Essay about MW corp

1406 Words Oct 18th, 2013 6 Pages
Draft
MW Petroleum Corporation (A)

Background:
In late 1990, the group of Amoco Corporation and Apache Corporation had begun talking regarding the possible acquisition of MW Petroleum from Amoco to Apache. MW Petroleum Corporation is a wholly owned subsidiary of Amoco Corporation which has its own reserves, management team and with full ownership in geologic and engineering data. MW Petroleum, a free-standing exploration company that was even as large as some of independent oil companies. It operated exploration and development for well, approximately working interests in 9,500 wells in 300 production areas. The growth of MW was very attractive to the other investors, which company grows 30% per year since mid-1980s, due to large
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The MW Petroleum Reserve is composed of Proved, Probable and Possible Reserves. By using the DCF valuation, the company value is worth $647.3 million. The company shows positive NPV and can consider accepting this project. If Amoco was willing to sell MW for less than $647.3 million, Apache would likely accept the offer as it presents a positive NPV investment. Conversely, if Amoco would not sell for less than $647.3 million, Apache may not execute the acquisition, as the investment would present a negative NPV at that time and would, therefore, reduce the overall value of the company.
Year
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
PV
56.4001
63.37
48.21
26.63
34.79
42.47
44.25
40.9
39.71
32.72
28.48
26.81
22.71
19.43
95.4
Total PV

622.3
Additional

25
Total PV of MW

647.3

The estimate is more likely biased to be high since the projection of the oil and gas price growths are in positive trend. As we check the below projection of price growth of MW corp. The price projection for oil and gas are 5.75% and 7.89% respectively. It indicates that the price of oil and gas will be moving upwards for 15 years.

Price = Revenue/Production
Price Growth % Year
Oil
Gas
1

2
5.54%
7.48%
3
5.62%

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