Petrolera Zuata, Petrozuata C.A.

: Analysis of Sponsor Returns and Debt Coverage Ratios

Assumptions

(Change these six RED variables)

Initial Oil Price in 1996
Annual Change in Oil Price (1996-2012)
Royalty Rate (2001-2008)
Royalty Rate (2009-2034)
Total Debt Financing
Leverage: Debt/Total Project Cost
Project's Total Cost
Tax Rate

$12.25
2.5%
1.0%
16.7%
$1,450,000
60%
$2,416,667
34%

Asset Beta
Risk-free Rate (Yield on the 30-year Treasury Bond as of January 1997)
Market Risk Premium
Country Risk Premium

Year

1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034

Forecasted
Maya
Price

$12.25
$12.56
$12.87
$13.19
$13.52
$13.86
$14.21
$14.56
$14.93
$15.30
$15.68
$16.07
$16.47
$16.89
$17.31
$17.74
$18.19
$18.64
$18.64
$18.64
$18.64
$18.64
$18.64
$18.64
$18.64
$18.64
$18.64
$18.64
$18.64
$18.64
$18.64
$18.64
$18.64
$18.64
$18.64
$18.64
$18.64
$18.64
$18.64

Change
in Maya
Price

2.5%
2.5%
2.5%
2.5%
2.5%
2.5%
2.5%
2.5%
2.5%
2.5%
2.5%
2.5%
2.5%
2.5%
2.5%
2.5%
2.5%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%

Total
Revenue

$0
$0
$78,524
$429,059
$803,290
$560,499
$580,141
$594,310
$608,833
$623,720
$638,978
$654,618
$670,649
$687,081
$703,924
$721,187
$738,882
$757,020
$758,224
$759,457
$760,722
$762,018
$763,347
$764,708
$766,104
$767,535
$769,001
$770,504
$772,045
$773,624
$775,243
$776,902
$778,603
$780,346
$782,133
$783,964
$785,842
$787,766
$789,738

Cash
Available
for Debt
Service
(CADS)

($80,007)
($610,492)
($820,154)
($139,352)
$243,952
$383,869
$374,482
$351,470
$383,135
$379,409
$415,819
$416,376
$417,733
$364,040
$353,700
$359,505
$367,531
$309,595
$341,704
$373,643
$365,851
$366,964
$312,682
$293,660
$264,839
$281,934
$276,305
$278,150
$273,514
$274,138
$263,068
$262,329
$260,484
$250,113
$234,648
$238,181
$231,118
$229,576
$215,770

Total
Debt
Outstanding

$0
$1,000,000
$1,024,299
$1,242,981
$1,450,000
$1,411,120
$1,372,240
$1,333,360
$1,268,892
$1,205,447
$1,103,295
$992,187
$864,195
$768,166
$680,692
$576,861
$456,838
$408,576
$354,212
$256,355
$136,753
$75,000
$75,000
$75,000
$75,000
$75,000
$0

0.60
6.81%
7.50%
0.00%

Total
Debt
Service

Equity
Cash
Flows

$0
$935,950
($63,079)
$113,580
$85,113
($157,629)
($154,472)
($151,315)
($171,563)
($165,270)
($195,423)
($195,059)
($201,103)
($161,187)
($145,382)
($153,095)
($159,037)
($83,154)
($84,614)
($119,749)
($131,281)
($68,159)
($6,405)
($6,405)
($6,405)
($6,405)
($75,000)
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0

($79,035)
($1,986)
($550,148)
$1,576
$185,047
$227,819
$221,589
$190,031
$214,719
$199,063
$220,578
$218,294
$236,588
$210,755
$204,461
$203,439
$246,435
$225,711
$239,522
$248,128
$266,131
$329,682
$306,277
$287,255
$258,434
$241,232
$201,306
$278,150
$273,514
$274,138
$263,068
$262,329
$260,484
$250,113
$234,648
$238,181
$231,118
$229,576
$215,770

Debt
Service
Coverage
Ratio

2.44
2.42
2.32
2.23
2.30
2.13
2.13
2.08
2.26
2.43
2.35
2.31
3.72
4.04
3.12
2.79
5.38
48.82
45.85
41.35
44.02
3.68

Note: This simplified version of the Petrozuata project's economics is designed to accompany Petrolera Zuata, Petrozuata C.A. , HBS No. 299-012. Although the have been made to
model is based on the actual model used, a number of changes have been made to facilitate the analysis.

Model Output
Minimum Debt Service Coverage Ratio (DSCR)
Year of Minimum DSCR
Average DSCR
Internal Rate of Return
Net Present Value

2.08
2008
10.46
25.1%
$267,607

IRR and Minimum DSCR Output Table

Leverage

IRR
25.1%

40%
45%
50%
55%
60%
65%
70%
75%
80%

18.4%
19.5%
21.0%
22.8%
25.1%
28.2%
32.5%
39.0%
49.0%

Min. DSCR
2.08
3.05
2.73
2.47
2.25
2.08
1.93
1.80
1.69
1.59

IRR as a Function of the Number

of Years of Cash Flow
Number of Years
With Cash Flow

IRR

5
10
15
20
25
30
34

15.9%
22.7%
24.3%
24.9%
25.0%
25.0%
25.1%

Petrolera Zuata, Petrozuata C.A.: Analysis of Sponsor Returns and Debt Coverage Ratios

Year
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034

Forecasted
Maya
Price
$12.25
$12.56
$12.87
$13.19
$13.52
$13.86
$14.21
$14.56
$14.93
$15.30
$15.68
$16.07
$16.47
$16.89
$17.31
$17.74
$18.19
$18.64
$18.64
$18.64
$18.64
$18.64
$18.64
$18.64
$18.64
$18.64
$18.64
$18.64
$18.64
$18.64
$18.64
$18.64
$18.64
$18.64
$18.64
$18.64
$18.64
$18.64
$18.64

Change
in Maya
Price
2.5%
2.5%
2.5%
2.5%
2.5%
2.5%
2.5%
2.5%
2.5%
2.5%
2.5%
2.5%
2.5%
2.5%
2.5%
2.5%
2.5%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%

Total
Revenue
$0
$0
$78,524
$429,059
$803,290
$560,499
$580,141
$594,310
$608,833
$623,720
$638,978
$654,618
$670,649
$687,081
$703,924
$721,187
$738,882
$757,020
$758,224
$759,457
$760,722
$762,018
$763,347
$764,708
$766,104
$767,535
$769,001
$770,504
$772,045
$773,624
$775,243
$776,902
$778,603
$780,346
$782,133
$783,964
$785,842
$787,766
$789,738

Cash
Available
for Debt
Service
(CADS)
($80,007)
($610,492)
($820,154)
($139,352)
$243,952
$383,869
$374,482
$351,470
$383,135
$379,409
$415,819
$416,376
$417,733
$364,040
$353,700
$359,505
$367,531
$309,595
$341,704
$373,643
$365,851
$366,964
$312,682
$293,660
$264,839
$281,934
$276,305
$278,150
$273,514
$274,138
$263,068
$262,329
$260,484
$250,113
$234,648
$238,181
$231,118
$229,576
$215,770

Total
Debt
Outstanding
$0
$1,000,000
$1,024,299
$1,242,981
$1,450,000
$1,411,120
$1,372,240
$1,333,360
$1,268,892
$1,205,447
$1,103,295
$992,187
$864,195
$768,166
$680,692
$576,861
$456,838
$408,576
$354,212
$256,355
$136,753
$75,000
$75,000
$75,000
$75,000
$75,000
$0

Total
Debt
Service

Equity
Cash
Flows

$0
$935,950
($63,079)
$113,580
$85,113
($157,629)
($154,472)
($151,315)
($171,563)
($165,270)
($195,423)
($195,059)
($201,103)
($161,187)
($145,382)
($153,095)
($159,037)
($83,154)
($84,614)
($119,749)
($131,281)
($68,159)
($6,405)
($6,405)
($6,405)
($6,405)
($75,000)
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0

($79,035)
($1,986)
($550,148)
$1,576
$185,047
$227,819
$221,589
$190,031
$214,719
$199,063
$220,578
$218,294
$236,588
$210,755
$204,461
$203,439
$246,435
$225,711
$239,522
$248,128
$266,131
$329,682
$306,277
$287,255
$258,434
$241,232
$201,306
$278,150
$273,514
$274,138
$263,068
$262,329
$260,484
$250,113
$234,648
$238,181
$231,118
$229,576
$215,770

Cash
Return on
Investment

68.5%
64.6%
59.1%
62.9%
60.8%
65.1%
63.6%
62.3%
53.0%
50.2%
49.8%
49.7%
40.9%
45.1%
49.2%
48.1%
48.2%
41.0%
38.4%
34.6%
36.7%
35.9%
36.1%
35.4%
35.4%
33.9%
33.8%
33.5%
32.1%
30.0%
30.4%
29.4%
29.1%
27.3%

Debt
Service
Coverage
Ratio

2.44
2.42
2.32
2.23
2.30
2.13
2.13
2.08
2.26
2.43
2.35
2.31
3.72
4.04
3.12
2.79
5.38
48.82
45.85
41.35
44.02
3.68

Equity/Total
Capital at
BOOK VALUES

Equity
Beta

Cost of
Equity

Discount
Factor

PV
ECF

100%
10%
40%
41%
42%
42%
43%
44%
45%
46%
49%
51%
55%
58%
60%
64%
70%
72%
75%
80%
88%
93%
93%
93%
93%
93%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%

0.60
6.00
1.52
1.46
1.44
1.41
1.39
1.37
1.33
1.29
1.24
1.17
1.10
1.04
0.99
0.93
0.86
0.84
0.80
0.75
0.68
0.64
0.64
0.64
0.64
0.64
0.60
0.60
0.60
0.60
0.60
0.60
0.60
0.60
0.60
0.60
0.60
0.60
0.60

11.31%
51.81%
18.18%
17.74%
17.57%
17.41%
17.24%
17.07%
16.79%
16.52%
16.08%
15.60%
15.04%
14.63%
14.25%
13.80%
13.28%
13.08%
12.84%
12.42%
11.90%
11.63%
11.63%
11.63%
11.63%
11.63%
11.31%
11.31%
11.31%
11.31%
11.31%
11.31%
11.31%
11.31%
11.31%
11.31%
11.31%
11.31%
11.31%

1.000
0.659
0.557
0.473
0.403
0.343
0.293
0.250
0.214
0.184
0.158
0.137
0.119
0.104
0.091
0.080
0.070
0.062
0.055
0.049
0.044
0.039
0.035
0.032
0.028
0.025
0.023
0.020
0.018
0.016
0.015
0.013
0.012
0.011
0.010
0.009
0.008
0.007
0.006

($79,035)
($1,308)
($306,647)
$746
$74,511
$78,133
$64,822
$47,484
$45,939
$36,551
$34,892
$29,872
$28,142
$21,870
$18,570
$16,236
$17,362
$14,063
$13,225
$12,187
$11,681
$12,962
$10,787
$9,063
$7,304
$6,107
$4,579
$5,683
$5,021
$4,521
$3,898
$3,492
$3,115
$2,687
$2,265
$2,065
$1,800
$1,607
$1,357

Assumptions
Initial Oil Price in 1996
Annual Change in Oil Price (1996-2012)
Royalty Rate (2001-2008)
Royalty Rate (2009-2034)
Total Debt Financing
Leverage: Debt/Total Project Cost
Project's Total Cost
Tax Rate
Asset Beta
Risk-free Rate (Yield on the 30-year Treasury Bond as of January 1997)
Market Risk Premium
Country Risk Premium

$12.25
2.5%
1.0%
16.7%
$1,450,000
60%
$2,416,667
34%
0%
0.60
6.81%
7.50%
0.00%

Model Output
Minimum Debt Service Coverage Ratio (DSCR)
Year of Minimum DSCR
Average DSCR
Internal Rate of Return
Net Present Value

2.08
2008
10.46
25.1%
$267,607

IRR and Minimum DSCR Output Table

Leverage
40%
45%
50%
55%
60%
65%
70%
75%
80%

IRR
25.1%
25.1%
25.1%
25.1%
25.1%
25.1%
25.1%
25.1%
25.1%
25.1%

Min. DSCR
2.08
2.08
2.08
2.08
2.08
2.08
2.08
2.08
2.08
2.08

IRR as a Function of the Number

of Years of Cash Flow
Number of Years
With Cash Flow

IRR

5
10
15
20
25
30
34

15.9%
22.7%
24.3%
24.9%
25.0%
25.0%
25.1%