OSU SPEARS SCHOOL OF BUSINESS ADMINISTRATION
Department of Finance
FIN 4363 Energy Finance Course Syllabus – Spring 2009
Instructor:
Office and Phone:
Office Hours:
E-Mail:
Class Webpage:
Class Times/Rooms:
Required Materials:
Dr. Betty J. Simkins
336 Bus. Bldg; (405) 744-8625
M/W, 12:00 noon-1:00pm; Wednesdays, 4:00-5:00pm or by appointment.
simkins@okstate.edu
Desire to Learn http://oc.okstate.edu
Stillwater: M/W 2:30-3:45pm in BUS 009 and Tuesdays 4:30-7:10pm at OSU-Tulsa
(1) Pennwell book: Introduction to Oil Company Financial Analysis by David Johnston and
Daniel Johnston, ISBN 978-1-59370-044-7
(2) The Breaking Point: American’s Energy Dreams and Global Economic Realities, by Mark
A. Stansberry with Jason P. Reimbold, Hawk Publishing Group: Tulsa, 2008, ISBN 978-1930709-67-6
(3) Readings and articles listed on class schedule which will be posted to class webpage.
(4) Case: Risk Management at Apache, Product Number: 201113 (available in the bookstore or
also at http://harvardbusinessonline.hbsp.harvard.edu/)
(5) (EXTRA CREDIT) Boone Pickens: The First Billion is the Hardest, ISBN 1-58798-109-3 or
The Prize: The Epic Quest for Oil, Money, and Power by Daniel Yergin.
(6) (OPTIONAL) 3-Ring binder (2 inch minimum is best) to organize handouts and other
materials.
Other Required Materials: The assigned articles will be available from the class webpage. You will also find it useful
to use your primary text from your first corporate finance class for additional background reading on certain topics. For
some classes, I will duplicate material.
Course Prerequisite: FIN 3113
Course Description: In this energy finance course, students will study the current energy outlook, supply and demand
issues, industry structure and terminology, financial statement analysis, capital budgeting and risk analysis, corporate
strategy, decision making, value creation, and risk management in the energy industry. Students will also analyze case
problems addressing various course topics and learn to apply finance theories to “real world” practice.
Learning Outcomes:
1)
To acquaint students with basic knowledge, key concepts, terminology, industry structure, supply and demand
issues and related concepts about the oil and gas industry.
2)
To learn how to understand and analyze the financial statements of oil and gas companies including energy ratio
analysis.
3)
To conduct capital budgeting and risk analysis in the oil and gas industry.
4)
To explore value creation and decision making in the energy industry.
5)
To learn basic hedging techniques in energy risk management.
6)
To gain a firm understanding of the importance of the energy industry and the role alternative energy sources can
provide (and not provide) in meeting our energy needs.
Grading Procedures:
Exams (4 exams: Exam 1 worth 15% and the others work 20% each)
75%
Case Analysis (2 cases)
10%
Homework, quizzes, class participation, and attendance, etc.
15%
Total
100%
Grading will be based on the following scale: 90% or above = A; 80-89%=B; 70-79%=C; 60-60%=D. Below is failing.
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Extra Credit: You can read Boone Pickens’ book for extra credit. This will add “1.5 %” to your overall course average.
What this means is that if you have an overall average of 88.5% (a grade of B) before the extra credit, then you will have
a 90% average if you do the extra credit assignment – and as a result, you will earn an A in the course instead of a B.
The extra credit assignment is due the last day of classes before the final exam week. No extra credit work will be
accepted after that date.
Course Policies: Attendance is mandatory and you are expected to attend and take part in each class period. Attendance
is part of the grading procedure and will be taken regularly. OSU-Tulsa students: Attendance will be taken both before
and after the class break. This course is heavily geared toward the lectures and topics covered in class. You are expected
to arrive in the classroom before the scheduled starting time. If you arrive late, enter the room quietly and do not disturb
the other class participants. There is a lot of reading material in this class so please keep up!
It is essential for you to submit homework or case assignments on the day assigned. Late homework will be counted off
½ and must be turned in by the next class period to receive credit. Late cases will be counted off 25%. Work not
turned in during class the day it is due is considered late.
Please get the contact information (phone numbers and email addresses) from several students in the class – so that if you
are absent, you can get homework assignments, missed notes and materials from other students. It is your responsibility
to keep up, even if you have an unexpected absence. Please contact a student in the class to get assignments or missed
notes if you are absent.
Cell phones, pagers and other electronic devices must be turned off and kept out of sight during the class. Repeated
interruption from these items will run the risk of dismissing the student from the class or the items being confiscated.
Weekly Websites to Monitor: Each week, students should be prepared to talk about something which occurred the prior
week which affected energy markets. A couple of suggestions: www.wtrg.com; http://www.api.org/;
http://www.nymex.com; http://www.petrostrategies.org/Learning%20Center/Learning_Center.htm;;
http://bigpicture.typepad.com/ ; http://eia.doe.gov. Also, I will forward a few articles this semester for you to read from
www.wtrg.com (written by James Williams). See my website for even more ideas on energy resources available on the
web: http://spears.okstate.edu/home/simkins/FIN5550/Energy_web_resources.htm
University Policy (also see Syllabus Attachment)
Drop Policy: See the most recent OSU policy in the syllabus attachment
Academic Integrity: As a reminder, the University has a policy on academic honesty. You are expected to abide by
the procedures set forth in the document. For more information, please see the syllabus attachment. Do not copy
other students work in any situation including homework assignments!
Office of Student Disability Services (315 Student Union): According to the Americans with Disabilities Act, each
student with a disability is responsible for notifying the University of his/her disability and requesting
accommodations. If you think you have a qualified disability and need special accommodations, you should notify
the instructor and request verification of eligibility for accommodations from the Office of Student Disability
Services. Please advise the instructor of your disability as soon as possible, and contact Student Disability Services,
to ensure timely implementation of appropriate accommodations. Faculty have an obligation to respond when they
receive official notice of a disability but are under no obligation to provide retroactive accommodations. To receive
services, you must submit appropriate documentation and complete an intake process during which the existence of a
qualified disability is verified and reasonable accommodations are identified. Call 405-744-7116 or go to
www.okstate.edu/ucs/stdis/.
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FIN 4363 ENERGY FINANCE
TENTATIVE SCHEDULE FOR SPRING 2009
Students are expected to read the assigned materials (see below) the week it is covered in class.
W
E
E
K
1
Date
Week of
January
12th
TOPIC
Course Introduction and
Fundamental Issues
Introduction to the Oil
Industry
2
3
Week of
January
19th
Week of
January
26th
Introduction to the Oil
Industry -- continued
Accounting Standards
for Oil and Gas
Accounting Standards
for Oil and Gas
ASSIGNMENTS
( denotes material available on class webpage or by email.)
a
Read the following materials:
API PowerPoint Pdf file “The Truth About Oil and Gasoline: An API Primer”
UBS Investment Research Report: Introduction to the Oil Industry pages 1-35 a
Chapter 1 Introduction
No class on Monday, January 19th – University holiday – MLK Day
Chapter 2 Fundamentals of Valuation (from textbook)
UBS Investment Research Report: Introduction to the Oil Industry pages 36-73 a
Catch up on any materials for Weeks 1 & 2
Ch. 3 Accounting Systems for Oil and Gas
Read Appendix 9 Natural Gas Products, Appendix 11 Reporting Systems & Statements.
Focus on the description of the Annual Report and 10-K Report including a Summary of
Information Found in the 10-K Report.
Chapters 1-4 of The Breaking Point
4
Week of
Feb. 2nd
Analyzing Petroleum
Company Financial
Statements
Chapter 3 continued
Chapter 4: Analyzing Petroleum Company Financial Statements
Skim pages 1-35 of UBS Investment Research Report: Sixth Annual E&P Accounting
Survey: Which Companies are Most Aggressive a
Assign Case #1: Financial Statement Analysis Case Study
5
Week of
Feb. 9th
Analyzing Petroleum
Company Financial
Statements – continued
and Using Energy
Conversion Factors
Chapter 4 Continued
Read: Appendix 5 Crude Oil & Gas Prices, Appendix 6 Energy Conversion Factors, (both
from textbook) and page 108 Appendix 2 Conversion Factors from UBS Report:
Introduction to the Oil Industry
Reserve replacement ratio analysis and finding cost ratio analysis
UBS Investment Research Report: Introduction to the Oil Industry pages 74-85
Exam 1 – Terminology and Concepts (Wednesday for Stillwater class)
6
7
Week of
Feb. 16th
Week of
Feb. 23rd
Competitive
Comparisons and
Benchmarking
Introduction to
Bloomberg
Begin Capital Budgeting
and Risk Analysis in the
Oil and Gas Industry (if
time)
Chapter 4 Continued
Appendix 18 Expanded Definitions of Key Terms from textbook
(Skim Chapter 6 Competitive Comparisons)
Introduction to Bloomberg (if time)
Chapter 8 Value of Reserves-in-the-Ground
Begin Capital Budgeting
Reading: Capital Budgeting Teaching Note a
Financial Statement Analysis Case Study due this week.
3
8
9
Week of
March 2nd
Week of
March 9th
Capital Budgeting and
Risk Analysis in the Oil
and Gas Industry
Capital Budgeting and
Risk Analysis in the Oil
and Gas Industry
“The Risks of E&P” (published in Energy Risk, October 2005) a
Chapters 6-10 of The Breaking Point (Read on your own and know for exam.)
Exam 2 – Wednesday for Stillwater class
Risk Analysis in Capital Budgeting using Sensitivity and Scenario Analysis, and Monte
Carlo Analysis with @ Risk
SPRING BREAK MARCH 16-20TH
10
Week of
March
23rd
Capital Budgeting and
Risk Analysis in the Oil
and Gas Industry
Assign Case #2
Wrap Up -- Risk Analysis in Capital Budgeting using Sensitivity and Scenario Analysis,
and Monte Carlo Analysis with @ Risk – continued
Begin Relative Valuation this week if time -- Reading: Relative Valuation Using Market
Comparables – chapter from Titman/Martin book a
11
Week of
March
30th
Relative Valuation of an
IPO and an Acquisition
Reading: Relative Valuation Using Market Comparables – chapter from Titman/Martin
book a
Chapters 11-16 of The Breaking Point (Read on your own and know for exam.)
12
Week of
April 6th
Relative Valuation of an
IPO and an Acquisition
Relative valuation continued
Exam 3 this week.
13
Week of
April 13th
Introduction to Energy
Risk Management
Energy risk management readings and handout material
Guide to Energy Hedging by NYMEX (available at http://www.nymex.com)
Reading: Risk Management at Apache
14
Week of
April 20th
Energy Risk
Management
Energy risk management continued
Readings – to be announced
15
Week of
April 27th
Energy Risk
Management
Energy risk management continued
Readings – to be announced
Week of
May 4th
Final Exam Week
Stillwater Class: Final Exam is from 2:00-3:50pm on Friday, May 8th
Tulsa Class: Tuesday, May 5th during regular class time
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