midland). Here are the results of our research: 1. Ms. Mortensen estimates Midland’s cost of capital for a variety of reasons including use for capital budgeting, financial accounting, performance assessments, stock repurchase estimations, and potential “M&A” opportunities. In addition, Midland relies on

Gap Analysis: Kuiper Leda

1571 words - 7 pages must decide whether to outsource to meet the demands of Midland. Kuiper Leda has never has such a large order and so the company must decide whether to outsource to meet the demands of Midland “Outsourcing is subcontracting a process, such as product design or manufacturing, to a third-party company. The decision to outsource is often made in the interest of lowering firm costs, redirecting or conserving energy directed at the competencies of a

Case Analysis Midland Energy

1591 words - 7 pages Cost of Capital Estimate for Midland Energy Resources, Inc. In the first section of my report, I list out the main models and methods applied to estimate the cost of capital for Midland’s three divisions, general assumptions made and the corresponding justifications. In the second section, Calculations, I not only compute the cost of capital based on the general assumptions previously made, but also discuss specifics of each division and the

Case For C Of C

605 words - 3 pages has to meet. In the case, Janet Mortensen prepared the annual cost of capital estimates for Midland Energy Resources Inc. and each of its three divisions. Estimates of the cost of capital were used in many analyses within Midland, including asset appraisal for both capital budgeting and financial accounting, performance assessments, M&A proposal, and stock repurchase decisions. No, they were using the formula for WACC to estimate the

Adm Stock Valuation

3359 words - 14 pages Name: Instructor: Subject: Date: Corporate valuation: Archer-Daniels-Midland Company ADM (Archer-Daniels-Midland) company is one of the world’s largest food processing firms operating over 270 plants worldwide and operating in over 75 countries. Headquartered in Decatur, Illinois, the company is listed on the New York stock exchange main board and is a part of the S&P 500 index. The company is one of the most admired in the US and

Corporate Strategy - Reliance

3473 words - 14 pages into two roughly equal components. Mukesh Ambani remained as head of the company's petroleum, petrochemical, and textiles operations, and Anil Ambani regrouped the company's telecommunications, energy, capital finance, and other operations into a new company. The breakup of the company took place in 2006. As a result, Reliance Industries merged as a focused and highly integrated petroleum and petrochemicals challenger to the global heavy RILights

Financial Control

3331 words - 14 pages constructing for each financial year and contain information on the estimated value of sales and value of costs. From this we can see how the coming accounting period is nearly to end. The actual performance of the business can be measured against this proposed plan. Different budgets can be created depending on what particular aspect of the business requires focus. See three popular kinds of budgeting plans below. UK Midland region a Davis

Related Essays

Midland Energy Resources Essay

1904 words - 8 pages Executive Summary Midland Energy Resources is a leading global energy developer dedicated to providing advanced power systems and energy services around the world. Midland Energy Resources has three divisions Exploration & Production, Refining & Marketing, and Petrochemicals. They have been incorporated more than 120 years previously and they have 80,000 employees in 2007. Janet Mortensen, the senior vice president of project finance for

Midland Energy Resources Essay

1904 words - 8 pages Executive Summary Midland Energy Resources is a leading global energy developer dedicated to providing advanced power systems and energy services around the world. Midland Energy Resources has three divisions Exploration & Production, Refining & Marketing, and Petrochemicals. They have been incorporated more than 120 years previously and they have 80,000 employees in 2007. Janet Mortensen, the senior vice president of project finance for Midland

Midland Energy Resources Case Study

2660 words - 11 pages BRIEF INFORMATION ABOUT MIDLAND ENERGY RESOURCES Midland Energy Resources was a global energy company with operations in oil and gas exploration and production (E&P), refining and marketing (R&M), and petrochemicals. It had been incorporated more than 120 years and had more than 80,000 employees in 2007. Its consolidated operating revenue, operating income and total assets were $248.5 billion, $42.2 billion and $262.4 billion respectively in

Midland Energy Resources Inc.: Cost Of Capital

1059 words - 5 pages Introduction Midland Energy Resources have a senior vice president, Janet Mortension, of project finance. She was preparing her annual cost of capital for midland as well as for each of its following three divisions: * Exploration & production (E&P) * Refining & Marketing (R&M) * Petrochemicals Midland was a global company with operations in oil and gas. Midland corporate treasury had began analysis and preparation