MIDLAND ENERGY RESOURCES

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MIDLAND ENERGY RESOURCES

Income Statement
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Income Statement

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MIDLAND ENERGY RESOURCES

Income Statement

Operating Results
Operating Results:
Operating Revenues
Plus: Other Income
Total Revenue & Other Income
Less: Crude Oil & Product Purchases
Less: Production & Manufacturing
Less: Selling, General & Administrative
Less: Depreciation & Depletion
Less: Exploration Expense
Less: Sales Based Taxes
Less: Other Taxes & Duties
Operating Income
Less: Interest Expense
Less: Other Non-Operating Expenses
Income Before Taxes
Less: Taxes
Net Income

2004
201,425
1,239
202,664
94,672
15,793
9,417
6,642
747
18,539
27,849
29,005
10,568
528
17,910
7,414
10,496

2005
249,246
2,817
252,062
125,949
18,237
9,793
6,972
656
20,905
28,257
41,294
8,028
543
32,723
12,830
19,893

2006
248,518
3,524
252,042
124,131
20,079
9,706
7,763
803
20,659
26,658
42,243
11,081
715
30,447
11,747
18,701

0.41

0.39

0.39
40%

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MIDLAND ENERGY RESOURCES

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MIDLAND ENERGY RESOURCES

Balance Sheet
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Balance Sheet

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MIDLAND ENERGY RESOURCES

Assets:
Cash & Cash equivalents
Restricted Cash
Notes Receivable
Inventory
Prepaid Expenses
Total Current Assets

2005
16,707
3,131
18,689
6,338
2,218
47,083

2006
19,206
3,131
19,681
7,286
2,226
51,528

30,140
156,630
10,818
244,671

34,205
167,350
9,294
262,378

Liabilities & Owners' Equity:

Accounts Payable & Accrued Liabilities
Current Portion of Long Term Debt
Taxes Payable
Total Current Liabilities

24,562
26,534
5,723
56,819

26,576
20,767
5,462
52,805

Long Term Debt

Post Retirement Benefit Obligations
Accrued Liabilities
Deferred Taxes
Other Long Term Liabilities

82,414
6,950
4,375
14,197
2,423

81,078
9,473
4,839
14,179
2,725

Total Shareholders' Equity

Total Liabilities & Owners' Equity

77,493
244,671

97,280
262,378

Investments & Advances

Net Property, Plant & Equipment
Other Assets
Total Assets

Balance Sheet

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alance Sheet

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MIDLAND ENERGY RESOURCES

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MIDLAND ENERGY RESOURCES

Business Segments
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Business Segments

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MIDLAND ENERGY RESOURCES

Business Segments

Exploration & Production:

Operating Revenue
After-Tax Earnings

2004
15,931
6,781

2005
20,870
13,349

2006
22,357
12,556

Capital Expenditures
Depreciation
Total Assets

6,000
4,444
76,866

7,180
4,790
125,042

7,940
5,525
140,100

2004
166,280
2,320

2005
206,719
4,382

2006
202,971
4,047

Capital Expenditures
Depreciation
Total Assets

1,455
1,620
60,688

1,550
1,591
91,629

1,683
1,596
93,829

Petrochemicals:
Operating Revenue
After-Tax Earnings

2004
19,215
1,394

2005
21,657
2,162

2006
23,189
2,097

Capital Expenditures
Depreciation
Total Assets

305
578
19,943

330
591
28,000

436
642
28,450

Refining & Marketing:

Operating Revenue
After-Tax Earnings

0.534
0.358
0.108

0.358

93,829

262,378

0.108

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MIDLAND ENERGY RESOURCES

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MIDLAND ENERGY RESOURCES

Stock & Dividend Data
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Stock & Dividend Data

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MIDLAND ENERGY RESOURCES

Stock Prices:
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
Dividends Per Share:
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
Annual Dividend
Selected Financial Data:
Net Income
Shares Outstanding
EPS
Payout Ratio
DPS

Stock & Dividend Data

2001
$27.16
$27.90
$28.33
$24.13

2002
$31.29
$30.41
$27.80
$26.85

2003
$32.59
$29.42
$32.45
$31.57

2004
$34.37
$35.78
$36.98
$31.28

2005
$38.32
$40.29
$37.52
$34.58

2006
$44.11
$39.75
$46.32
$38.81

$0.28
$0.28
$0.28
$0.28
$1.11

$0.29
$0.29
$0.29
$0.29
$1.14

$0.30
$0.29
$0.29
$0.29
$1.17

$0.31
$0.31
$0.31
$0.31
$1.24

$0.34
$0.34
$0.34
$0.34
$1.35

$0.36
$0.36
$0.36
$0.36
$1.46

15,303
2,049
7.47
14.8%
1.11

11,448
2,025
5.65
20.2%
1.14

11,848
2,035
5.82
19.9%
1.16

10,496
2,055
5.11
24.2%
1.24

19,893
2,945
6.75
20.0%
1.35

18,701
2,951
6.34
23.0%
1.46

Note: Results have not been adjusted for a divestiture at the end of 2001 and an acquisition at the beginning of 2005.

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MIDLAND ENERGY RESOURCES

Comparable Companies
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Comparable Companies

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MIDLAND ENERGY RESOURCES

Exploration & Production:

Jackson Energy, Inc.
Wide Palin Petroleum
Corsicana Energy Corp.
Worthington Petroleum
Average

Equity
Market Value
57,931
46,089
42,263
27,591

Comparable Companies
Net
Debt
6,480
39,375
6,442
13,098

D/E
11.2%
85.4%
15.2%
47.5%
39.8%

Equity
Beta
0.89
1.21
1.11
1.39
1.15

LTM
Revenue
18,512
17,827
14,505
12,820

LTM
Earnings
4,981
8,495
4,467
3,506

0.27
0.48
0.31
0.27

Unlevered
beta
0.834
0.800
1.017
1.082
0.933

Refining & Marketing:

Bexar Energy, Inc.
Kirk Corp.
White Point Energy
Petrarch Fuel Services
Arkana Petroleum Corp.
Beaumont Energy, Inc.
Dameron Fuel Services
Average

60,356
15,567
9,204
2,460
18,363
32,662
48,796

6,200
3,017
1,925
(296)
5,931
6,743
24,525

10.3%
19.4%
20.9%
-12.0%
32.3%
20.6%
50.3%
20.3%

1.70
0.94
1.78
0.24
1.25
1.04
1.42
1.20

160,708
67,751
31,682
18,874
49,117
59,989
58,750

9,560
1,713
1,402
112
3,353
1,467
4,646

134,114

79,508

59.3%

1.25

251,003

18,888

1.601
0.842
1.582
0.259
1.047
0.925
1.091
1.05

Midland Energy Resources

D/E

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Table 1
Credit
Business Segment:

Debt/

Spread to

Rating

Value

Treasury

Consolidated

A+

42.2%

1.62%

Exploration & Production

A+

46.0%

1.60%

Refining & Marketing

BBB

31.0%

1.80%

Petrochemicals

AA-

40.0%

1.35%

D/V
42.2%
46.0%
31.0%
40.0%

Note: Debt/Value is based on market values.

Table 2
Maturity:

Rate:

1-Year

4.54%

10-Year

4.66%

30-Year

4.98%

In 2006 Midland used an equity market risk premium of 5.0%,

EMRP

6.00%

E/V
D/E
57.8% 73.01%
54.0% 85.19%
69.0% 44.93%
60.0% 66.67%

Values derived from Table 1 in 'others' s

Inputs
Tax rate
10 year treasury bond
Spread to treasury
Consolidated
E&P
R&M
Petro chemicals
Beta (Equity)
Risk premium for market
Equity
Debt

Beta
Rate (Rd) (Asset)
Midland (consolidated)
6.28%
0.921
E&P
6.26%
0.933
40% Average value taken
R&M
6.46%
1.050
4.66% 10 year treasury bond taken as Rf Petro
6.01%
0.436
1.62%
1.60%
1.80%
1.35%
1.25 times
5%
134114
79508

Target
Debt to
Equity
New Beta
ratio
(Equity)
0.73
1.32
0.85
1.41
0.45
1.33
0.67
0.61

Beta (firm) = Beta (Asset) [ 1+(D/E) (1-T)]

Qn1:
To estimate the asset appraisals, mergers & acquisistion propos
Estimates based on individual divisions performance is better
Qn2:
Midland's cost of capital

8.11%

Qn3:
Individual division's performance is better for estimates.
Qn4:
Exploration & production Coc
Refining & Manufacturing

8.05%
9.01%

Qn5:
Based on the share of assets & using the computed betas
Petrochemicals Division CoC
6.07%

derived from Table 1 in 'others' sheet

Debt
79508.00
79508.00
79508.00
79508.00

Rate
Equity
(equity)
WACC
108899.58
11.28%
8.11%
93335.48
11.71%
8.05%
176969.42
11.32%
9.01%
119262.00
7.71%
6.07%

(Asset) [ 1+(D/E) (1-T)]

s, mergers & acquisistion proposal,stock repurchases

divisions performance is better

nce is better for estimates.

using the computed betas