Mwmetro
MW Petroleum Corporation (A)
FINC558
Junxi Nie
Qilu Gao
Shiqian Tang
Kai Zhou
It had been a difficult decade for the oil industry in the 1980s. Low prices depressed the profitability of oil companies, so many companies responded with downsizing programs and other cost-cutting measures aimed at overhead expenses. Many major companies also sought to consolidate and rationalize their productive assets, which often meant divesting marginal properties. Since 1983, Amoco itself had sold more than $750 million worth of small properties which, it felt, could be more economically operated by smaller, low-overhead independent companies. Amoco review its cost structure and profitability extensively. It concluded that direct operating costs were controlled and offered little opportunity for major savings. Based on these, Amoco restructured to better focus on its most attractive properties and opportunities. The first step was the sale of more than 400 fields in the end of the margin curve. These properties were Amoco's least profitable. Next step, as part of the overall restructuring of Amoco Production Company, Amoco's board of directors approved a plan to divest up additional properties from the middle section of the margin curve. Apache Corporation was an independent oil and gas company engaged in exploration, development, and production of oil and natural gas, primarily in the United States. It had low costs and was considered an efficient operator of small-sized to medium-sized properties. To exploit these strengths, Apache chairman Raymond Plank developed a strategy he labeled "rationalize and reconfigure." The strategy involved acquiring producing properties whose operations Apache could control and quickly make more efficient. In the 1980s, Apache's tactics frequently entailed significant borrowing to finance the purchase of a portfolio of properties, the best of which would be retained and operated, while the remainder was sold to help pay down
FINC558
Junxi Nie
Qilu Gao
Shiqian Tang
Kai Zhou
It had been a difficult decade for the oil industry in the 1980s. Low prices depressed the profitability of oil companies, so many companies responded with downsizing programs and other cost-cutting measures aimed at overhead expenses. Many major companies also sought to consolidate and rationalize their productive assets, which often meant divesting marginal properties. Since 1983, Amoco itself had sold more than $750 million worth of small properties which, it felt, could be more economically operated by smaller, low-overhead independent companies. Amoco review its cost structure and profitability extensively. It concluded that direct operating costs were controlled and offered little opportunity for major savings. Based on these, Amoco restructured to better focus on its most attractive properties and opportunities. The first step was the sale of more than 400 fields in the end of the margin curve. These properties were Amoco's least profitable. Next step, as part of the overall restructuring of Amoco Production Company, Amoco's board of directors approved a plan to divest up additional properties from the middle section of the margin curve. Apache Corporation was an independent oil and gas company engaged in exploration, development, and production of oil and natural gas, primarily in the United States. It had low costs and was considered an efficient operator of small-sized to medium-sized properties. To exploit these strengths, Apache chairman Raymond Plank developed a strategy he labeled "rationalize and reconfigure." The strategy involved acquiring producing properties whose operations Apache could control and quickly make more efficient. In the 1980s, Apache's tactics frequently entailed significant borrowing to finance the purchase of a portfolio of properties, the best of which would be retained and operated, while the remainder was sold to help pay down