CIMA BUSINNESS GLOBAL CHALLENGE

Detailed Business Analysis of YJCIMA BUSINNESS GLOBAL CHALLENGE

Team NameNewGeneration Leaders

Team MembersKomal ShakilEshwar KumarAfshan KhanUrooj Baqai

University NameInstitute of Business ManagementContents

1.INTRODUCTION31.1 YJ LTD BACKGROUND31.2 PRIORITISATION OF MAIN ISSUES31.3 FINANCING41.3.1 RATIOS51.3.2 FUTURE COSTS OF PRODUCTION51.3.3 STAKEHOLDERS61.4 FARM OUT61.5 DRILL T61.5.1 STEALING IN THE FIRM61.5.2 RECRUITING AND RETAINING A MOTIVATED WORKFORCE WITH THE REQUIRED SKILL SET71.6 ETHICAL ISSUES71.7.1 RISK OF INADEQUATE RESERVES71.7.2 IMPROVING OPERATIONAL PERFORMANCE71.7.3 HEALTH, SAFETY AND ENVIRONMENTAL ISSUE71.8 LONG TERM INVESTMENT71.8.1 ALTERNATIVE FUEL VEHICLES72.DISCUSSION82.1 PEST ANALYSIS82.1.1 POLITICAL82.1.2 ECONOMIC82.1.3 SOCIAL82.1.4 TECHNOLOGY82.2 PORTERS GENERIC STRETEGY92.3 PORTERS FIVE FORCES102.3.1 COMPETITIVE RIVALRY102.3.2 BUYER POWER102.3.3 FORCE OF SUPPLIERS112.3.4THE THREAT OF SUBSTITUTES112.3.5 DANGER OF NEW ENTRY112.4 SWOT ANALYSIS122.4.1 THREAD122.4.2 STRENGTH142.4.3 OPPERTUNITIES142.4.4 WEAKNESSES152.5 ANSOFFS MATRIX162.5.1 MARKET PENETRATION16LEGITIMATE LIMITATIONS162.6 MENDELOWS STAKEHOLDERS ANALYSIS MATRIX172.6.1 STAKEHOLDERS172.7 CRITICAL SUCCESS FACTORS182.8 FINANCE182.8.1 SHARE ISSUE182.8.2 LOAN192.9 FARM OUT192.9.1 MARKET SUITABILITY192.10 ETHICAL202.10.1 DRILLT202.10.2 PROTEST BY THE GREENBIES PARTY202.11 OTHER ISSUES202.11.1 HSE202.12 LONG TERM INVESTMENT202.12.1 EXIT MARKET212.12.2 FEASIBILITY213.RECOMMENDATIONS223.1 FINANCE223.1.1 SHARES ISSUING223.1.2 LOAN223.2 FARMOUT223.3 DRILLT223.3.1 STEALING223.3.2 RECRUITING AND RETAINING A MOTIVATED WORKFORCE WITH THE REQUIRED SKILL SET233.4 ETHICAL ISSUES233.5 OTHER ISSUES243.5.1 RISK OF INADEQUATE RESOURCE243.5.2 IMPROVING OPERATIONAL PERFORMANCE243.5.3 HSE.243.6 LONG TERM INVESTMENT243.6.1 NEW BUSINESS IDEA243.6.2 RISK253.6.3 INVESTORS POINT OF VIEW253.6.4 STRONG TECHNICAL CAPABILITY25APPENDIX 26YJS OIL AND GAS PRODUCTION26WITHOUT IMPACT OF COST AND FINANCING27PROFIT OR LOSS STATEMENT, BALANCE SHEET, CASH FLOW27WITH CHANGES IN COST AND FINANCE30PROFIT OR LOSS STATEMENT, BALANCE SHEET, CASH FLOW30REFERENCE.....36

1. INTRODUCTION

1.1 YJ LTD BACKGROUND

YJ Ltd (YJ) is a UK organization which was recorded on AIM in January 2007 with a beginning public offering (IPO) of US$60 million. YJ Company creates value by investigating, evaluating and create into creation its licensed oil and gas fields both securely and responsibly. To date, YJ has been effective in distinguishing and bringing into generation three oil and gas fields. YJ's incomes became by 47% to US$174 million in 2013/14 and the organization reported record post-duty benefits of US$41 million (2012/13 was US$20 million). The majority of the penetrating operations that YJ embraces are seaward and in shallow water. YJ's geologists and review groups are specialists at mulling over and checking potential ranges for oil and gas holds.YJ Company creates value by investigating; evaluating its licensed oil and gas fields both securely and responsibly. Since its birth YJ has come a long way, it has grown tremendously. Company has brought three fields into production successfully and with license of three new fields is a great opportunity for the company to succeed. But like any other growing company, YJ has to face problems in the path to success. Issues related to production, HSE, ethics, stakeholders, scares reserves and other market related issues. I strive to recommend potential solutions for these problems which would set right track for the company to accomplish companys long term goals. The YJ Company wishes to guarantee that it effectively plans for and deals with the dangers it faces in the threatening and troublesome situations in which it works by immovably putting health, Safety and Environmental (HSE) issues at the highest point of YJ's goals. Corporate social responsibility (CSR) is key to the path in which YJ works. In request to fulfill every last bit of its shareholders and different partners, YJ dependably considers the ramifications of its activities and CSR is joined into its administration frameworks and systems. To date, YJ has not partook in both of the farm-in or form-out conceivable outcomes. On the other hand, YJ may need to consider a farm-out course of action for a piece of one or more licenses that it might be allowed later on

1.2 PRIORITISATION OF MAIN ISSUES

1.2.1 Financing

First of all the most important decision of make will be where we finance drilling to three areas.

1.2.2 Farming out

Second most important decision is to farm out or not the field of GGG. Although without making this decision we would not be clear about the amount required for financing but in importance rank financing is main priority.

1.2.3 Drill T

Issues relating drill T outsourcers Stealing recruiting and retaining a motivated workforce with the required skill set

1.2.4 Ethical issues

Ethics is also major concerns and image of the company depends on it stakeholders trade and market image all depend about how ethical the company is.

1.2.5 Long term investment

The future decision the company has to take within few years when reserves finish.

1.2.6 Others issues

Health, safety and environment. Managing the risk of accidents. Managing the threat posed by terrorist activities. Improving operational performance. Risk of inadequate reserves

1.3 FINANCINGCompany has been given drilling license of three areas EEE, FFF and GGG. We require financing to drill them. Total finance required for all three areas are $ 63 Million for all three areas. And only cash available from cash flow is $ 13.6 Million. Finance capacity being one of the threats for the company. Deficit has to be financed either by farming out, issuing shares or through debt financing 1.3.1 RATIOSLIQUIDITY RATIOS

Ratios20142015Industry Average

Current ratio1.3911.913.6

Quick ratio0.621.622.8

As we can optically discern, YJ's quick ratio and current ratio all much lower than the industry average level. This designates that YJ has a deplorable short-term debt-paying ability and at a not so good liquidity position. PROFITABILITY RATIOS

Ratios20142015Industry Average

Return on investment17.50%35%31.47%

Return on equity66.50%95%51.37%

In 2014, The ROI increases from 2013-2014 but are lower than the average industry level. The YJ Company increases its ROI. However the ROE has declined in year of 2013-2014. Overall the ROE is higher than the average industry level. This shows the good trend and efficiency of YJ Company in generating profits of shareholder equity. LONG-TERM DEBT-PAYING ABILITY RATIOS

Ratios20142015Industry Average

Interest coverage ratio3.654.8736.08

Debt ratio0.7360.6651.12

Debt to equity ratio2.7941.9620.34

The YJ interest coverage ratio has increased which is good trend. However company should still increase its ability to pay back the interest by comparing with the industry average which is 36 times. Moreover the companys Debt ratio is less than the average industry. Finally the companys Debt to equity ratio has declined by 0.832 but is even higher than average industry ratio of 0.34. Overall the YJ Company is more risky.

1.3.2 FUTURE COSTS OF PRODUCTIONCost of production as mentioned in appendix 3 is increasing and financing is needed at every step opting for all and leaving nothing for future need for financing could be a mistake.

1.3.3 STAKEHOLDERSReferring to appendix (mend lows analyses) we can say that most of our stakeholders manage closely any decision without their consultation could result in disastrous for companys future. 1.4 FARM OUTYJ has received a proposal from LG Company to farm out our drilling license for GGG field to them. There are many factors which require serious attention and though process backed up with calculation to make any decision. The two options here are whether to farm out or wait till test drilling for other offers.1.5 DRILL TDrill T is YJs outsourcer for AAA field. It has been with the company from the very start and in the past there have been no complaints regarding their performance. But recently there have been few problems, which include:1.5.1 STEALING IN THE FIRMOf the incident happened was Mr. Paul who had left the firm two months ago his payroll showed that he had been taking his salary means someone took his salary in his name. This is not just against ethics but its also illegal and can effort the trust which YJ had on DrilTls performance.1.5.2 RECRUITING AND RETAINING A MOTIVATED WORKFORCE WITH THE REQUIRED SKILL SETDue to several reasons such as harsh working conditions, terrorist attacks at African coast, dangerous accidents common in the E&P companies and other workers are not motivated.1.6 ETHICAL ISSUESYJ is an ethical company; it is always concerned with ethical issues and how to resolve them in best manner possible. Example of the event when Asian and African officials belonging to government asked for bribe at time of licensing but Jason Oldman made it clear that YJ always take ethical stance along with the help of Oliver Penn.1.7 OTHER ISSUES1.7.1 RISK OF INADEQUATE RESERVESIn DDD when reserves quantity was not enough to send in to production, YJ had to face numerous problems. This problem is very common with E&P companies.1.7.2 IMPROVING OPERATIONAL PERFORMANCECompany is also facing problem with operational performance of its workers which can affect performance of the company as a whole. 1.7.3 HEALTH, SAFETY AND ENVIRONMENTAL ISSUE HSE issues continually bring E & P businesses disastrous results so YJ ought to take them seriously. One of the case happened when oil linked in the water and it damaged the water and even workers. 1.8 LONG TERM INVESTMENTCompany is facing problem with ending reserves in about seven years and change in the trend of price, consumption, technology and cost indicates that there is no future for oil companies. Especially YJ will dry out in next seven years.1.8.1 ALTERNATIVE FUEL VEHICLES

CNG, electricity, hydrogen, E85 (flex fuel) Alternative fuel vehicles benefit from a long history of federal aid by way of tax breaks, subsidized R&D, mandatory shares of government vehicle and public transport vehicle fleets, and tax credits for certain infrastructure. Alternative fuel vehicles in the US increased from 0.15% of the total fleet in 1995 to 0.4% in 2009. Nearly two-thirds of these were flex-fuel vehicles (capable of using 85% ethanol). Already in model year 2011 more than 50 models of flex-fuel vehicles were on offer in the US, as well as 30 different models of hybrid electric vehicles2. DISCUSSION2.1 PEST ANALYSIS

2.1.1 POLITICAL The government takes a huge rate of the benefits. Directors find its hard to manage a few individuals from the legislature of the African and Asian nations and on occasion they may confront moral test. 2.1.2 ECONOMIC The all out capital venture for penetrating attempted in gas and oil field reach, or even exceed US $ 100 million. The financial specialists search for long haul development in the offer cost. The premium rates over that the moneylender of the advance stores and the bank giving the overdraft saw comparable levels of danger. 2.1.3 SOCIAL The climbing interest for common gas may push up regular gas costs. Speed of utilization had been figure to develop at a higher rate than has really happened lately. Cutting oil utilization further will drag out the life of worldwide oil holds. 2.1.4 TECHNOLOGY YJ has been fruitful in distinguishing and bringing into generation three oil and gas fields. New common gas fields are being found and with the utilization of new innovation gas stores have the capacity to enter generation in some of the climatically harsher ranges of the world.

\2.2 PORTERS GENERIC STRETEGY

I can argue in here that, there is not too much room in to compete on the price in the oil and gas industry in the both senses.1. Cost2. Differentiation

Oil and gas is vital to many industries for maintaining industrial growth and for nearly all forms of transportation. Oil and gas prices are determined by the market not by the E&P companies.

However, the current approach used by the YJ company is more focused because it targets the particular customers of oil and gas rather than in any other business field. So the company is using more focus strategy. I would argue to be more focused on deep water exploration so that company can achieve greater size of oil and gas from the fields.

2.3 PORTERS FIVE FORCES

2.3.1 COMPETITIVE RIVALRYAs there are a large number of E&P organizations on the planet with the same business, they confront with serve rivalry. Contention could rebate cost, present new items and enhance administration to rival different organizations. All E&P organizations worldwide are generally equivalent in size and force; exit obstructions are high and profoundly dedicated to the business (Doorman, 2008). In this way, the power of contention is awesome. An organization might differentiated itself through incredibleness in a specific piece of the oil and gas quality chain, relationship administration in a critical region, strength in a specific innovation, or mastery in certain business settings. The competition at this stage is chiefly innovative to discover the most proficient method for changing over expansive amounts of low-vitality power material into a fluid fuel at an attractive cost.

2.3.2 BUYER POWERPurchasers who can contract for huge buys additionally press hard for value concession, deferred installments or returned items. These can sink an undercapitalized organization. In oil and gas industry, purchasers are capable on the grounds that every purchaser buys in substantial volume, purchasers confront few exchanging expenses in evolving merchants (Doorman, 2008). Additionally, a few purchasers are halfway clients. They purchase raw petroleum as oil brokers then increase dealing power as they can influence the buying choices of downstream clients (Doorman, 2008).

2.3.3 FORCE OF SUPPLIERS An E&P organization depends vigorously on a novel data for its items, for example, stage, wellhead, long lead things, boring bits which must be supplied by a minor of specialized organizations, for example, oilfield administration organizations. Any postponement in conveyance or out of stock should be imperatives for its business. In addition, the opposition between suppliers may cause weight on the value which prompts the value race, limits quality or movement beds to industry members.

2.3.4THE THREAT OF SUBSTITUTES A substitute which performs the same or comparable capacities as raw petroleum can be the danger for an oil and gas organization. Renewable vitality sources, for example, sunlight based vitality, atomic force limit the business' benefit potential by putting a roof on costs (Watchman, 2008).

2.3.5 DANGER OF NEW ENTRYThe profitable vitality market has a tendency to draw in new contestants. They can build the gainful limit serving the business, battle to expand piece of the pie that put weight on costs, expenses, and the rate of venture important to finish and actually bring new assets to the opposition. As of the stature of entrance barriers, high cost, high risk and change in trend of the industry, risk of new participants in E&P division is low.

2.4 SWOT ANALYSIS

2.4.1 THREAD ADEQUATE RESERVES Biggest thread to the company is if there will be enough reserves available in these areas. Example of DDD where Company faced great loss due to DDD, shareholders were disappointed due to previous writing off the losses and would not excuse that mistake again. These factors should be taken in to account since company wouldnt be able to afford such massive loss. Finding reserves in this business is 1/10 ratio.

MARKET The ground in the oil patch has moved significantly. The gauge for the business is to a great degree distinctive today contrasted and how it looked only a few years prior, when the essentials of the oil business were controlled via cartels. That conventional structural order has been supplanted by a systemic irregularity checked by immeasurably expanded supply and subsiding interest development. Worldwide monetary shortcoming (specifically, slower development in China and proceeding with budgetary burdens in Europe)

THE INCREMENT IN THE SUPPLY OF PETROLEUM AND OTHER FLUID FUELS WAS TWICE THAT OF WHAT WAS CONSUMED.Little amaze, then, that the U.S. Vitality Information Administration evaluates that in 2014 the increment in the worldwide supply of petroleum and other fluid powers was double the increment in utilization. That was a formula at lower costs and contracting benefits. What's more it shows an upsetting viewpoint for oil titans, for example, ExxonMobil, BP, Total, Chevron, and Shell that put several billions of dollars in oil investigation when costs were high however did not appreciate an attending help underway or overall revenues. Some Chinese cities, such as Beijing, not only ban car circulation for one day a week, but also limit car sales. In Beijing, people will have to join the lottery to gain permission to buy a car. If this continues and spreads to other major cities, it will slow the car fleet growth rate.

REDUCTION IN PRICESA consultation paper (August 2011) proposes a 2020 minimum of 20.1 km/l (47.3 MPG(US)), a reduction of 24%, with a reduction of approximately 2% per year in fuel consumption a lower rate than envisaged in the US for 2015 or the EU for 2020. A 24% reduction of fuel consumption achieved by this route would translate into roughly 0.3 mbd by 2020.

COST OF PRODUCTIONNew assets have gone the distance significant revelations in beforehand unexplored districts, eminently in Brazil and Africa, though officially found volumes in conventional ranges outside of these new plays and the Middle East have declined Ultra deepwater plays now account for40 to 60 percent of all new found asset volumes. The expense of creating and working such assets has expanded forcefully as of late. The full lifecycle breakeven costs for bringing such new creation on line are regularly now in the scope of US$80 to $110per barrel.TERRORIST ACTSThere was a terrorist act in starting of 2013 which is also a threat to the company since it could affect its production in that area and high risk to workers. Although, company took measures PROTEST BY GREENBIES PARTYThis is not a major problem but if not handled immediately it can affect future image of the company and hence bad impression over investors.ENDING RESERVES It has been estimated that after 7 years companys reserves will end this is also threat to a company but measures will be taken by planning alternative business.

2.4.2 STRENGTHOne of the biggest strengths of YJ is its IT system. The business driving programming bundle has been chosen. The IT frameworks are completely coordinated and empower the creation of official rundown reports and the capacity to bore down to increase particular information on every passage or occasion. If the company continues to improve this IT technology it can be used as a way to position itself among the competitors.2.4.3 OPPERTUNITIESWith license to drill three to location new opportunities had knocked YJs door. This can be great opportunity to succeed and grow for the company. The sudden growth in price share from $ 26.80 to $ 35 instantly the news of license been granted was announced. ASIA GROWTH MARKETMere presence in a growth market is an opportunity, not a guarantee of increasing volume profitably. In China, Southeast Asia and India, rapid growth eases the problem of adjusting to higher standards for product quality and environmental processes. A private-sector company (Reliance) has demonstrated it is possible to succeed in India in terms of both scale and quality investment by investing in new, state-ofthe-art capacity.2.4.4 WEAKNESSESBiggest weakness at the moment is financial capacity of the firm. Even though the opportunity has been given to YJ but its current financial position is a barrier for this.Making the decision, of what to do at this stage about these licenses, very hard.

2.5 ANSOFFS MATRIX

2.5.1 MARKET PENETRATIONThe company is going for market development according to Ansoffs matrix. In which the product is the existing which is oil and gas and even market is the same only they will be increasing their production after their fields start producing in the coming future.AFFECTS OF MP

COUNTERING FROM COMPETITION: when a firm increase market share, it will make the opposition more extraordinary. Rivals in industry may make the value war. Thus, the offer additions can't repay the cost emerging from rivalry. LEGITIMATE LIMITATIONS: more noteworthy business entrance may raise concerns from rivalry controllers who have forces to control intense organizations.

2.6 MENDELOWS STAKEHOLDERS ANALYSIS MATRIX2.6.1 STAKEHOLDERS

SHAREHOLDERS (OWNERS):YJs shareholders lie in the category manage closely of the matrix. As they have high power in the company due to the institutional investors owning 96% of the shareholding. These investors especially the institutional have high interest in the decision making process of the company. The share prices have been fluctuated due to any circumstances such as finding the potential oil fields, concerns regarding the future of the company and due to the recent news related to test drilling license. They were unhappy due to the write off of the field (DDD). They were eagerly waiting for the announcement of the licenses so they should be kept informed about the business strategy especially during the implementation of it.DIRECTORS:They fall in the category of Manage Closely as they have high power (they run the organization) and they have high interest. They are the key decision makers. They have contributed considerably in the success of the organization.GOVERNMENT:The government lies in the category of Keep Satisfied. They have low interest and high power, as they grant licenses to the company to drill and produce. It is important to reassure them of the business strategies because they are a part of the PSA agreement in which they have a share in profits in if the company has actually produced oil and gas.COMMUNITY:They fall in the category of keep informed. They have low power but have high interest in business strategies because recently they protested outside the companys head office regarding the finite use of resources. This protest has led to a bad publicity of the entire industry.BANK:They fall in the category of Keep informed as they have low power but high interest in the business strategies because the bank has given the loan of $140million to the company.EMPLOYEES:They fall in the category of Monitor. They are the ones which are likely to do what they are told to do.OUTSOURCER:They also fall in the category of Monitor. They are the ones which are likely to do what they are told to do and they do not have enough power within the organization to influence the decision making.

2.7 CRITICAL SUCCESS FACTORS

The key drivers of success are following of YJ Company: It has the technical capability to bring the potential oil and gas fields into the production. The team of expert geologists and survey teams have successfully brought three fields into the production through its high technological capacity. It has latest software packages of 3D images for the potential area. They have high HSE IT standards. They have production of environmental statements of each location where YJ is operating and for the potential fields also. They had only one failure (DDD) which did not go into the production. Since then they have been very careful and have found three more potential fields from which one field has confirmed production of 8 and 10 mmbbl/mmbble of oil and gas.

YJ has the CSR policy to strive to protect the environments in which they operate. They always incorporate the CSR policies into its management systems and procedures. Recently, due to some terrorist attacks, Lee Wang persuaded the board to appoint international security company. They have strong HSE standards and have does not have a track record of major incidents. This has showed the level of awareness of the environmental issues and actions taken upon it and a good track record.

2.8 FINANCEThere are two possible solutions to finance our costs2.8.1 SHARE ISSUECompany has currently 50 million authorized shares out of which only 10 million shares have been issued. New CEO of the company is planning to buy 0.2 million shares at market rate which is $35 per share. Secondly in the mentioned article shareholder were unhappy when they were forced to invest in right shares as one for two already held. Two conditions were kept on table by shareholders Firstly, giving 15% discount on market price per share Secondly, ratio should be one for four already held. 2.8.2 LOAN Condition for granting of loan is three times that of operating profit. YJs current operating profit is $ 57 million. Three times would be $ 171 million and loan already taken is of $ 140 million. Hence company can only finance $ 31 million from loan. Other factors include.The offer given by LG is that they will pay us $10 Million initial for test drilling and will buy the reserves at 10% discount. But it would not be given altogether. $2 million when contract is signed further $2 million when drilling is started and 100 meters have been drilled under water and $6 million after completion of drilling. All the work should be completed by 31st march or we have to pay them $1 million every month until completed.2.9 FARM OUT

2.9.1 MARKET SUITABILITYFarm out option is most common for E&P companies. With the help of SWOT analysis market suitability can be assessed. We know our weakness (financial) and threats (changing market trend) of company. We can say that minimizing risk must be our choice.2.9.2 FEASIBILITY Total cost of drilling is $18 M. LG is giving us $10M for drilling. And will buy reserves for $9.9M per mmbbl. (10% discounted) compared to $11M sold in the market. Reserves on average will me 9mmbble. Option 1= 9.9*9+10= 91.1-18= $81.1MOption 2= 11*9=99-18= $81MTwo risks are to be taken in to account. First if no reserves are found we will only face loss of $8M ($18m-$10m given by LG) instead of $18M. Second, prices are very unpredictable if prices drastically decrease like previously witnessed, we could face loss if we wait for an offer till drilling is completed.2.9.3 ACCEPTABILITYStakeholder goes for low risk and certainty which we assessed in mendelow analysis in appendix. They manage closely so we have to keep them in mind before making decision. Adequate resources as one of our threat mentioned in appendix 3 can turn down our stakeholders. We would loss trust of our stakeholder. 2.10 ETHICAL2.10.1 DRILLT The chaos happened in the AAA field is definitely due to nonappearance of administration, however a CSR issue also. Presently YJ confronts a hard decision between covering the supposed mishap and uncovering the rough truth to people in general. YJ's company seeks to work with uprightness and trustworthiness, in agreement of the business morals in the CSR strategy. 2.10.2 PROTEST BY THE GREENBIES PARTY The oil, viewed as the non-renewable fundamental vitality source today, which is actually a complete issue including all the political, financial and social perspectives. In the mean time, the protestors highlight individuals concerns of natural assurance and our fate of breaking point asset of oil. It is a CSR issue to YJ.

2.11 OTHER ISSUES2.11.1 HSETERRORIST ATTACKSIn African coast there have been number of terrorist attacks which is extremely dangerous for the company and the workers working there.WORKERS AND STAFF SAFETY Drilling under water and underground can be dangerous for the workers. They can get hurt easily or even die under pressure of gas. IT FRAMEWORK YJ has a coordinated programming to work itself. It not just incorporates the records of organization and register of staff additionally could study and sweep to impart information for geologists. The most powerful for IT framework is wellbeing, security and environment (HSE) issues. For YJ, inadequate workforce is a standout amongst the most troublesome issues and in the event that it cant hold ability who is crucial YJ will be difficult to create itself even manages its wells.

2.12 LONG TERM INVESTMENTThere are two choices either to exit E&P market or become an energy company.

2.12.1 EXIT MARKETSimply existing market would not be very feasible since all the employees, directors and other people related have experience and knowledge of oil, gas and other form of energy sources. Quitting from this sector will affect many things

INVESTORS: Investors who have been part of the company would not be happy at all knowing that company will start over with something new which on one has experience. PROFITABILITY: After year, Company stood out from the crowd and made its name in energy sector now with high competition in the market going for something entirely news means trouble for many coming years and no surety at all.

2.12.2 FEASIBILITYCAPACITY: Current company resources and capability including its employees abilities in which they already lack would not allow YJ to start from zero again.

RISK: Extremely risky decision. No certainty at all.

3. RECOMMENDATIONS3.1 FINANCE3.1.1 SHARES ISSUINGSince Mr. Ullan Shah already wants to buy 0.2 Million shares at market rate $7 million can be raised from this option. Secondly if we can issue right share with 15% discount on market share priced at $ 29.75 (discounted price) per share and amount we need to raise for EEE and FFF is $ 45 million and for GGG, LG Company will provide advance $ 4 million. The amount we require as advance for financing will be $ 38.4 million (20+25+18-13.6(cash)-7-4). Total shares to be issued would be 1,290,756 or 1,300,000 approx. Which will be 1 for 7 (approx) already held.3.1.2 LOANCompany just recently has started earning profit; finance cost already is high $ 15.6 million. Ratios are proving to that. Further loan means further interest payable. At the moment company is in no position to take further risk. Company should play safe.

3.2 FARMOUTWe would recommend accepting the offer. Company does not have capability to drill and produce all three wells it has to farm out GGG. In this option the risk is much low which is important for stakeholders. And company cannot take bold steps when market already is not in favor.

3.3 DRILLT3.3.1 STEALING Take strict measures to find out who was behind such offence. Increase supervision in this area so that next time such things do not happen. Ask drillT to compensate for damage done. Create system of reward for employees who report unethical and illegal activities happening in the firm.

3.3.2 RECRUITING AND RETAINING A MOTIVATED WORKFORCE WITH THE REQUIRED SKILL SETFORMATION OF JD AND JSJob description and job specification should be constructed and strictly followed at the time of recruiting process. Right people for right job can be accessed in this manner.HIRING BEST HR TEAM AND FORMING HR STRATEGIES It is the job of HR department to recruit and retain workforce with right skills and keep them motivated. Hiring HR team which can do that would solve almost entire problem. Above is Microsofts HR strategy which is very effective ( self evident).3.4 ETHICAL ISSUES

Take the DrillT mischance as the opportunity to enhance the present overseeing framework, and discharge the entire methodology to the administration bunch and people in general with a correction. The positive and straightforward mentality YJ partnership holds will doubtlessly help itself to overcome both the overseeing and CSR the challenge easily. A propelled correction makes the administration, shareholders, and stakeholders accept and trust the ability of YJ'S partnership and its firm future. YJ needs to emerge and disclose to the general public with that the organization's proposition is to improve a world, with less demanding life and more helpful correspondence, by extricating the oil from oil fields. It will settle shareholders and solace the administration which imparts benefit from YJ's oil and gas field. Additionally YJ is obliged to guarantee there will be changes on removing effectiveness and sparing the vitality while penetrating or separating. 3.5 OTHER ISSUES3.5.1 RISK OF INADEQUATE RESOURCERisk of inadequate reserves will always stay with E&P business but it could be minimize if care is taken. Geologists have to be very careful before drilling decision is made. Research has be done carefully and use of advance technological instrument will always help reduce this risk.3.5.2 IMPROVING OPERATIONAL PERFORMANCE Operational improvement Productivity tracking Set standards, form various KPIs (key performance indicator) and job standards Performance incentive programs3.5.3 HSE. Government should be asked for safety of the workers as its their responsibility. Increased security would help but since conditions are getting worse company should think about winding up soon. Workers should be insured for their health The framework needs a stage, for example, minute or discussion for staff to submit considerations to headquarter and speak with one another. It is important for YJ to update the hole in the framework. Furthermore it will raise security components to reinforce staff's certainty. The framework ought to be reviewed and upgrade in time to convey genuine and careful data to headquarter.3.6 LONG TERM INVESTMENT3.6.1 NEW BUSINESS IDEAThe IOCs have made investments in wind and solar, the main thrust of their effort is in biofuels. This makes perfect sense, far more so than wind or solar. Companies are very wise to be involved in the technological development of biofuels. Their investments broadly fall into two categories: ethanol-related (generally based in Brazil, e.g. BP, Royal Dutch Shell) and those involved in developing efficient processes to extract energy from non-food sources such as cellulose (BP, Royal Dutch Shell, and Total), conversion of vegetable oils (ENI, Total) or algae (ExxonMobil). The research centers for these are often based in California (where investment in biofuels is mandated) or in joint ventures with specialist companies. All the companies emphasize their commitment to biofuels. EXAMPLE; ExxonMobil is very focused on the potential of algae, which it states produces bio-oil with similar molecular structures to petroleum and refined products.

3.6.2 RISKRisk again is high but since trend is changing investing in this sector will be profitable in the long run as suggested by market research. This is where next market will be.3.6.3 INVESTORS POINT OF VIEWFrom an investors point of view it would be worrying if the companies were not exploring the potential both as possible incremental business and as a defense against government or regulatory requirements. What investors will be concerned about is whether these investments will be material within an investment time horizon, and what the returns will be. Despite uncertainties about policy, major US and EU companies in the agriculture, oil, process control and chemical industries are investing for the longer term, in research and projects for the development of processes to produce second-generation biofuels.

3.6.4 STRONG TECHNICAL CAPABILITYAs mentioned in appendix we have advance softwares and technical capability which can help us in doing research and supporting new idea in energy business.

4. APPENDIX YJS OIL AND GAS PRODUCTION

OPERATIONAL OIL AND GAS FIELD:location continentAAA

AfricaBBB

AsiaCCC

AsiaTOTAL

Production in year till 31 march 2015Oil boepd

mmbbl

Revenue US$million1,5001,20010403,740

0.550.440.381.37

63.12

50.50

43.76

157.94

`(30% increase in volume of CCC. AAA, BBB will remain same.Oil US$ 115.29 per barrel for all fields. 5% increase in US$109.80)

Gas boepd

Mmbbl

Total gas revenues US$million

( 30% increase in volume of CCC. AAA, BBB will remain same. Gas price to be US$19.16 from US$18.25 per barrel 5% increase)1500200019505450

0.550.730.711.99

10.4913.9913.6438.128

Total oil & gas revenues for year ended 31 March 2014 US$million 73.6164.4957.4195.5

4.1 APPENDIX WITHOUT IMPACT OF COST AND FINANCING

PROFIT OR LOSS STATEMENT

RevenueCost of salesGross profitDistribution costAdministrative expenseOperating profit

Finance incomeFinance expenseProfit before taxTax expense

Profit Year end 21 march 2015US $ millionYear end 21 march 2014US $ million

205.50106.8698.640.5022.1076.04

0.115.60 60.5014.5

46.0

174.094.479.60.522.157.0

0.115.6 41.50.5

41.0

SHAREHOLDER EQUITY31 MARCH 2015

SHARE CAPITAL

SHARE PREMIUM

RETAINEDEARNINGS

TOTAL

Balance at 31 march 2014

Profit

Dividend paid

31 march 2014 ending balanceUS millionUS millionUS millionUS million

1050.01.70

61.7

46.046.0

(10.0)(10.0)

10.050.037.797.7

BALANCE SHEET

Non-current assets (net) Current assets Inventory Trade receivables Deferred tax Cash and cash equivalents

Total current assets Total assets

Equity and liabilities

Equity Issued share capital Share premium Retained earnings Total Equity

Non-current liabilities Long term loans

Current liabilities Bank overdraft Trade payables Tax payable Total current liabilities Total equity and liabilities As at31 march 2015As at31 march 2014

US$ million US$ million 191.0

15.0 8.5 0 74.6

98.1 289.1

10.0 50.0 37.70

97.7

140.0

036.9014.5051.4 289.1US$ million US$ million 189.0

25.0 6.5 0 13.6

45.1 234.1

10.0 50.0 1.7

61.7

140.0

031.90.532.4 234.1

4.2 APPENDIX

CASH FLOW STATEMENT`

Cash flows from operating activities: Profit before taxation (after Finance costs (net)) Adjustments: Depreciation & amortization of E&P drilling costs Finance costs (net)

(Increase) / decrease in inventories (Increase) / decrease in trade receivables (Increase) / decrease in deferred tax asset Increase / (decrease) in trade payables (excluding taxation)

Finance costs (net) paid Tax paid

Cash generated from operating activities

Cash flows from investing activities: Purchase of non-current assets (net) Cash used in investing activities

Cash flows from financing activities: Dividends paid Cash flows from financing activities

Net increase in cash and cash equivalents Cash and cash equivalents at 31 March 2013Cash and cash equivalents at 31 March 2014

US$ million US$ million 60.50

28.015.50

43.50 10.0(2.0)05.0 13.0(15.0)(0.5)16.0101.0

30.030.0

10.010.0

61.013.674.6

4.3 APPENDIXWITH CHANGES IN COST AND FINANCE

Cost of drilling is added in the year ending 31 March 2015.Depreciation is assumed to be 20%, 5 year full depreciation.Impact of new shares issued is shown in all the financial statements.

PROFIT OR LOSS STATEMENT

RevenueCost of salesGross profitDistribution costAdministrative expenseOperating profit

Finance incomeFinance expenseProfit before taxTax expense

Profit Year end 21 march 2015US $ millionYear end 21 march 2014US $ million

205.50(119.46)89.04(0.50)(22.10)63.44

0.1(15.60) 47.9411.506

36.43

174.0(94.4)79.6(0.5)(22.1)57.0

0.1(15.6) 41.50.5

41.0

SHAREHOLDER EQUITY31 MARCH 2015

SHARE CAPITAL

SHARE PREMIUM

RETAINEDEARNINGS

TOTAL

Balance at 31 march 2014

Profit

Shares issued at $35

Shares issued at $29.75

Dividend paid

31 march 2014 ending balanceUS millionUS millionUS millionUS million

1050.01.70

61.7

36.4336.43

0.206.87.0

1.2937.3838.66

(10.0)(10.0)

11.4994.1828.13133.8

BALANCE SHEET

Non-current assets (net) Current assets Inventory Trade receivables Deferred tax Cash and cash equivalents

Total current assets Total assets

Equity and liabilities

Equity Issued share capital Share premium Retained earnings Total Equity

Non-current liabilities Long term loans

Current liabilities Bank overdraft Trade payables Tax payable Total current liabilities Total equity and liabilities As at31 march 2015As at31 march 2014

US$ million US$ million

241.4

15.0 8.5 0 61.3

84.8 326.2

11.49 94.18 28.13 133.8

140.0

036.9014.50

51.4 326.2US$ million US$ million 189.0

25.0 6.5 0 13.6

45.1 234.1

10.0 50.0 1.7

61.7

140.0

031.90.532.4 234.1

CASH FLOW STATEMENT`

Cash flows from operating activities: Profit before taxation (after Finance costs (net)) Adjustments: Depreciation & amortization of E&P drilling costs Finance costs (net)

(Increase) / decrease in inventories (Increase) / decrease in trade receivables (Increase) / decrease in deferred tax asset Increase / (decrease) in trade payables (excluding taxation)

Finance costs (net) paid Tax paid

Cash generated from operating activities

Cash flows from investing activities: Investment in drillingPurchase of non-current assets (net) Cash used in investing activities

Cash flows from financing activities: Shares issuedDividends paid LG company advanceCash flows from financing activities

Net increase in cash and cash equivalents Cash and cash equivalents at 31 March 2013Cash and cash equivalents at 31 March 2014

US$ million US$ million 47.94

40.615.50

56.1 10.0(2.0)05.0 13.0(15.0)(0.50)(16.0)101.04

(63)(30.0)(93.0)

45.66(10.0)4.039.66

47.713.661.3

.

5. REFERENCES

http://www.cimaglobal.com/Events-and-cpd-courses/globalbusinesschallenge/Already-registered/case-study-and-format/http://www.mindtools.com/pages/article/newTMC_05.htmhttp://www.ansoffmatrix.com/http://www.businessballs.com/portersfiveforcesofcompetition.htmhttps://www.fueleconomy.gov/feg/oildep.shtmlhttp://www.environmentalleader.com/2013/07/09/bp-shell-biofuel-investments-hit-seven-year-low/http://5oro5.livejournal.com/7676.htmlhttp://www.srr.com/article/trends-and-challenges-oil-and-gas-industryhttp://idioms.thefreedictionary.com/farm+outhttp://markets.on.nytimes.com/research/markets/usmarkets/industry.asp?industry=50131http://www.propublica.org/article/who-are-americas-top-10-gas-drillers

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