Top Cima - Analysis of YJ

Topics: Stock market, Debt, Free cash flow Pages: 4 (1455 words) Published: October 23, 2014

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review of issues facing YJ
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ANALYSIS
The potential 12 fields could be considered as question marks. If these 12 turn out to be unsuccessful then it will be a dog & a decision has to be taken whether to kill or not. Current 3 fields are cash cows.

Potential fields with good reserves can be stars.
This is a highly capital intensive industry & it is normal to have a high debt to equity ratio. At the time the loan was taken in 2008, it was the time of the sub-prime crisis or the credit crunch. At this time no one was willing to lend.

11% of interest rate is high & this may be due to the risk of lending was high at that moment. YJ could consider in taking out another loan to settle this current loan, but early settlements could have penalties. The current loan matures in 2018.

Investors currently happy with YJ’s performance.
The oil & gas industry is completely a suppliers game to play with prices. OPEC controls the supply & demand.
The new CEO has a different vision & mission compared to the previous CEO. He wants faster growth.
Previous CEO Inspirational & YJ’s success was due to the team he recruited. Change management can come in the exam.
But CFO has concerns regarding lack of funds.
There seems to be a board dispute.
Board disputes can be no.1 issues at the exam.
YJ will have macro issues such as changes in oil prices, ex.rate & interest rate. It’s normally good for directors to hold shares in a company y because, they will want the share price to appreciate & such appreciation will require the company to perform well. YJ deals with multiple currencies such as $, £, Asian & African currencies. YJ is exposed to Transaction, Translation risks. But very less to Economic risks. That is because most companies in the E&P sector deal with USD when receiving income & the customers will have very little to choose which...
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