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 must determine the weighted average cost of capital (WACC) for the company as a whole and each of its divisions as part of the annual capital budgeting process. As each division has different functions and risk associations, the ...view middle of the document...

Finally, Petrochemicals are chemical products made from raw materials of petroleum. Although, petrochemical is a very large growing business, Midland’s petrochemical performance is relatively low. Overall, Midland is a profitable company with a strong capital structure. Its stock price has increased continuously over time. Moreover, Midland’s earning per share and dividend per share have been grown up uninterruptedly. According to Exhibit 4, its earning per share has increased from $5.65 to $6.34 from 2002-2006 and dividend per share has also raised up from $1.11 to $1.46 from 2001-2006. Exhibit A and Exhibit B show profit margin comparison and size comparison among those three business units respectively. Exhibit A Exhibit B Risk Factors Midland Energy Resources is a high capital-spending company since this business’s nature requires heavy investment. This condition reflects both favorable and disadvantageous views. High capital investment is beneficial since it will be a

newcomer’s barrier by preventing potential competitors to easily access market. However, it is risky for company itself to remain high performance due to the fact that high-cost of capital company requires high rate of return. If any unexpected situations happen, it will slowly recover but double-dip recession. Furthermore, Midland’s business associates with natural resources, social acceptance and corporate social responsibility (CSR) have to be seriously considered. In Midland business climate, firm needs to tread carefully to maintain the trust of the public. Rearranging Financial Statements Beyond separating assets and liabilities on balance sheet, I am making a further distinction between real and financial activities of the firm to facilitate financial analysis. On the above side of Balance sheet will show net working capital and net fixed assets, both reflecting "real" activities, while on the below side will show debt and equity, both reflecting financial activities. Exhibit C is Midland’s rearranged Balance sheet. After rearranged the Balance sheet, Midland’s net working capital is 2,846 millions, net fixed assets is 179,634 millions, and net debt is 79,508 millions. Exhibit C Reorganized Midland Balance Sheets, at December 31 ($ in millions) Operating Account Working Capital Notes Receivable 19,681 Inventory 7,286 Prepaid Expenses 2,226 Less : Accounts Payable & Accrued Liabilities Taxes Payable 5,462 Net Working Capital (2,846) Working Asset Investments & Advances 34,205 Net Property, Plant & Equipment 167,350 Other Assets 9,294 Less : Post Retirement Benefit Obligations Accrued Liabilities 4,839 Deferred Taxes 14,179 Other Long Term Liabilities 2,725 Net Fixed Assets 179,634 Net Operating Assets 176,788

26,576

9,473

Financial Account Current Portion of Long Term Debt 20,767 Long Term Debt 81,078 Less : Cash & Cash equivalents 19,206 Restricted Cash 3,131 Net Debt 79,508

Shareholders' Equity Net Capital

97,280 176,788

Statement of problems To...

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

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

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 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