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MWPetroleumAssignment1Fall20191.xlsx

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MW Petroleum Corp. - A

Harvard Business School Case #295-029

Case Software #XLS083

Copyright © 2010 President and Fellows of Harvard College. No part of this product may be reproduced, stored in a retrieval system or transmitted in any form or by any means—electronic, mechanical, photocopying, recording or otherwise—without the permission of Harvard Business School.

Table A

Table A: MW Petroleum's Estimated Reserves
	Oil (MMB)	Gas (MMCF)	Total (MMBOE)
Proved developed producing	73.6	381.1	137.1
Proved developed non-producing	7.9	61.5	18.1
Proved undeveloped	15.8	58.5	25.6
Total Proved	97.3	501.1	180.8
Total Probable	14.1	70.4	25.8
Total Possible	44.5	75.4	57.1
Total Reserves	155.9	646.9	263.7

Exhibit 1

Exhibit 1 Amoco Corporation, Selected Historical Financial Data (in $ millions except as noted)
	1986	1987	1988	1989	1990
Income Statements
Operating revenues	$18,281	$20,174	$21,150	$23,966	$28,010
Consumer excise taxes and other	2,064	2,282	2,769	2,794	3,571
Total revenues	20,345	22,456	23,919	26,760	31,581
Purchased crude oil, petroleum products & merchandise	7,593	8,970	8,471	10,619	13,697
Operating expenses	3,451	3,370	3,915	4,380	5,395
Petroleum exploration expenses	925	647	767	726	693
Selling and administrative expenses	1,358	1,424	1,466	1,888	1,991
Taxes other than income taxes	2,592	2,840	3,207	3,224	3,395
Depreciation, depletion and amortization	2,418	2,295	2,318	2,500	2,413
Interest expense	468	410	468	728	587
Total costs and expenses	18,805	19,956	20,612	24,065	28,171
Income before income taxes	1,540	2,500	3,307	2,695	3,410
Income taxes	793	1,140	1,244	1,085	1,497
Net income	747	1,360	2,063	1,610	1,913
Balance Sheets
Current assets	4,200	5,899	5,393	6,428	8,216
Investments and other	1,337	1,072	1,431	1,355	1,287
Properties, net	18,169	18,151	23,095	22,647	22,706
Total assets	23,706	25,122	29,919	30,430	32,209
Current liabilities	4,180	4,503	4,799	5,148	6,092
Short term debt	174	468	444	483	492
Long term debt	3,556	3,303	6,274	5,915	5,464
Other liabilities	4,472	4,741	5,060	5,200	6,093
Shareholders’ equity	11,324	12,107	13,342	13,684	14,068
Financial Ratios
Return on operating revenues	4.1%	6.7%	9.8%	6.7%	6.8%
Return on assets	3.2%	5.4%	6.9%	5.3%	5.9%
Return on average equity	6.5%	11.6%	16.2%	11.9%	13.8%
Current ratio	0.9	1.1	1.0	1.1	1.2
Debt / capital ratio	19.1%	22.1%	32.4%	30.8%	28.8%
Interest coverage ratio	7.4	8.3	8.8	5.3	7.4
Debt rating	Aaa	Aaa	Aaa	Aaa	Aaa
Price - earnings ratio	22.59	14.7	10.0	14.4	15.4
Cash flow per share	$6.3	$7.1	$8.1	$8.0	$8.3
Common shares outstanding, (millions)	502.0	515.3	517.1	511.5	502.0
Year-end stock price	$32 3/4	$34 1/2	$37 1/2	$54 5/8	$52 3/8

Exhibit 2

Exhibit 2 Apache Corporation, Selected Historical Financial Data (in $ millions, except as noted)
	1986	1987	1988	1989	1990
Income Statements
Revenues	106.0	100.5	141.7	246.9	273.4
Operating Expenses:
Depreciation, depletion and amortization	82.1	184.6	61.4	96.3	116.8
Operating costs	23.5	25.5	27.6	42.5	44.6
Gathering and marketing costs			14.4	31.3	22.1
Administrative, selling and other	14.6	18.9	16.7	23.4	21.5
Financing costs, net	15.9	15.1	14.5	21.4	11.0
Income from continuing operations before income taxes	(30.1)	(143.6)	7.1	32.0	57.4
Provision for income taxes	(14.8)	(62.1)	1.6	9.8	17.2
Income from continuing operations	(15.3)	(81.5)	5.5	22.2	40.2
Discontinued operations:
Income from discontinued operations, net of income taxes	4.4	0.6	2.6	0.0	0.0
Gain on sale of discontinued operations, net of income taxes	0.0	8.8	0.0	0.0	0.0
Net income before extraordinary item	(10.9)	(72.1)	8.1	22.2	40.2
Extraordinary item:
Gain on early extinguishment from debt, net of income taxes	0.0	1.1	1.0	0.0	0.0
Net income (loss)	(10.9)	(71.0)	9.1	22.2	40.2
Balance Sheets
Current assets	89.6	121.0	109.2	132.6	138.5
Property and equipment, net	490.7	363.4	570.9	603.6	663.4
Other assets	64.3	20.0	21.6	28.2	27.8
Total assets	644.6	504.4	701.7	764.4	829.7
Current liabilities	75.6	91.3	87.3	105.5	117.6
Long term debt	260.9	238.8	320.0	198.1	200.0
Shareholders’ equity	207.4	128.8	206.9	350.3	386.8
Financial Ratios
Return on assets			1.3%	2.9%	4.8%
Return on average equity			5.4%	8.0%	10.9%
Current ratio	1.17	1.26	1.11	1.23	1.13
Debt / capital ratio	55.7%	65.0%	60.7%	36.1%	34.1%
Interest expense (net)	15.9	15.1	14.5	21.4	11.0
Interest coverage			1.7	2.5	6.2
Debt rating (subordinated convertible debentures)	Ba3	B2	B2	NRa	Ba3
Price - earnings ratio			33.2	19.4	17.9
Cash flow per share	$2.87	$2.45	$2.03	$2.70	$3.52
Common shares outstanding (millions)	20.3	20.1	33.0	44.0	44.7
Year-end stock price	$9	$7 1//2	$7 7/8	$18 3/8	$14 5/8
Unlevered (asset) betab					0.82
aNot rated.
bThe mean asset beta, estimated by Morgan Stanley for six independent companies including Apache, was 0.64.

Exhibit 3

Exhibit 3 Proved Developed Reserves: Production and Cash Flow Projections ($ millions except as noted)
	Proved Developed Reserves	1991	1992	1993	1994	1995	1996	1997	1998	1999	2000	2001	2002	2003	2004	2005
	Production:
(1)	Crude and condensates (MB)	9.4	8.1	7.1	6.3	5.3	4.5	3.7	2.9	2.4	2.2	1.9	1.7	1.5	1.4	1.2
(2)	Gas (MMCF)	45.3	36.8	29.5	25.0	21.7	18.6	16.5	14.9	12.8	11.3	10.3	8.5	7.6	6.7	6.2
	Cash Flows (in millions):
(3)	Revenues - oil	192.0	180.4	168.2	154.5	139.4	124.5	109.1	94.7	82.7	75.7	72.0	66.7	63.4	59.9	56.6
(4)	Revenues - gas	90.5	82.1	73.5	67.8	64.1	59.2	56.7	54.2	50.4	47.6	45.8	41.1	38.2	36.9	36.1
(5)	Total revenues	282.5	262.5	241.7	222.3	203.5	183.7	165.8	148.9	133.1	123.3	117.8	107.7	101.6	96.8	92.7
(6)	Direct production taxes	25.5	23.6	21.6	19.9	18.0	16.2	14.4	12.7	11.4	10.5	9.8	9.1	8.5	8.1	7.7
(7)	Direct operating expense	79.9	80.3	79.8	78.9	76.0	71.0	63.8	56.1	49.9	48.2	45.5	44.1	44.5	43.7	43.0
(8)	Overhead	33.9	32.2	28.6	25.9	23.0	20.4	18.3	16.1	13.9	12.6	10.8	9.7	9.0	8.3	7.8
(9)	Fin. book DD&A	58.0	45.2	35.6	29.1	23.8	19.1	19.6	16.6	13.3	10.7	9.0	7.5	6.3	5.3	4.5
(10)	Net income before taxes	85.2	81.2	76.1	68.6	62.7	57.0	49.7	47.4	44.6	41.4	42.8	37.3	33.3	31.3	29.7
(11)	Federal and state income taxes:
(12)	Current	48.5	44.4	39.3	34.1	29.9	25.9	23.6	21.5	19.3	17.5	17.4	15.2	13.4	12.7	12.0
(13)	Deferred	(19.1)	(15.2)	(11.8)	(9.5)	(7.7)	(5.9)	(6.2)	(5.1)	(3.9)	(3.1)	(2.5)	(2.2)	(1.8)	(1.4)	(1.2)
(14)	Total income taxes	29.4	29.2	27.4	24.6	22.3	20.0	17.4	16.4	15.4	14.4	14.9	13.0	11.7	11.3	10.8
(15)	Profit contribution	55.8	52.0	48.6	43.9	40.4	37.0	32.2	31.0	29.2	27.0	27.9	24.3	21.7	20.0	18.9
(16)	Non-cash charges	38.9	30.1	23.7	19.6	16.1	13.2	13.5	11.5	9.5	7.7	6.4	5.3	4.5	4.0	3.3
(17)	Cash from operations	94.7	82.0	72.3	63.5	56.6	50.3	45.7	42.5	38.7	34.6	34.4	29.6	26.2	24.0	22.2
(18)	Capital expenditures	5.4	2.0	2.7	0.5	0.6	0.8	0.8	0.6	1.1	0.4	0.1	0.1	0.1	0.5	0.1
(19)	Cash flow	89.4	80.0	69.6	63.0	56.0	49.5	44.9	41.9	37.6	34.3	34.2	29.5	26.1	23.5	22.1
(20)	Terminal value															92.1
(21)	Cumulative cash flow	89.4	169.4	239.1	302.1	358.0	407.5	452.4	494.3	531.9	566.2	600.4	629.9	656.0	679.4	793.6
Notes to follow Exhibit 7.

Exhibit 4

Exhibit 4 Proved Undeveloped Reserves: Production and Cash Flow Projections ($ millions except as noted)
	Proved Undeveloped Reserves	Year 1	2	3	4	5	6	7	8	9	10	11	12	13	14	15
	Production:
(1)	Crude and condensates (MB)	0.3	0.6	0.5	0.5	0.5	0.5	0.5	0.7	0.8	0.7	0.7	0.7	0.7	0.7	0.6
(2)	Gas (MMCF)	1.7	4.9	5.6	3.3	2.3	2.0	2.0	2.2	2.3	1.9	1.6	1.3	1.3	1.0	0.9
	Cash Flows (in millions):
(3)	Revenues - oil	6.0	14.0	12.9	11.8	12.3	13.2	16.1	21.0	27.1	25.2	25.3	26.8	28.7	30.9	29.3
(4)	Revenues - gas	3.4	11.3	14.5	9.1	6.7	6.2	6.6	7.1	8.2	7.2	6.6	5.5	5.2	5.2	4.5
(5)	Total revenues	9.4	25.3	27.4	20.9	19.0	19.4	22.7	28.1	35.3	32.4	31.9	32.3	33.9	36.1	33.8
(6)	Direct production taxes	0.9	2.4	2.3	1.8	1.7	1.7	2.0	2.5	3.1	2.8	2.8	3.0	3.1	2.9	3.0
(7)	Direct operating expense	1.2	1.5	2.0	2.3	2.8	3.4	3.3	3.3	4.5	3.4	3.7	4.2	4.5	4.7	4.8
(8)	Overhead	1.1	3.1	3.2	2.4	2.1	2.2	2.5	3.0	3.7	3.3	2.9	2.9	3.0	3.1	2.8
(9)	Fin. book DD&A	12.3	12.6	10.6	9.3	8.1	6.7	6.8	5.8	4.6	3.7	4.3	3.6	3.0	2.5	2.1
(10)	Net income before taxes	(6.2)	5.7	9.2	5.1	4.2	5.5	8.1	13.5	19.5	19.2	18.2	18.6	20.3	22.8	21.1
(11)	Federal and state income taxes:
(12)	Current	2.1	6.4	7.0	5.0	4.3	4.1	5.1	6.5	8.0	7.7	7.6	7.5	7.9	8.8	8.1
(13)	Deferred	(4.1)	(4.2)	(3.5)	(3.0)	(2.6)	(2.1)	(2.1)	(1.8)	(1.3)	(1.1)	(1.2)	(1.0)	(0.9)	(0.7)	(0.6)
(14)	Total income taxes	(2.0)	2.2	3.5	2.0	1.7	2.1	2.9	4.7	6.7	6.6	6.3	6.5	7.1	8.1	7.5
(15)	Profit contribution	(4.2)	3.5	5.8	3.1	2.6	3.4	5.1	8.8	12.8	12.6	11.8	12.1	13.3	14.7	13.5
(16)	Non-cash charges	8.3	8.4	7.1	6.3	5.5	4.6	4.7	4.0	3.2	2.6	3.1	2.5	2.2	1.9	1.6
(17)	Cash from operations	4.0	11.9	12.9	9.3	8.1	8.0	9.8	12.8	16.0	15.2	14.9	14.7	15.4	16.6	15.1
(18)	Capital expenditures	17.5	17.7	5.3	4.1	3.5	1.3	0.1	0.3	0.0	0.1	8.1	0.0	0.2	0.0	0.0
(19)	Cash flow	(13.5)	(5.8)	7.6	5.2	4.6	6.7	9.7	12.5	16.0	15.1	6.8	14.7	15.2	16.5	15.1
(20)	Terminal value															67.8
(21)	Cumulative cash flow	(13.5)	(19.3)	(11.7)	(6.4)	(1.9)	4.9	14.6	27.1	43.1	58.2	65.0	79.7	95.0	111.5	194.3
Notes follow Exhibit 7.

Exhibit 5

Exhibit 5 Probable Reserves: Production and Cash Flow Projections ($ millions except as noted)
	Probable Reserves	Year 1	2	3	4	5	6	7	8	9	10	11	12	13	14	15
	Production:
(1)	Crude and condensates (MB)	0.2	0.3	0.4	0.4	0.5	0.5	0.7	0.9	0.8	0.7	0.6	0.5	0.4	0.4	0.3
(2)	Gas (MMCF)	2.8	4.2	4.9	5.3	4.2	3.8	4.5	4.2	3.3	2.4	2.1	2.0	1.5	1.3	1.1
	Cash Flows (in millions):
(3)	Revenues - oil	3.7	6.3	8.0	9.6	13.3	14.3	17.0	19.6	20.3	19.8	18.6	17.1	15.8	14.5	13.4
(4)	Revenues - gas	5.8	9.4	11.6	14.1	12.3	12.3	13.0	11.6	10.7	9.3	9.5	10.1	8.8	8.1	7.3
(5)	Total revenues	9.5	15.7	19.5	23.7	25.7	26.6	30.0	31.2	31.0	29.2	28.1	27.2	24.7	22.6	20.6
(6)	Direct production taxes	0.8	1.3	1.7	2.0	2.2	2.3	2.7	2.9	3.1	3.0	2.8	2.7	2.5	2.3	2.1
(7)	Direct operating expense	0.4	0.7	0.8	2.6	4.4	4.7	5.3	5.7	6.0	6.4	7.0	7.4	7.4	7.3	7.2
(8)	Overhead	1.3	1.9	2.3	2.8	3.0	2.9	3.1	3.3	3.0	2.8	2.6	2.5	2.2	2.0	1.9
(9)	Fin. book DD&A	0.4	0.8	1.2	2.5	1.6	1.3	1.5	2.0	1.5	1.4	1.4	1.4	1.4	1.3	1.3
(10)	Net income before taxes	6.6	11.0	13.5	13.8	14.5	15.4	17.3	17.4	17.5	15.5	14.3	13.3	11.3	9.6	8.1
(11)	Federal and state income taxes:
(12)	Current	2.9	3.7	4.8	4.8	3.8	4.2	5.5	5.8	5.5	5.4	5.0	4.7	4.0	3.5	3.0
(13)	Deferred	(0.2)	0.0	(0.2)	(0.2)	0.3	0.3	0.1	(0.0)	0.0	0.0	0.0	0.0	0.0	0.0	0.0
(14)	Total income taxes	2.6	3.7	4.6	4.5	4.1	4.5	5.6	5.7	5.6	5.4	5.0	4.7	4.0	3.5	3.0
(15)	Profit contribution	4.0	7.3	8.9	9.3	10.5	10.8	11.7	11.7	11.9	10.1	9.3	8.6	7.2	6.1	5.1
(16)	Non-cash charges	0.2	0.8	1.1	2.2	1.9	1.6	1.6	1.9	1.6	1.4	1.4	1.4	1.4	1.4	1.3
(17)	Cash from operations	4.2	8.1	9.9	11.5	12.3	12.4	13.4	13.6	13.5	11.5	10.7	10.0	8.6	7.5	6.4
(18)	Capital expenditures	10.0	4.3	11.4	14.0	2.6	0.5	0.3	0.6	0.3	0.5	0.5	0.0	0.2	0.5	0.0
(19)	Cash flow	(5.8)	3.8	(1.5)	(2.5)	9.7	11.9	13.1	13.0	13.2	11.0	10.2	10.0	8.4	7.0	6.4
(20)	Terminal value															51.0
(21)	Cumulative cash flow	(5.8)	(2.0)	(3.5)	(6.0)	3.7	15.7	28.8	41.8	55.0	66.0	76.3	86.3	94.7	101.7	159.0
Notes follow Exhibit 7.

Exhibit 6

Exhibit 6 Possible Reserves: Production and Cash Flow Projections ($ millions except as noted)
	Possible Reserves	Year 1	2	3	4	5	6	7	8	9	10	11	12	13	14	15
	Production:
(1)	Crude and condensates (MB)	0.1	0.8	0.9	0.8	0.8	1.0	1.6	2.1	2.4	2.3	2.0	1.7	1.6	1.4	1.2
(2)	Gas (MMCF)	0.5	3.5	3.8	3.9	3.6	3.7	3.2	3.0	3.2	2.8	1.9	1.3	1.4	1.2	1.0
	Cash Flows (in millions):
(3)	Revenues - oil	2.1	10.1	13.2	14.4	18.0	24.1	42.3	59.1	67.4	69.4	66.8	62.7	59.7	56.4	52.0
(4)	Revenues - gas	0.6	3.6	5.1	6.9	7.2	7.7	7.7	7.0	7.8	9.3	8.1	6.1	5.9	5.9	5.7
(5)	Total revenues	2.7	13.7	18.3	21.3	25.1	31.8	50.0	66.1	75.2	78.7	74.9	68.8	65.7	62.3	57.7
(6)	Direct production taxes	0.3	1.2	1.6	1.8	2.2	2.8	5.0	6.8	7.9	8.0	7.1	6.7	6.4	6.1	5.6
(7)	Direct operating expense	0.2	1.0	1.5	2.1	6.5	13.1	21.2	31.9	33.0	35.1	26.4	26.3	25.7	25.8	25.6
(8)	Overhead	0.4	1.6	2.1	2.5	2.9	3.4	5.2	6.9	7.3	7.6	6.9	6.3	5.9	5.7	5.3
(9)	Fin. book DD&A	0.7	1.4	2.2	4.9	3.5	3.1	3.6	4.5	3.5	3.3	3.3	3.2	3.2	3.1	3.1
(10)	Net income before taxes	1.2	8.5	10.9	10.0	10.0	9.4	15.0	16.0	23.4	24.6	31.1	26.2	24.5	21.6	18.1
(11)	Federal and state income taxes:
(12)	Current	0.8	3.1	4.2	4.4	3.2	3.2	5.4	6.1	7.8	8.9	10.9	9.4	8.8	7.9	6.7
(13)	Deferred	(0.4)	(0.0)	(0.3)	(0.5)	0.7	0.7	0.2	(0.2)	0.2	0.0	0.0	0.0	0.0	0.0	0.0
(14)	Total income taxes	0.3	3.1	4.0	3.9	3.8	3.9	5.6	6.0	8.0	8.9	11.0	9.4	8.8	7.9	6.8
(15)	Profit contribution	0.8	5.4	7.0	6.2	6.1	5.5	9.3	10.0	15.4	15.7	20.2	16.9	15.7	13.7	11.4
(16)	Non-cash charges	0.3	1.4	1.9	4.4	4.2	3.8	3.8	4.4	3.7	3.3	3.3	3.3	3.2	3.2	3.1
(17)	Cash from operations	1.1	6.8	8.9	10.6	10.4	9.3	13.2	14.4	19.1	19.1	23.5	20.1	18.9	16.9	14.5
(18)	Capital expenditures	9.7	9.8	22.4	38.9	27.4	6.8	0.7	1.0	0.7	3.0	2.3	0.0	0.1	0.0	0.0
(19)	Cash flow	(8.6)	(2.9)	(13.5)	(28.4)	(17.1)	2.5	12.5	13.4	18.5	16.1	21.2	20.1	18.8	16.8	14.4
(20)	Terminal value															72.3
(21)	Cumulative cash flow	(8.6)	(11.6)	(25.1)	(53.5)	(70.6)	(68.1)	(55.6)	(42.2)	(23.8)	(7.7)	13.5	33.6	52.4	69.2	155.9
Notes follow Exhibit 7.

Exhibit 7

Exhibit 7 Aggregated MW Production and Cash Flow Projections ($ millions except as noted)
	Aggregated MW Projections	Year 1	2	3	4	5	6	7	8	9	10	11	12	13	14	15
	Production:
(1)	Net crude and condensates (MB)	10.0	9.8	8.9	8.1	7.1	6.5	6.5	6.6	6.4	5.8	5.2	4.6	4.3	3.8	3.4
(2)	Net gas (MMCF)	50.2	49.5	43.7	37.5	31.8	28.1	26.2	24.4	21.6	18.3	15.9	13.1	11.8	10.2	9.3
	Cash Flows (in millions):
(3)	Revenues - oil	203.9	210.9	202.3	190.3	183.0	176.1	184.5	194.4	197.5	190.2	182.7	173.2	167.7	161.7	151.3
(4)	Revenues - gas	100.3	106.3	104.7	97.9	90.3	85.4	84.0	80.0	77.2	73.4	70.0	62.8	58.1	56.1	53.5
(5)	Total revenues	304.1	317.2	306.9	288.3	273.3	261.5	268.5	274.4	274.7	263.6	252.7	236.0	225.8	217.8	204.8
(6)	Direct production taxes	27.5	28.5	27.3	25.5	24.1	23.0	24.1	25.0	25.4	24.3	22.5	21.5	20.4	19.4	18.4
(7)	Direct operating expense	81.7	83.5	84.1	85.9	89.7	92.2	93.7	97.0	93.3	93.2	82.6	82.0	82.0	81.5	80.6
(8)	Overhead	36.6	38.7	36.3	33.6	31.0	28.8	29.2	29.3	27.9	26.3	23.2	21.4	20.1	19.1	17.8
(9)	Fin. book DD&A	71.4	60.0	49.6	45.7	37.0	30.2	31.6	28.9	23.0	19.2	18.0	15.7	13.8	12.3	11.0
(10)	Net income before taxes	86.8	106.5	109.7	97.5	91.5	87.2	90.0	94.3	105.0	100.7	106.5	95.5	89.5	85.4	77.0
(11)	Federal and state income taxes:
(12)	Current	54.2	57.6	55.3	48.3	41.2	37.4	39.5	39.9	40.7	39.4	40.9	36.8	34.2	32.8	29.8
(13)	Deferred	(23.8)	(19.4)	(15.8)	(13.2)	(9.3)	(7.0)	(7.9)	(7.1)	(4.9)	(4.1)	(3.7)	(3.2)	(2.6)	(2.0)	(1.8)
(14)	Total income taxes	30.4	38.2	39.5	35.0	31.9	30.5	31.6	32.8	35.8	35.3	37.2	33.6	31.6	30.8	28.1
(15)	Profit contribution	56.4	68.3	70.3	62.5	59.6	56.8	58.4	61.5	69.2	65.3	69.2	61.9	57.9	54.5	48.9
(16)	Non-cash charges	47.6	40.6	33.8	32.4	27.7	23.3	23.6	21.8	18.1	15.1	14.3	12.5	11.3	10.4	9.3
(17)	Cash from operations	104.0	108.9	104.0	95.0	87.3	80.0	82.1	83.3	87.3	80.4	83.5	74.4	69.1	64.9	58.2
(18)	Capital expenditures	42.6	33.8	41.8	57.5	34.1	9.4	1.9	2.6	2.0	3.9	11.0	0.0	0.6	1.1	0.2
(19)	Cash flow	61.4	75.1	62.2	37.4	53.2	70.7	80.2	80.7	85.3	76.5	72.5	74.3	68.5	63.8	58.0
(20)	Terminal value															283.1
(21)	Cumulative cash flow	61.4	136.5	198.8	236.2	289.3	360.0	440.2	520.9	606.2	682.7	755.2	829.5	898.0	961.8	1302.9
Notes follow Exhibit 7.

Exhibit 10

Exhibit 10 Selected Contemporary Financial Market Data
U.S. Government Bond Yields, Year-end 1990
Term	Yield
30-day	6.52%
10-year	8.03%
30-year	8.24%
Note: Yields are expressed on a bond-equivalent basis.
Industrial Bond Yields
Rating	Dec-90	Jan-91	Feb-91
AAA	9.08%	8.95%	8.80%
AA	9.45%	9.40%	9.09%
A	9.54%	9.50%	9.29%
BBB	11.55%	11.67%	10.38%
BB	12.41%	12.24%	12.30%
B	19.02%	20.20%	17.37%
Sources: Wall Street Journal, Morgan Stanley, Standard & Poor’s.

Solutions

Year	1	2	3	4	5	6	7	8	9	10	11	12	13	14	15
Cash Flow from Exhibit 7	61.4	75.1	62.2	37.4	53.2	70.7	80.2	80.7	85.3	76.5	72.5	74.3	68.5	63.8	341.1
Present Value
Total Value
PD
Year	1	2	3	4	5	6	7	8	9	10	11	12	13	14	15
Cash Flow from Exhibit 3	89.4	80	69.6	63	56	49.5	44.9	41.9	37.6	34.3	34.2	29.5	26.1	23.5	114.2
PV(CF)
Total Value
PUD
Cash Flow from Exhibit 4	-13.5	-5.8	7.6	5.2	4.6	6.7	9.7	12.5	16	15.1	6.8	14.7	15.2	16.5	82.9
PV(CF)
Total Value
Proved Reserves
Maximum Debt Capacity
Year	1	2	3	4	5	6	7	8	9	10	11	12	13	14	15
CF from Operations, Exhibit 7 line 17	104	108.9	104	95	87.3	80	82.1	83.3	87.3	80.4	83.5	74.4	69.1	64.9	58.2
"Growth"
Average OCF Growth Rate
Debt raised	200
Coupon Rate	0.14
Tax Rate	0.36
Cost of Debt	0.12	based on the credit rating
PV (Tax Shields)
Other Opportunities
Total Deal