j.c. penney valuation
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J.C. Penney Valuation. Brooks Associates, Inc. Agenda. Projections and Recommendation Financial Analysis New Remodeling Strategy. Recommendation. Stock not Undervalued No Additional Purchases. Weighted Average Cost of Capital. Future Projections. Pricing Strategy. Fair-and-Square - PowerPoint PPT PresentationTRANSCRIPT
2016 Brooks Case CompetitionBattling the Oil ‘Death Spiral’
Team 7: Johanan Tai, Xin (Kathy) Zhang, Kevin Wang
OverviewPart I: Industry Outlook
❖Fitting the Oil Price Trend to a distribution
❖Traditional versus Horizontal Tracking Analysis
❖Saudi Arabia Strategy & Effectiveness
Part II: Firm Analysis
❖ConocoPhillips & Antero Resources
❖Firm Strategies & Recommendation
❖Overall Investment Attractiveness
Oil Prices Fitted to a Lognormal Distribution❖Similar to stock in the sense that prices can’t be negative
❖Right skewed distribution
❖Lognormally distributed for both 2 yr and 5 yr
❖Annualized Parameters: Alpha and sigma
Lognormal Data❖Based on rate of
change on a daily basis
❖Continuously Compounded RoC
❖2 year had higher volatility
❖Significance of forward vs backward looking
Breakeven Analysis ❖Assumptions: inelastic supply
existent platforms
mainly variable costsHorizontal Vertical
Price/barrel 34.01 34.01
VC/barrel 13.60 40% 22.11 65%
BOPD 80 40
Breakeven Analysis❖Other factors: Horizontal
---more initial and storage costs ---pollution ---more time and water ---hydraulic fracturing
Saudi Arabia’s Role in OPEC❖2nd largest Country in terms of Reserves (~268 Billion Barrels)❖Largest OPEC producer (11.62M Barrels/day)❖Strategy: Refusal to give up market share against the US❖Belief: US has high production cost compared to Saudi Arabia
"The Hidden Agenda Behind Saudi Arabia's Market Share Strategy | OilPrice.com." OilPrice.com. N.p., n.d. Web. 19 Feb. 2016.
How Successful are they?❖US output growth in 2015 outpaced Saudi Arabia and other oil
producers❖US has higher delta in production rates ❖US companies have high debt and fixed costs
"The Hidden Agenda Behind Saudi Arabia's Market Share Strategy | OilPrice.com." OilPrice.com. N.p., n.d. Web. 19 Feb. 2016.
Revenue Mix❖Antero Resources
❖ConocoPhillips
❖ ConocoPhillips
Antero Resource Strategy & Recommendation❖Currently one of main shale
oil players➢ Shale drawbacks/costs
❖Experienced a 93% increase in production of NGL
❖Price per Mcfe increased from $4.31 to $4.73
❖NG uses and potential future in North America
ConocoPhillips Strategy & Recommendation
❖Operations in 27 countries
❖Large majority of US energy market
❖Current cuts and losses
❖Best course of action: short hedging
Financial Ratio Analysis of ConocoPhillips/Antero