strategic consulting and industry …...strategic consulting and industry advisory services merger...

Baker & O’Brien’s due diligence experts often work closely with and advise financialteams on a wide range of technical and economic issues that impact thehydrocarbon processing industries. Our consultants have prepared due diligencereports for transactions involving a wide variety of existing facilities. In addition toacting for equity investors, we also provide support to lending institutions that requirean independent assessment of the facilities to secure the loan and operatingcompanies seeking to divest or acquire the assets.

Our expertise in conducting due diligence investigations of existing midstream anddownstream assets has typically included some or all of the following activities:

Review of purchase and sale contracts for consistency with commercial norms;Analysis of historical and projected operational and financial data for significantanomalies;Physical inspection of the facilities, operations, and associated records;Competitive review of the facilities within the appropriate markets; andDevelopment of a financial model that translates estimated production volumes, prices, operating expenses, sustaining capitalrequirements, and an appropriate discount rate into a fair market value.

RELATED INDUSTRIESAdditional Process IndustriesGas ProcessingOil and Gas ProductionPetrochemical / ChemicalPetroleum RefiningPower GenerationRenewable / Alternative EnergyTransportation and Storage

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STRATEGIC CONSULTING AND INDUSTRY ADVISORYSERVICES

Merger and Acquisition Support

PRIMARY CONTACTS

Robert L. BeckConsultantHouston

Amy L. KaltConsultant, Manager of Analytical ServicesHouston

Charles G. KempVice President, Business Development ManagerDallas

Tim D. RooneyVice President, Dallas Office ManagerDallas




RELATED EXPERIENCECrude Oil Gathering System Acquisition Due DiligenceConducted technical and economic due diligence for a commercial bank that was considering financing a crude oil gatheringsystem acquisition. Bankruptcy ReorganizationDeveloped, in conjunction with senior management, reorganization plans for various operating segments of a major trading andtransport company. The resulting business plan formed the foundation of the company's successful reorganization and emergencefrom bankruptcy. Oil Exploration Business/Technology ValuationConducted a due diligence assessment and economic valuation of a business with proprietary technology designed to significantlyreduce crude oil exploration and finding costs. Company Reorganization StudyFollowing the bankruptcy of a major Singapore-based shipyard, with significant oil interests throughout Southeast Asia, workedwith the company's lenders to restructure and reorganize the company's asset base. Made visits to all major company sites andprepared report outlining current status. Recommended the disposition of non-core assets and the reorganization of core assetsinto a smaller and less highly leveraged entity. Following acceptance of most of recommendations by creditors' committee,company was able to successfully emerge from bankruptcy protection. Crude Oil EvaluationEvaluated several processing alternatives and combinations of various refining assets located in the Caribbean and on the U.S.Gulf Coast to process heavy Ecuadorian crude oil production. Crude Oil Pipeline AcquisitionDue diligence for a Canada to U.S. crude oil pipeline acquisition including a crude oil supply/demand balance forecast. Due Diligence of Gas Gathering and Processing AssetsConducted due diligence on gas gathering and processing assets within the Permian Basin in Southeast New Mexico and WestTexas on behalf of lending group and prospective purchaser. Conducted physical inspection of the facilities, reviewed operationand maintenance records, assessed gas supply and competitive position, and reviewed financial assumptions and projections toensure consistency with current gas supply contracts and asset performance. Ethanol Terminal Blending Facility EvaluationOn behalf of a private equity firm, reviewed a site development plan for a coastal ethanol receiving terminal and associatedgasoline blending facility. Evaluated the market competition for terminalling services within the local area. Evaluation of Refinery Competitive EnvironmentAssisted in a dispute between a major oil company and the Federal Trade Commission's claims regarding the anti-competitivenature of the company's proposed acquisition of a West Coast-based refining and marketing company. Prepared a detailed reportanalyzing the West Coast refining industry. Assessed the competitive position of each West Coast refinery processing Alaskancrude oil and how they might respond to changes in crude oil prices and/or availability. Agrochemicals ManufacturingPerformed due diligence for the purchase of several fertilizer plants on behalf of an investor. These plants manufactured nitrogenfertilizers, phosphate fertilizers, methanol, and other related industrial chemicals. Inspected company assets, assessed technology,analyzed feedstock and product markets, reviewed contracts, evaluated capital investment programs, and analyzed comparativemanufacturing economics.




manufacturing economics. M&A DisputeEvaluated the foreseeability of project cost overruns that negatively impacted the economics of the acquisition of an EPC Firm. Manufacturing Facility and Plant EvaluationPerformed an on-site assessment of a pipe manufacturing facility to determine operational viability. Key assessments made onmechanical integrity and reliability of the process equipment, technical understanding and organizational strength of facilitypersonnel, and related operational issues. Midstream Acquisition Due DiligenceAssisted energy distribution company with due diligence for potential transaction involving gas gathering and processing assetslocated in the Permian Basin. Assets evaluated included over 4,000 miles of gas and liquid pipelines, four gas processing plants,and multiple gas treating plants. Participated in data room reviews and management presentations with a focus on commercial,operational, and technical evaluations of midstream systems. Developed comprehensive economic model of the integratedgathering and processing assets that was used to determine valuations and evaluate key sensitivities. Natural Gas Pipeline and Processing Plant Due DiligenceAssisted an electric utility in its merger with a gas transmission and distribution company. Inspected pipeline and processingfacilities and reviewed natural gas and natural gas liquids supply and marketing issues. Conducted operations review and ananalysis of staffing levels. Oil Sands Downstream Integration VentureAssisted a producer of Canadian oil sands in assessing potential joint venture partners and refinery acquisition targets forprocessing diluted bitumen in the U.S. Conducted modeling and analysis of prospective refineries and advised the client on likelycapital expenditures required for processing increasing volumes of diluted bitumen. Performed technical due diligence, assistedwith cash flow valuation analysis, and supported negotiations. Refinery Valuation and Due DiligencePrepared an analysis of refining and marketing assets for a company that was considering acquisition of shares of a refining andmarketing business located in South Korea. The analysis included refining and marketing economics, and due diligence of thefacilities. Refinery Acquisition PlanningOn behalf of an acquisitive client, developed a summary of the U.S. refining business to focus on the supply/demand andcompetitive forces within the market. Provided information regarding historical U.S. refinery M&A transactions and a summary oftypical due diligence focus items. Screened several potential acquisition candidates and developed a shortlist of opportunitieswhich appeared to best align with the strategic objectives of the client. Technical ReviewPerformed technical review of chlor-alkali and calcium chloride processes and project plan on behalf of prospective lender.Reviewed the process design packages for the chlor-alkali and calcium chloride production facilities and provided opinionsregarding the selected processes and their technical compatibility. Reviewed the project schedule and cost estimate for thefacilities and provided input to the prospective lender regarding the appropriate level of contingency. Evaluated the contractingstrategy and project execution plan and provided opinions. U.S. Refining and Marketing StrategyAdvised a client on developing strategic options as it relates to future participation in the U.S. refining and marketing sector.Developed scenarios and assessed the medium term outlook for refining and marketing in the U.S. to support client objectives.




Prepared short list of potential candidates for acquisition, and developed case studies and recommendations related to postmerger integration activities. Advised client on appropriate timing for executing strategic objectives. Refinery AnalysisFor a prospective investor, provided analysis and commentary on the relative competitiveness of a targeted refinery, explaining thefundamental basis for its competitive position. Refinery Operations SnapshotProvided client with an estimate of actual crude runs by grade, product yields, and operating costs for a European refinery in 2007based on our proprietary PRISM refinery database and simulator. Process Plant Leasehold SettlementsAssessed the market value of residual operating interests held by a major financial entity in several leased chemical processingfacilities. Each engagement included an ongoing advisory role pursuant to successful negotiations for sale of the institution'sownership interests. NGL Pipeline Due DiligenceReviewed data presented by a potential NGL pipeline seller on behalf of a potential buyer. The review focused on mechanicalintegrity and other safety issues. Gas Gathering and Treating Due DiligencePerformed due diligence of West Texas natural gas gathering and treating system. Reviewed contracts and facilities, assessedcompetition, developed economic model, and estimated market value of assets. Petroleum Refinery Due DiligencePrepared a due diligence report on a full conversion refinery, including a review of regional crude oil supply and regional productsmarkets. Reviewed refinery operations, including high level assessments of refinery safety and environmental performance. Developed economic model of refinery and estimated market value. Due Diligence of a Lube Re-Refining FacilityConducted a due diligence analysis of technical and economic features of a lube oil re-refining plant involving a potentialacquisition. Gasoline and Diesel Terminal Due DiligencePerformed technical due diligence for terminal assets on behalf of financial firm. Visited the facilities and reviewed relevantdocumentation to advise the client on issues concerning the operability, safety, and physical conditions of the facilities andpotential future maintenance and capital costs. Refinery Economic AnalysisPrepared due diligence analysis of refinery technical and economic performance to support a potential working capital loan. Refinery Technical ReviewProvided a technical review and forecast of cash flows for a refinery acquisition candidate. Condensate Gathering System Due DiligenceAssisted client with engineering due diligence on a Texas condensate gathering system focusing on pipeline mechanical integrityissues. PADD 1 Refining StudyProvided a competitiveness analysis of refineries located in U.S. PADD 1, U.S. Virgin Islands, and Eastern Canada. Developed aprice forecast and historical supply and demand balance. Provided a competitive ranking of a prospective acquisition of a refineryin the region being considered by the client.




Refinery Due DiligenceAssisted financial client with a due diligence study of a European Refinery. Visited the site and received briefing from refinerymanagement. Developed cash flow model of historic and projected operations. Tuned cash flow model to match past four year'sof operations and cash flow results. Developed five year price forecasts for crude oil and refined products in Europe. Reviewedoperating and maintenance expenses. Crude Oil Pipeline System Due DiligenceSupplemented the client's team performing due diligence as part of a potential transaction regarding a crude oil gathering andmainline pipeline system. Our focus was on the engineering aspects of new facilities and facilities under construction. Weprovided an opinion on whether the new facilities, and the facilities under construction, appeared to be designed to applicableindustry specifications. Refining and Marketing PrivatizationAssisted a state-owned integrated oil company in Central Europe in completing a strategic planning study for its downstreamrefining and marketing business. The study considered potential markets and pricing for crude oil and refined products.Opportunities to optimize the operation and logistics of the company's refining and marketing system were evaluated in view ofmaximizing the value of the assets prior to privatization. Reorganization of Crude Oil Trading BusinessAnalyzed crude trading business for potential reorganization. M&A in the Cement Industry Performed acquisitions (share and asset) with hands on accountability for economic valuations, financial and market analysis,development of strategic rationale, approval documentation / presentations, deal negotiation, due diligence, legal agreements, andmanagement and integration planning. Privatization of Olefins Plant Evaluated an olefins plant for competitiveness in operating costs, yields, feed supply, and product marketing. Identified anddocumented strengths and weaknesses and presented the key initiatives, which would be needed to ensure a successfultransaction. Estimated the fair market value. Product Terminal and Transmix Processing ValuationPhysical asset appraisal and business valuation of a refined product terminal and transmix processing facility. Estimated thereplacement cost and deferred replacement value of the physical assets to provide a depreciation basis for taxes. Valued thebusiness enterprise using a discounted cash flow approach based on an analysis and projection of transmix processing andproduct terminal activities. Refinery Valuation and Synergy AnalysisOn behalf of two international refining companies, investigated and estimated the potential value of synergies that might berealized upon the combination of the two refineries. Provided indication of value capture, based on criteria provided by companies. Terminal Acquisition Due Diligence SupportConducted a review of fuel oil and asphalt terminal assets in support of a potential acquisition. Provided input andrecommendations as to the overall quality of the assets, including a review of previous expenditures and maintenance records. Refinery Risk AssessmentAssessed the technical and commercial risks inherent in each of several refineries owned by a U.S. refining company. Product Pipeline Terminal ValuationPrepared a terminal valuation based on a discounted cash flow analysis of transmix and terminal businesses and an appraisal of




the physical assets. Polypropylene Plant Due Diligence SupportProvided technical due diligence support for a moth-balled polypropylene plant. Evaluated capacity, historical utilization andmechanical availability and other factors. Refinery Due DiligenceEvaluated the condition of refining assets for a potential acquisition. Addressed potential "fatal flaws" regarding the acquisition of atopping refinery. Provided support in evaluating the potential cash flow for the refinery. Refinery Screening and EvaluationProvided cash flow forecasts and indicative transaction values for select target refineries using PRISM charges and yields andclient price forecasts. Natural Gas Midstream Due DiligenceConducted due diligence on gas gathering assets in East Texas for a prospective purchaser. Inspected facilities, reviewed pipelineand facility construction records, confirmed regulatory status, evaluated pipeline integrity management program, and assessedprocess safety. Strategic Review of Refining PortfolioFor a large integrated refiner and marketer, assessed the historical performance of each refinery in the company's system, andevaluated key benchmark metrics against various selected peer groups. Reviewed each refinery's competitive position andhighlighted the key factors that differentiated its performance. Quantified the performance gaps on a dollar-per-barrel basis,attributed the gaps to controllable or structural factors, and made recommendations for improving the controllable gaps. Wyoming Refinery AppraisalFair market appraisal of a refinery including connecting crude and products pipelines and storage assets to support debt financing.Project included income valuation with forecast prices, discounted cash flows, and replacement cost estimates for the refinery aswell as the pipeline and storage assets. PRISM Refinery DataProvided refinery capacity, throughput, product yield, and cash flow estimates for two European refineries in support of preliminaryacquisition discussions. Refinery Acquisition StudyAssisted client in screening refinery acquisition targets using PRISM operating and profitabiility data. Evaluated options to processEagle Ford crude oil at one refinery and building a distillate hydrocracker at another. Refinery Acquisition Screening and ValuationProvided refinery modeling, valuation and M&A support for a client that was considering a refinery acquisition. Crude Oil Pipeline Due DiligenceProvided technical, commercial, and market due diligence for acquisition of pipeline transportation rights in Latin America. Carriedout a technical review of the oil pipeline and pump station facilities. Reviewed the tariff setting mechanism and analyzed key inputs.Developed a tariff model and ran sensitivity scenarios to predict future pipeline tariffs. Carried out regional market study tocompare alternate transportation modes (pipeline versus truck) and reviewed forecasts for crude oil production and transportation. Crude Oil Pipeline System Due DiligenceOn behalf of an investment group, provided technical and operational due diligence of an interstate (FERC regulated) crude oilpipeline system. Our focus included the review of asset integrity, design, system capacity, and operating costs of an existing assetand the design, project execution plan, schedule, cost estimate, and projected operating costs of a proposed pipeline.




LNG Due DiligenceOn behalf of potential offtakers and equity investors of train one, performed a technical due diligence and risk assessment of atwo-train liquefaction project, including common use of certain existing regasification facilities. Work completed during thedevelopment phase of the project involved the evaluation of pre-completion risks and post-completion risks, including a review ofplanned and existing facilities. CAPEX, contractor capabilities, construction schedule duration, and OPEX were reviewed forappropriateness and risk of overrun. Subsequent follow-up work included a review of an Open Book Estimate (OBE), a project riskevaluation (reviewed and quantified pre-FID and post-FID cost and schedule risk), and an assessment of the project’s draftenvironmental impact statement (EIS). Logistics services company assessmentProvided an independent financial and commercial assessment of a logistics services company that our client was consideringpurchasing. Condensate Splitter Due DiligenceConducted asset due diligence activities: inspected facility under construction; provided market incentives, operating costs, riskoverview, and staffing recommendations for successful acquisition of condensate splitter and associated logistics. Refinery Due Dilgence AssessmentProvided an initial assessment of a Gulf Coast refinery for possible acquisition by the client. Provided estimated refinery yields andprofitability. Refined Products Terminal StudyTo support a client's due diligence efforts for a potential petroleum products terminal acquisition, undertook a market study toevaluate the current refined products supply and demand balance on the U.S. Gulf Coast. Key market drivers were identifiedwhich could impact future market growth. Terminal Due DiligenceProvided technical due diligence support for a large terminal acquisition opportunity involving approximately 50 terminals, 700tanks, and 30MMbbls of storage. Condensate Splitter Due DiligenceConducted asset due diligence activities: (1) inspected facility under construction; (2) provided market incentives; (3) operatingcosts; (4) risk overview; and (5) staffing recommendations for successful acquisition of condensate splitter and associated logistics. Condensate Splitter Market StudyDeveloped market study and economics for a "grassroots" Eagle Ford condensate splitter located in Corpus Christi. Evaluatedalternate locations and presented to CEO and management. Potential Refinery Acquisition On behalf of a prospective buyer, evaluated a Northern European refinery as a potential acquisition target. Determined the currentphysical condition of the refinery, its existing processing capability, and the potential for expansion and upgrade. Developed aneconomic and financial model that was used by client to prepare its tender offer. Refinery Due DiligenceIn support of a potential acquisition and start-up of a topping refinery that had been shut down for an extended period, addressedany "fatal flaws" and provided support for evaluating order-of-magnitude costs required to inspect, repair, staff, and start-up thefacility. Fertilizer Complex Economic ModelConstructed an economic model to analyze the financial performance of a fertilizer complex that produced ammonia and other




nitrogen chemicals. Evaluated expected operations and financial performance subsequent to the completion of an ongoing capitalexpansion project. Refinery Acquisition AssessmentPrepared an initial profitability assessment of two refineries for possible acquisition. Identified key drivers to profitability and thestrengths and weaknesses of each refinery. Refinery Acquisition AssessmentProvided initial due diligence for a potential refinery acquisition. Evaluated refinery profitability and strengths and weaknesses.Developed forecast for future refinery profitability. Refinery Assessment for AcquisitionDeveloped a cash flow model for valuation of a potential refinery acquisition. Used PRISM data to estimate the refinery yields andoperating costs. Evaluated several refineries as part of acquiring the entire refining assets. Refiner Acquisition StudyDeveloped cash flow models of a U.S. refiner for a client interested in a potential acquisition. Developed a price forecast and cashflow model for each refinery under consideration. Utilized PRISM and publicly available data to model the charge and yield andeconomic performance of each refinery. Cash flow models were used for valuation of the potential acquisition. Refinery Acquisition StudyDeveloped a cash flow model of a U.S. refinery for a client interested in a potential acquisition. Utilized PRISM and publiclyavailable data to model the charge and yield and economic performance of the refinery. Cash flow model was used for valuation ofthe potential acquisition. Oil Company Due DiligenceRetained to visit data room and prepare due diligence report summarizing facilities and environmental information for multiple oilfields and an oil processing and export terminal. Terminal Due DiligencePerformed a technical due diligence of a Gulf Coast refinery tank farm and associated transfer pipelines for a prospective investor. Reviewed inspection and maintenance records of the assets during a site visit. Reviewed numerous operating performancedocuments from a data room. Prepared a technical due diligence report outlining our findings. St James Louisiana Crude Supply StudyAnalyzed crude supply sources and pipeline flows for the Southern Louisiana refining market in conjunction with a potentialpipeline acquisition. Forecasted crude supply availability by grade in the St. James trading hub and analyzed impact of new crudeoil pipelines in the market. California Terminal Due DiligenceAssisted midstream buyer with valuation of a large Northern California petroleum terminal. Delivered market study presentation tocompany management to assist in due diligence and valuation using market metrics. Crude Oil Rail Terminal StudyProvided an overview of the Chicago market in terms of crude oil pipeline logistics, refinery crude oil slates, and refineryprofitability. Provided supporting information for client considering an investment in a crude oil rail terminal. Supportinginformation included a Canadian crude oil takeaway outlook and Chicago area refineries crude oil slate outlook. Condensate Splitter Investment AnalysisAnalyzed a proposed condensate splitter investment for a large midstream company. The study included feed and productsupply/demand, economics, staffing, operating costs, and export ban lift scenarios.




Condensate Splitter Operating PlanAssisted a large midstream company with preparation of a condensate splitter operating plan, including staffing, maintenance,quality assurance, planning, and related items. Louisiana Crude Oil Supply StudyAnalyzed crude oil supply and distribution for a potential pipeline acquisition. Evaluated refinery crude slate preferences andcapabilities, along with access to domestic and foreign crude oils. Reviewed production trends, crude oil flows, new pipelineconstruction, and changes of service to estimate future utilization and profitability. Pipeline Due Diligence - Operation and ExpansionPerformed a technical due diligence (operations, integrity management and maintenance of pipeline, terminal, and marine loadingassets). Refinery Company AcquisitionDeveloped and presented a multi-refinery acquisition package to the CEO of a large refining company. Using PRISM models,developed a 10-year cash flow of heavy crude refining economics. Presented economics of extensive marketing supply chainthrough numerous company terminals. Provided economics of company owned pipelines and lubes business. Discussedorganization structure, company culture, and pros/cons of each refinery. Refinery Acquisition StudyDeveloped cash flow models for

regional refineries in conjunction with a potential acquisition target. Utilized PRISM yieldsand operating costs to evaluate the potential profitability of the target refinery. Alsodeveloped a price forecast for input into the cash flow model.

Refinery Due Diligence - Rocky MountainsAssisted a prospective buyer and commercial bank advisor in a technical and market due diligence study for a refinery. Prepared a pricing outlook, reviewed technical inputs to a financial model, and visited the site. Prepared a summary report offindings including, among other factors, maintenance program status, tank inspection schedule conformance, reliability,utilization, and fixed costs. Catalyst Financial Projection ReviewEvaluated catalyst sales and financial forecasts for select business lines for various industry applications. Evaluated marketsizes and competitors. Gas Processing Plant DisputeProvided an expert witness report on natural gas processing operatings, emissions, and economics in a disputeregarding the acquisition of a gas processing plant. Gas Processing Plant Due DiligencePrepared a due diligence report describing the physical condition and maintenace practices of the gas processingplant, staffing and organizational issues, and other operational issues. Natural Gas Company ValuationAppraised the fair market value of a company involved in natural gas gathering, processing and marketing. Gas Transmission Company Due DiligencePerformed due diligence for a natural gas transmission company acquisition including physically inspecting thepipeline and compression facilities, reviewing maintenance records, and interviewing company management.




Provided client with written report Gas Gathering System Due DiligencePerformed due diligence for a natural gas gathing system acquisition including physically inspecting the pipeline andcompression facilities, reviewing maintenance records, and interviewing company management. Provided client withwritten report documenting our findings. Gas Pipeline Due DiligencePerformed due diligence for a natural gas pipeline acquisition including a physical inspection and review ofmaintenance and corrosion protection records. A report was delivered to the client. Power Plant Due DiligencePrepared a due diligence report describing the physical condition and maintenace practices of the gas fired steamand electric power co-generation facility, staffing and organizational issues, and other operational issues.




strategic consulting and industry …...strategic consulting and industry advisory services merger...

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