Top Cima - Analysis of YJ

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Date review of issues facing YJ
review of issues facing YJ

The potential 12 fields could be considered as question marks.
If these 12 turn out to be unsuccessful then it will be a dog & a decision has to be taken whether to kill or not.
Current 3 fields are cash cows.
Potential fields with good reserves can be stars.
This is a highly capital intensive industry & it is normal to have a high debt to equity ratio.
At the time the loan was taken in 2008, it was the time of the sub-prime crisis or the credit crunch.
At this time no one was willing to lend.
11% of interest rate is high & this may be due to the risk of lending was high at that moment.
YJ could consider in taking
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However COS is likely to include several amortized costs.
In this case payables are also not necessarily associated with COS.
Payables maybe linked to new investment activities (surveying, licencing, test drilling etc…)
Although the gearing is high the company may be able to borrow depending on availability of proven licenced oil reserves.
Future cash flows maybe collaterized for new borrowings.(securitization)
Due to the residual dividend policy all the profits have been re-invested.
With the new CEO’S strategy it is unlikely there will be any dividends in the foreseeable future also.
Upto now YJ has completely used up its tax losses.
Going forward full tax at 24% has to be paid.
Potential issues YJ may have with outsourcers is
Control – HSE issues with regard to their companies.
Timing – Availability of suppliers at the time YJ requires.
Major accidents.
Bad employment conditions.
Negotiation issues – pricing.
Potential issues with new CEO’S strategy for faster growth.
Lack of funds
Staff – only 200
Finding outsourcers
Work pressure, stress & dissatisfied employees.
Conflict with shareholders-companies risk profile will change.(even CFO might object)
Challenges to sustainability – Because operations going at a faster rate. (HSE issues).
With the availability of alternatives such as shale gas, gas prices could come down.
In such a case revenue for YJ could drop.
Jason speaking to Oliver regarding bribes. Why former ceo??

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