Submitted by: Submitted by mangomango90
Views: 10
Words: 684
Pages: 3
Category: Business and Industry
Date Submitted: 09/13/2016 02:45 AM
Mark: 9/10 – Very Good, Well Done
Kerr-Mc Gee case
1) Is Kerr-McGee undervalued? Answer this question by examining EV/Revenue,
EV/EBITDA, and EV/BOE. (Exhibit 16)
EV
EV/Revenue EV/EBITDA
EV/BOE
Kerr-McGee
13683
2,69
5,10
11,23
Anadarko
19218
3,20
4,37
8,12
Apache
20415
3,83
4,99
10,54
Burlington Resources
19436
3,48
4,74
9,71
Canadian Nat Res.
15602
2,82
4,67
10,31
Devon
25674
2,77
4,25
12,36
EnCana
34045
2,76
6,36
15,16
EOG Resources
9885
4,33
5,65
10,50
Nexen
9269
3,09
5,35
13,13
28333
2,41
4,84
11,19
Pioneer Nat Res.
7821
4,25
5,56
7,65
Talisman Energy
13256
2,68
4,96
10,67
Average of Competitors
18450
3,24
5,07
Median of Competitors
17410
3,09
4,96
Occidental Petroleum
10,85
10,54
There is no substantial differences between Kerr-McGee EV multiples and its
competitors. Thus, according to this analysis, it does not seem that Kerr-McGee is
undervalued.
2) Discuss the drawbacks of using EV multiples to value Kerr-McGee relative to
the comparable firms.
Using EV multiples to value Kerr-McGee relative to the comparable firms have several
disadvantages.
First of all, even though markets are usually right on average, a proportion of securities
are undervalued and overvalued. Thus, our analysis could be distorted if the markets make
mistakes in aggregate for the considered firms.
Secondly, this method reflects market perceptions and moods. Thus, even though our
analysis could be very useful for short term discussion, it is less appropriate for long term
investors.
3) Value the following parts of the Icahn-JANA proposal:
- Sell forward a portion of the oil and gas reserves in a VPP
1. Use DCF analysis
2. Cash inflows: VPP proceeds (p.5 proposal point #2)
3. Cash outflows: Lifting costs and Taxes (p.4 and Exhibit 10 for
lifting...