What Is Gulf Worth?
Gulf Oil Corporation
Time lag in reserve use
Barrels 3,038 725 2,313
End of 1983, Gulf reserves (Ex 3) less projected expropriations Estimated reserves
1983 production of 290 barrels suggests it takes about 8 years (2,313/290) to produce discovered oil. We’ll thus use an eight-year cycle.
Gulf Oil Corporation
4
What is Gulf worth?
To assess their value we proceed as follows. 1. Identify key assumptions.
Finding cost per barrel
E&D outlays usually take a year to produce reserves. 1981 + 82 E&D outlays (Ex. 2) 1982 + 83 reserves (Ex. 3) Finding cost estimate $2,696 + $2,646 = $5,342 314 + 359 = 673 bl $5,342/673 = $7.94
Gulf Oil Corporation
2
Gulf Oil Corporation
5
A. Assessing value from E&D losses
Profits per barrel: Less cost …show more content…
SoCal acquired reserves, their price fell 9% then rebounded SoCal planned to cut debt ratio back to 30% They kept reserves and cut E&D Cut 10,000 jobs (10,000x30,000(1-.5) /(.17-.05) = $7.50 shr. Mesa made $750 million
Gulf Oil Corporation
21
Gulf Oil Corporation
24
Time lag in reserve use
Barrels 3,038 725 2,313
End of 1983, Gulf reserves (Ex 3) less projected expropriations Estimated reserves
1983 production of 290 barrels suggests it takes about 8 years (2,313/290) to produce discovered oil. We’ll thus use an eight-year cycle.
Gulf Oil Corporation
4
What is Gulf worth?
To assess their value we proceed as follows. 1. Identify key assumptions.
Finding cost per barrel
E&D outlays usually take a year to produce reserves. 1981 + 82 E&D outlays (Ex. 2) 1982 + 83 reserves (Ex. 3) Finding cost estimate $2,696 + $2,646 = $5,342 314 + 359 = 673 bl $5,342/673 = $7.94
Gulf Oil Corporation
2
Gulf Oil Corporation
5
A. Assessing value from E&D losses
Profits per barrel: Less cost …show more content…
SoCal acquired reserves, their price fell 9% then rebounded SoCal planned to cut debt ratio back to 30% They kept reserves and cut E&D Cut 10,000 jobs (10,000x30,000(1-.5) /(.17-.05) = $7.50 shr. Mesa made $750 million
Gulf Oil Corporation
21
Gulf Oil Corporation
24