Midstream Oil Hub Valuation Modeling
This was a state-run oil hub project. They were looking for a co-investor and I am on the sell-side. Assume that I am drafting a CIM, which model should I use to value the company? NAV? DDM? It is so hard since the JV is established just for this oil hub project. The state-run oil hub project wants to form a JV with an oil company and the oil company ended up buying a 45.5% stake of the JV. Does this mean they raised Debt or Equity?
You're gonna need to be a bit clearer. Are you buying a minority equity stake in an SPV that only owns that one O&G hub, with the majority owner being the state?
Thanks. The company acquired a 45% stake of this SPV that only owns that one O&G hub. 55% belongs to the government entity called Korea National Oil Corp. What valuation modeling should I use?
DCF, if it’s true midstream then cash flows should be contracted so you’d have good visibility. You can either run it until the end of it’s useful life with no residual / terminal value, or if it’s a long-lived asset you can assume an exit multiple in Y7-12 in line with transaction comps.
The fact it’s a JV doesn’t matter for valuation, just multiply by 0.45 at the end. It matters for your business diligence however, particularly how governance rights / CoC provisions are structured.
Thank you very much
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