Teofilo Oil Services (Brazil)
Case number:
A06-14-0013
Abstract
Teofilo Oil Services was a privately owned Brazilian oil services and production company. Roberto Teofilo, the owner, had started the company in 2000. Originally founded to provide oil field services, it had eventually moved into field operations management, and was now expanding into full field production. The company would now be investing significantly in field licenses and well work (revitalization of an older closed field), and not just providing fee-based services. The Brazilian government was about to ask for tenders on a number of fields, and Teofilo was interested in Field 17A. The current challenge was to decide if and, if so, how much to bid on the closed field.
Teaching
This case has been used in degree and non-degree (executive education) programs to teach the fundamentals of capital budgeting. Students must first construct the pro forma income statement for the project, then build the project capital budget using that income statement base. Since the primary question is “What should the company bid?” on the field license, the bid becomes an added component of the up-front investment. This then requires the student to consider the many risks associated with the project as well as the minimum acceptable returns to the investor. The continuing premise is that the constructed financial analysis is a tool to be used to address a variety of business risk and managerial questions.
Case number:
A06-14-0013
Subject:
Finance
Year:
Setting:
Brazil
Length:
6 pages
Source:
Library