Mw Petroleum Corporation - 9758 Words

For the exclusive use of T. GU Harvard Business School 9 - 2 9 5 -029 Rev. November 21, 1994 MW Petroleum Corporation (A) In late 1990, executives, engineers, and financial advisors working for Amoco Corporation and Apache Corporation began serious discussions about the sale to Apache of MW Petroleum Corporation, a wholly-owned subsidiary of Amoco Production Company. Amoco had transferred to MW certain of its own assets that it regarded as non-strategic. MW s size, location, and operations were all very attractive to Apache, which had grown nearly 30% per year since the mid-1980s, largely through acquisitions. The transaction being discussed with Amoco would be Apache s largest to date. It would more than double the size†¦show more content†¦Since 1983, Amoco itself had sold more than $750 million worth of small properties which, it felt, could be more economically operated by smaller, low-overhead independent companies. In 1988, Amoco conducted an extensive review of its cost structure and profitability. The study concluded that direct operating costs were well-controlled and offered little opportunity for major savings. However, it also showed that in the United States 85% of the company s gross margin was provided by just 11% of its 1150 producing fields and that many of the remaining fields had disproportionately high overhead and repair expenses. Based on these and other findings, Amoco initiated a major restructuring to better focus on its most attractive properties and opportunities. The first step was the sale, in 1989, of more than 400 fields in the tail of the margin curve, comprising approximately one third of the field portfolio and 12% of leases. These properties were among Amoco s least profitable, contributing only 3% of the company s direct margin. Next, in January 1990, as part of the overall restructuring of Amoco Production Company, Amoco s board of directors approved a plan to divest up to $1.2 billion worth of additional properties from the middle section of the margin curve. Morgan Stanley was engaged to advise and assist in this process, which beganShow MoreRelatedMW PETROLEUM Essay1321 Words   |  6 Pagesï » ¿TITLE: MW Petroleum Corporation: A Valuation Approach on Real Assets ABSTRACTOR SUMMARY Valuation is the estimation of an asset’s value, whether real or financial, based on variables perceived to be related to future investment returns, on comparison with similar assets, or, when relevant, on estimates of immediate liquidation proceeds (Pinto, Henry, Robinson, Stowe; 2010). Correct valuation of real assets can present challenges to financial analysts. Different models can be used to arriveRead MoreMw Petroleum-Case Solution 2 Essay1615 Words   |  7 PagesMW corp By michael_manly | Studymode.com 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 largeRead MoreMW corp Essay1432 Words   |  6 Pagesï » ¿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. 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Specifical ly, whichRead MoreMw Petroleum1196 Words   |  5 PagesCompany Name: MW Petroleum Amoco Corporation was the fifth largest oil company in United States with 28 billion in operating revenues and 1.9 billion in net income. The low oil prices in the 1980s depressed the profitability of many oil companies and most of which responded with downsizing and other cost cutting measures aimed at overhead expenses. Amoco had already sold more than 750 million worth of small properties, which it felt could be more economically operated by companies with low overheadRead MoreSupply Options For Non Conventional Energy Essay1398 Words   |  6 Pagesthe country s energy need. The country s industrial heritage has been built upon indigenous coal. Commercial primary energy consumption in India has grown by about 700% in the last four decades. 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