Final Financial Analysis Of Pioneer Pe
Financial Analysis of Pioneer Petroleum Corporation
Yi Lyu
Harding University
Abstract
This paper aims to analyze the case of Pioneer Petroleum Corporation. It will analyze the financial summary of Pioneer from 1983 to 1990 as well as the U.S. capital markets from 1980 to 1990. It will present correct calculations of the overall corporate weighted average cost of capital, and will discuss the constant growth dividend valuation model and capital asset pricing model. This paper will choose either the single corporate cost of capital or multiple divisional hurdle rates in evaluating projects and allocating investment funds among divisions. It will also discuss the discount rate for environmental projects. Finally, it will analyze the strengths, weaknesses, opportunities, and risks of Pioneer.
Financial Analysis of Pioneer Petroleum Corporation
Introduction of Pioneer
The Pioneer Petroleum Corporation (hereinafter referred to as Pioneer) was “formed in 1924 with the merger of several formerly independent firms operating in the oil refining, pipeline transportation, and industrial chemical fields” (Ruback, 1991, p. 1). Pioneer was restructured in 1985, and after that it was a hydrocarbons-based company which was focused on oil, gas, coal and petrochemicals (Ruback, 1991). By improving operation for many years, Pioneer had been involved in multiple industries, including exploration and production of crude oil, marketing refined petroleum products, plastics, agricultural chemicals, and real-estate development (Ruback, 1991).
In addition, Pioneer was one of the refiners that had the lowest cost on the West Coast of the United States. It had an “extensive West Coast marketing network” (Ruback, 1991). Pioneer had put additional investment on its sulfur recovery facility and the improvement of a coker to increase the efficiency of refineries. Pioneer had tried its best to avoid pollution, and it had paid much attention to its environmental projects.
Statement of
Yi Lyu
Harding University
Abstract
This paper aims to analyze the case of Pioneer Petroleum Corporation. It will analyze the financial summary of Pioneer from 1983 to 1990 as well as the U.S. capital markets from 1980 to 1990. It will present correct calculations of the overall corporate weighted average cost of capital, and will discuss the constant growth dividend valuation model and capital asset pricing model. This paper will choose either the single corporate cost of capital or multiple divisional hurdle rates in evaluating projects and allocating investment funds among divisions. It will also discuss the discount rate for environmental projects. Finally, it will analyze the strengths, weaknesses, opportunities, and risks of Pioneer.
Financial Analysis of Pioneer Petroleum Corporation
Introduction of Pioneer
The Pioneer Petroleum Corporation (hereinafter referred to as Pioneer) was “formed in 1924 with the merger of several formerly independent firms operating in the oil refining, pipeline transportation, and industrial chemical fields” (Ruback, 1991, p. 1). Pioneer was restructured in 1985, and after that it was a hydrocarbons-based company which was focused on oil, gas, coal and petrochemicals (Ruback, 1991). By improving operation for many years, Pioneer had been involved in multiple industries, including exploration and production of crude oil, marketing refined petroleum products, plastics, agricultural chemicals, and real-estate development (Ruback, 1991).
In addition, Pioneer was one of the refiners that had the lowest cost on the West Coast of the United States. It had an “extensive West Coast marketing network” (Ruback, 1991). Pioneer had put additional investment on its sulfur recovery facility and the improvement of a coker to increase the efficiency of refineries. Pioneer had tried its best to avoid pollution, and it had paid much attention to its environmental projects.
Statement of
References: Block, S. B., Hirt, G. A., & Danielsen, B. R. (2011). Foundations of financial management (14th ed.). New York: McGraw-Hill/Irwin. Ruback, R. S. (1991). Pioneer Petroleum. Harvard Business School, Boson, MA 02163.