Petrolera Zuata, Petrozuata C.A.: Analysis of Sponsor Returns and Debt Coverage Ratios Assumptions
(Change these six RED variables) Initial Oil Price in 1996 Annual Change in Oil Price (1996-2012) Royalty Rate (2001-2008) Royalty Rate (2009-2034) Total Debt Financing Leverage: Debt/Total Project Cost Project's Total Cost Tax Rate
$12.25 2.5% 1.0% 16.7% $1,450,000 60% $2,416,667 34%
Asset Beta Risk-free Rate (Yield on the 30-year Treasury Bond as of January 1997) Market Risk Premium Country Risk Premium
Year
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034
Forecasted Maya Price
$12.25 $12.56 $12.87 $13.19 $13.52 $13.86 $14.21 $14.56 $14.93 $15.30 $15.68 $16.07 $16.47 $16.89 $17.31 $17.74 $18.19 $18.64 $18.64 $18.64 $18.64 $18.64 $18.64 $18.64 $18.64 $18.64 $18.64 $18.64 $18.64 $18.64 $18.64 $18.64 $18.64 $18.64 $18.64 $18.64 $18.64 $18.64 $18.64
Change in Maya Price
2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Total Revenue
$0 $0 $78,524 $429,059 $803,290 $560,499 $580,141 $594,310 $608,833 $623,720 $638,978 $654,618 $670,649 $687,081 $703,924 $721,187 $738,882 $757,020 $758,224 $759,457 $760,722 $762,018 $763,347 $764,708 $766,104 $767,535 $769,001 $770,504 $772,045 $773,624 $775,243 $776,902 $778,603 $780,346 $782,133 $783,964 $785,842 $787,766 $789,738
Cash Available for Debt Service (CADS)
($80,007) ($610,492) ($820,154) ($139,352) $243,952 $383,869 $374,482 $351,470 $383,135 $379,409 $415,819 $416,376 $417,733 $364,040 $353,700 $359,505 $367,531 $309,595 $341,704 $373,643 $365,851 $366,964 $312,682 $293,660 $264,839 $281,934 $276,305 $278,150 $273,514 $274,138 $263,068 $262,329 $260,484 $250,113 $234,648 $238,181 $231,118 $229,576 $215,770
Total Debt Outstanding
$0 $1,000,000 $1,024,299 $1,242,981 $1,450,000 $1,411,120 $1,372,240 $1,333,360 $1,268,892 $1,205,447 $1,103,295 $992,187 $864,195 $768,166 $680,692 $576,861 $456,838 $408,576 $354,212 $256,355 $136,753 $75,000 $75,000 $75,000 $75,000 $75,000 $0
0.60 6.81% 7.50% 0.00%
Total Debt Service
Equity Cash Flows
$0 $935,950 ($63,079) $113,580 $85,113 ($157,629) ($154,472) ($151,315) ($171,563) ($165,270) ($195,423) ($195,059) ($201,103) ($161,187) ($145,382) ($153,095) ($159,037) ($83,154) ($84,614) ($119,749) ($131,281) ($68,159) ($6,405) ($6,405) ($6,405) ($6,405) ($75,000) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
($79,035) ($1,986) ($550,148) $1,576 $185,047 $227,819 $221,589 $190,031 $214,719 $199,063 $220,578 $218,294 $236,588 $210,755 $204,461 $203,439 $246,435 $225,711 $239,522 $248,128 $266,131 $329,682 $306,277 $287,255 $258,434 $241,232 $201,306 $278,150 $273,514 $274,138 $263,068 $262,329 $260,484 $250,113 $234,648 $238,181 $231,118 $229,576 $215,770
Debt Service Coverage Ratio
2.44 2.42 2.32 2.23 2.30 2.13 2.13 2.08 2.26 2.43 2.35 2.31 3.72 4.04 3.12 2.79 5.38 48.82 45.85 41.35 44.02 3.68
Note: This simplified version of the Petrozuata project's economics is designed to accompany Petrolera Zuata, Petrozuata C.A. , HBS No. 299-012. Although the have been made to model is based on the actual model used, a number of changes have been made to facilitate the analysis.
Model Output Minimum Debt Service Coverage Ratio (DSCR) Year of Minimum DSCR Average DSCR Internal Rate of Return Net Present Value
2.08 2008 10.46 25.1% $267,607
IRR and Minimum DSCR Output Table Leverage
IRR 25.1%
40% 45% 50% 55% 60% 65% 70% 75% 80%
18.4% 19.5% 21.0% 22.8% 25.1% 28.2% 32.5% 39.0% 49.0%
Min. DSCR 2.08 3.05 2.73 2.47 2.25 2.08 1.93 1.80 1.69 1.59
IRR as a Function of the Number of Years of Cash Flow Number of Years With Cash Flow
IRR
5 10 15 20 25 30 34
15.9% 22.7% 24.3% 24.9% 25.0% 25.0% 25.1%
Petrolera Zuata, Petrozuata C.A.: Analysis of Sponsor Returns and Debt Coverage Ratios
Year 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034
Forecasted Maya Price $12.25 $12.56 $12.87 $13.19 $13.52 $13.86 $14.21 $14.56 $14.93 $15.30 $15.68 $16.07 $16.47 $16.89 $17.31 $17.74 $18.19 $18.64 $18.64 $18.64 $18.64 $18.64 $18.64 $18.64 $18.64 $18.64 $18.64 $18.64 $18.64 $18.64 $18.64 $18.64 $18.64 $18.64 $18.64 $18.64 $18.64 $18.64 $18.64
Change in Maya Price 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Total Revenue $0 $0 $78,524 $429,059 $803,290 $560,499 $580,141 $594,310 $608,833 $623,720 $638,978 $654,618 $670,649 $687,081 $703,924 $721,187 $738,882 $757,020 $758,224 $759,457 $760,722 $762,018 $763,347 $764,708 $766,104 $767,535 $769,001 $770,504 $772,045 $773,624 $775,243 $776,902 $778,603 $780,346 $782,133 $783,964 $785,842 $787,766 $789,738
Cash Available for Debt Service (CADS) ($80,007) ($610,492) ($820,154) ($139,352) $243,952 $383,869 $374,482 $351,470 $383,135 $379,409 $415,819 $416,376 $417,733 $364,040 $353,700 $359,505 $367,531 $309,595 $341,704 $373,643 $365,851 $366,964 $312,682 $293,660 $264,839 $281,934 $276,305 $278,150 $273,514 $274,138 $263,068 $262,329 $260,484 $250,113 $234,648 $238,181 $231,118 $229,576 $215,770
Total Debt Outstanding $0 $1,000,000 $1,024,299 $1,242,981 $1,450,000 $1,411,120 $1,372,240 $1,333,360 $1,268,892 $1,205,447 $1,103,295 $992,187 $864,195 $768,166 $680,692 $576,861 $456,838 $408,576 $354,212 $256,355 $136,753 $75,000 $75,000 $75,000 $75,000 $75,000 $0
Total Debt Service
Equity Cash Flows
$0 $935,950 ($63,079) $113,580 $85,113 ($157,629) ($154,472) ($151,315) ($171,563) ($165,270) ($195,423) ($195,059) ($201,103) ($161,187) ($145,382) ($153,095) ($159,037) ($83,154) ($84,614) ($119,749) ($131,281) ($68,159) ($6,405) ($6,405) ($6,405) ($6,405) ($75,000) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
($79,035) ($1,986) ($550,148) $1,576 $185,047 $227,819 $221,589 $190,031 $214,719 $199,063 $220,578 $218,294 $236,588 $210,755 $204,461 $203,439 $246,435 $225,711 $239,522 $248,128 $266,131 $329,682 $306,277 $287,255 $258,434 $241,232 $201,306 $278,150 $273,514 $274,138 $263,068 $262,329 $260,484 $250,113 $234,648 $238,181 $231,118 $229,576 $215,770
Cash Return on Investment
68.5% 64.6% 59.1% 62.9% 60.8% 65.1% 63.6% 62.3% 53.0% 50.2% 49.8% 49.7% 40.9% 45.1% 49.2% 48.1% 48.2% 41.0% 38.4% 34.6% 36.7% 35.9% 36.1% 35.4% 35.4% 33.9% 33.8% 33.5% 32.1% 30.0% 30.4% 29.4% 29.1% 27.3%
Debt Service Coverage Ratio
2.44 2.42 2.32 2.23 2.30 2.13 2.13 2.08 2.26 2.43 2.35 2.31 3.72 4.04 3.12 2.79 5.38 48.82 45.85 41.35 44.02 3.68
Equity/Total Capital at BOOK VALUES
Equity Beta
Cost of Equity
Discount Factor
PV ECF
100% 10% 40% 41% 42% 42% 43% 44% 45% 46% 49% 51% 55% 58% 60% 64% 70% 72% 75% 80% 88% 93% 93% 93% 93% 93% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
0.60 6.00 1.52 1.46 1.44 1.41 1.39 1.37 1.33 1.29 1.24 1.17 1.10 1.04 0.99 0.93 0.86 0.84 0.80 0.75 0.68 0.64 0.64 0.64 0.64 0.64 0.60 0.60 0.60 0.60 0.60 0.60 0.60 0.60 0.60 0.60 0.60 0.60 0.60
11.31% 51.81% 18.18% 17.74% 17.57% 17.41% 17.24% 17.07% 16.79% 16.52% 16.08% 15.60% 15.04% 14.63% 14.25% 13.80% 13.28% 13.08% 12.84% 12.42% 11.90% 11.63% 11.63% 11.63% 11.63% 11.63% 11.31% 11.31% 11.31% 11.31% 11.31% 11.31% 11.31% 11.31% 11.31% 11.31% 11.31% 11.31% 11.31%
1.000 0.659 0.557 0.473 0.403 0.343 0.293 0.250 0.214 0.184 0.158 0.137 0.119 0.104 0.091 0.080 0.070 0.062 0.055 0.049 0.044 0.039 0.035 0.032 0.028 0.025 0.023 0.020 0.018 0.016 0.015 0.013 0.012 0.011 0.010 0.009 0.008 0.007 0.006
($79,035) ($1,308) ($306,647) $746 $74,511 $78,133 $64,822 $47,484 $45,939 $36,551 $34,892 $29,872 $28,142 $21,870 $18,570 $16,236 $17,362 $14,063 $13,225 $12,187 $11,681 $12,962 $10,787 $9,063 $7,304 $6,107 $4,579 $5,683 $5,021 $4,521 $3,898 $3,492 $3,115 $2,687 $2,265 $2,065 $1,800 $1,607 $1,357
Assumptions Initial Oil Price in 1996 Annual Change in Oil Price (1996-2012) Royalty Rate (2001-2008) Royalty Rate (2009-2034) Total Debt Financing Leverage: Debt/Total Project Cost Project's Total Cost Tax Rate Asset Beta Risk-free Rate (Yield on the 30-year Treasury Bond as of January 1997) Market Risk Premium Country Risk Premium
$12.25 2.5% 1.0% 16.7% $1,450,000 60% $2,416,667 34% 0% 0.60 6.81% 7.50% 0.00%
Model Output Minimum Debt Service Coverage Ratio (DSCR) Year of Minimum DSCR Average DSCR Internal Rate of Return Net Present Value
2.08 2008 10.46 25.1% $267,607
IRR and Minimum DSCR Output Table Leverage 40% 45% 50% 55% 60% 65% 70% 75% 80%
IRR 25.1% 25.1% 25.1% 25.1% 25.1% 25.1% 25.1% 25.1% 25.1% 25.1%
Min. DSCR 2.08 2.08 2.08 2.08 2.08 2.08 2.08 2.08 2.08 2.08
IRR as a Function of the Number of Years of Cash Flow Number of Years With Cash Flow
IRR
5 10 15 20 25 30 34
15.9% 22.7% 24.3% 24.9% 25.0% 25.0% 25.1%
