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Deloitte Case 3 Final
- 1. Achieving a sustainable and profitable growth strategy for Lundin Petroleum Jomadati & Sons Tim Gudrais Jonas Halldén Darko Draskovic Martin Stenberg
- 2. By focusing new investments on a combination of organic growth and joint venture, Lundin Petroleum gains 12 billion barrels additional capacity Jomadati & Sons Challenge Retaining a high growth rate Darko Draskovic Tim Gudrais Jonas Halldén What growth strategy should we pursue in the Martin Stenberg Question future in order to increase to increase shareholder value? Saturating supply of petroleumand limited oil Complication sources Focus 80% of new investments on organic exploration in the Nordic and Arctic regions and Answer 20% on joint ventures in Africa and Latin Amerika
- 3. Chosing a strategy that combines organic exploration and joint ventures Lundin Petroleum maximizes growth while managing risks Extract existing Organic growth Expand through Joint venture oilfields through exploration acquisiton Revenue growth Sustainability Initial costs Risks Choice of strategy with high growth, high sustainability and managebale risks
- 4. General trends include economic, political and technological factors important to consider General trends & Value drivers Global economy Political decisions Technological changes CSR Oil price Exploration rights Investments Transparency - Supply & demand - BNP - Proactive towards - High credability - Skilled labour force - Investor relations the market - Financing - Retailers - PR communications - Relations with decisionmakers
- 5. Industry analysis Estimated petroleum demand Competitor enterprise value Stockprice development • Great potential in the market in two business cycles (8 years) • Value in joint venture do to competition with high enterprise value
- 6. By investing in new exploration in Latin Amerika, the Arctic, Afrika and the Nordic region, Lundin achieves high growth and diversified risks Today New exploration
- 7. By using 80% of our investment budget for future organic growth in the Nordics and Arctic region, we reach ca 290% ROI •High prior results Advantages •In-house knowledge of the region •Strong Returns •Highly dependable on new findings Disadvatages •Low risk diversity •High capital requirements reducing ROI Important •Geographic: Nordic & Arctic region •New exploration and findings Factors •Financing •3 new oil-field findings in the next 3 years Results •Total Capacity: 7 mlrd varrels
- 8. Joint venture with a state will lead to CSR, political and risk sharing benefits Growth expectations Financial benefit JV beneficials • To keep up with the • The main financial • Minimising risks growth expectations benefit for with JV • Minimising political of the hareholders, would be licencing issues Lundin cannot rely costs in attractive • Shared financing only on their currect areas. • CSR work exploration rights.
- 9. Compared to organic growth we estmate that a JV could yield a higher and more secure return ROI % estimate 450 400 • 33% higher return with JV 350 300 • Potentially 5 billion BOE worth 250 of findings. 200 150 100 50 0 Regular JV Investment
- 10. Future risks and how to deal with riskmanagement High 1 Volatility in oilprice 4 2 Financing 1 Impact 3 5 3 IR and PR 2 4 Future findings Low Small Probability High 5 Political deicisions
- 11. By focusing new investments on a combination of organic growth and joint venture, Lundin Petroleum gains 12 billion barrels additional capacity Jomadati & Sons Challenge Retaining a high growth rate Darko Draskovic Tim Gudrais Jonas Halldén What growth strategy should we pursue in the Martin Stenberg Question future in order to increase to increase shareholder value? Saturating supply of petroleumand limited oil Complication sources Focus 80% of new investments on organic exploration in the Nordic and Arctic regions and Answer 20% on joint ventures in Africa and Latin Amerika
- 13. Investment Calculation Organic JV Total Prospectation Inv. 112000000 28000000 140000000 Oil field size 2500000 2500000 # New Findings 3 2 Total Barrels 7500000 5000000 Oil Price 110 110 Revenues 825000000 550000000 Profit Margin 40% 40% Profit 330000000 110000000 ROI 2.946428571 3.928571429 ROI % 294.6428571 392.8571429
- 14. Organic Acquisition + So far so good + Tillflöde av kompetens + Kompetens + Stor del av arbetet gjort + Strong returns - Lower return - Highly dependable on new findings Faktorer: - Lågt diversifierad portfölj Oljepris Financing Vart ska vi leta? Afrika Joint venture + Bättre riskdiversifiering Arctic + Mindre kapitalkrävande Lat. amerika + Politik
- 15. BNP globalt Oljeprisutveckling Supply & Demand Political General trends / Valuedrivers Technological CSR Customer power Industry analysis Supplier power competition substitute Organic Growth Acquisition Joint venture