CALCULATING THE COST OF CAPITAL FOR MIDLANDDescription of item/component Symbol Value Unit
’s Equity Market Value on 12/31/06 from Exhibit 5 E ### million USDMidland’s Net Debt on 12/31/06 from Exhibit 5 D 79,508 million USD
Midland’s Total Market Value on 12/31/06 V ### million USDWeight for the cost of debt D/V 0.3722 N/A
Weight for the cost of equity E/V 0.6278 N/Adland's Income Before Taxes in 2006 from Exhibit 1 EBIT 30,447 million USDnd's Corporate income Taxes in 2006 from Exhibit 1 11,747 million USD
Midland's Corporate Tax Rate T ### N/ACost of Debt rd N/A
Cost of Equity re N/ACOST OF CAPITAL FOR MIDLAND WACC 0.00%
MIDLAND ENERGY RESOURCES Income Statement
Project: MIDLAND ENERGY RESOURCES
Analysis: Income Statement
Draft: N
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MIDLAND ENERGY RESOURCES Income StatementOperating Results
Operating Results: 2004 2005 2006 Operating Revenues 201,425 249,246 248,518
Plus: Other Income 1,239 2,817 3,524
Total Revenue & Other Income 202,664 252,062 252,042
Less: Crude Oil & Product Purchases 94,672 125,949 124,131
Less: Production & Manufacturing 15,793 18,237 20,079
Less: Selling, General & Administrative 9,417 9,793 9,706
Less: Depreciation & Depletion 6,642 6,972 7,763
Less: Exploration Expense 747 656 803
Less: Sales Based Taxes 18,539 20,905 20,659
Less: Other Taxes & Duties 27,849 28,257 26,658
Operating Income 29,005 41,294 42,243
Less: Interest Expense 10,568 8,028 11,081
Less: Other Non-Operating Expenses 528 543 715
Income Before Taxes 17,910 32,723 30,447
Less: Taxes 7,414 12,830 11,747
Net Income 10,496 19,893 18,701
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MIDLAND ENERGY RESOURCES Balance Sheet
Project: MIDLAND ENERGY RESOURCES
Analysis: Balance Sheet
Draft: N
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MIDLAND ENERGY RESOURCES Balance Sheet
Assets: 2005 2006
Cash & Cash equivalents 16,707 19,206
Restricted Cash 3,131 3,131
Notes Receivable 18,689 19,681
Inventory 6,338 7,286
Prepaid Expenses 2,218 2,226
Total Current Assets 47,083 51,528
Investments & Advances 30,140 34,205
Net Property, Plant & Equipment 156,630 167,350
Other Assets 10,818 9,294
Total Assets 244,671 262,378
Liabilities & Owners' Equity:
Accounts Payable & Accrued Liabilities 24,562 26,576
Current Portion of Long Term Debt 26,534 20,767
Taxes Payable 5,723 5,462
Total Current Liabilities 56,819 52,805
Long Term Debt 82,414 81,078
Post Retirement Benefit Obligations 6,950 9,473
Accrued Liabilities 4,375 4,839
Deferred Taxes 14,197 14,179
Other Long Term Liabilities 2,423 2,725
Total Shareholders' Equity 77,493 97,280
Total Liabilities & Owners' Equity 244,671 262,378
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MIDLAND ENERGY RESOURCES Business Segments
Project: MIDLAND ENERGY RESOURCES
Analysis: Business Segments
Draft: N
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MIDLAND ENERGY RESOURCES Business Segments
Exploration & Production: 2004 2005 2006
Operating Revenue 15,931 20,870 22,357
After-Tax Earnings 6,781 13,349 12,556
Capital Expenditures 6,000 7,180 7,940
Depreciation 4,444 4,790 5,525
Total Assets 76,866 125,042 140,100
Refining & Marketing: 2004 2005 2006
Operating Revenue 166,280 206,719 202,971
After-Tax Earnings 2,320 4,382 4,047
Capital Expenditures 1,455 1,550 1,683
Depreciation 1,620 1,591 1,596
Total Assets 60,688 91,629 93,829
Petrochemicals: 2004 2005 2006
Operating Revenue 19,215 21,657 23,189
After-Tax Earnings 1,394 2,162 2,097
Capital Expenditures 305 330 436
Depreciation 578 591 642
Total Assets 19,943 28,000 28,450
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MIDLAND ENERGY RESOURCES Stock & Dividend Data
Project: MIDLAND ENERGY RESOURCES
Analysis: Stock & Dividend Data
Draft: N
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MIDLAND ENERGY RESOURCES Stock & Dividend Data
Stock Prices: 2001 2002 2003 2004 2005 2006
Fourth Quarter $27.16 $31.29 $32.59 $34.37 $38.32 $44.11
Third Quarter $27.90 $30.41 $29.42 $35.78 $40.29 $39.75
Second Quarter $28.33 $27.80 $32.45 $36.98 $37.52 $46.32
First Quarter $24.13 $26.85 $31.57 $31.28 $34.58 $38.81
Dividends Per Share:
Fourth Quarter $0.28 $0.29 $0.30 $0.31 $0.34 $0.36
Third Quarter $0.28 $0.29 $0.29 $0.31 $0.34 $0.36
Second Quarter $0.28 $0.29 $0.29 $0.31 $0.34 $0.36
First Quarter $0.28 $0.29 $0.29 $0.31 $0.34 $0.36
Annual Dividend $1.11 $1.14 $1.17 $1.24 $1.35 $1.46
Selected Financial Data:
Net Income 15,303 11,448 11,848 10,496 19,893 18,701
Shares Outstanding 2,049 2,025 2,035 2,055 2,945 2,951
EPS 7.47 5.65 5.82 5.11 6.75 6.34
Payout Ratio 14.8% 20.2% 19.9% 24.2% 20.0% 23.0%
DPS 1.11 1.14 1.16 1.24 1.35 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
Project: MIDLAND ENERGY RESOURCES
Analysis: Comparable Companies
Draft: N
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MIDLAND ENERGY RESOURCES Comparable Companies
Equity Net Equity LTM LTM
Exploration & Production: Market Value Debt D/E Beta Revenue Earnings
Jackson Energy, Inc. 57,931 6,480 11.2% 0.89 18,512 4,981
Wide Palin Petroleum 46,089 39,375 85.4% 1.21 17,827 8,495
Corsicana Energy Corp. 42,263 6,442 15.2% 1.11 14,505 4,467
Worthington Petroleum 27,591 13,098 47.5% 1.39 12,820 3,506
Average 39.8% 1.15
Refining & Marketing:
Bexar Energy, Inc. 60,356 6,200 10.3% 1.70 160,708 9,560
Kirk Corp. 15,567 3,017 19.4% 0.94 67,751 1,713
White Point Energy 9,204 1,925 20.9% 1.78 31,682 1,402
Petrarch Fuel Services 2,460 (296) -12.0% 0.24 18,874 112
Arkana Petroleum Corp. 18,363 5,931 32.3% 1.25 49,117 3,353
Beaumont Energy, Inc. 32,662 6,743 20.6% 1.04 59,989 1,467
Dameron Fuel Services 48,796 24,525 50.3% 1.42 58,750 4,646
Average 20.3% 1.20
Midland Energy Resources 134,114 79,508 59.3% 1.25 251,003 18,888
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Table 1
Credit Debt/ Spread to
Business Segment: 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%
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%
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