a. Using the Balance-Sheet Valuation method, what would O&G report as Total Assets and as Equity. Show all work.

b. NY is working on new laws that might limit the development of the fields for which O&G has sole rights. O&G determined that there is a 15% chance that NY will enact the laws because the technique for extracting gas from this geology is environmentally damaging. In this case, the market value of O&G’s equity would be cut in half. What is the weighted-average value of O&G? {The formula for weighted average is: (Probability of case 1 * case 1 value) +(Probability of case 2 * case 2 value)}

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Oil & Gas Corp. (O&G) is an American company focusing on drilling for and producing natural gas in the newly rediscovered shale deposits of NY. Review the following balance sheet for O&G and note: • GAAP rules for valuing natural gas reserves are considered inaccurate throughout the natural gas industry. "Proved and Probable" reserves, as estimated by a reliable engineering firm are the industry-standard measure for the amount of natural gas under a given piece of land. . . 0&G owns $700MM worth development rights to 320 million (MM) cubic feet of reliably- estimated "Proved and Probable" natural gas in NY. O&G's "Other Current Assets" could be sold today for $365,000 and its "Other Long-term Assets" are worth $6,000,000. • There is no discrepancy between price and book value for other assets or liabilities . Balance Sheet (000) FOR PERIOD ENDING Assets Current Assets Cash And Cash Equivalents Net Receivables Other Current Assets Total Current Assets Oil and Gas Development Rights Other Long-term Assets Total Assets Liabilities Accounts Payable Long Term Debt Other Liabilities Total Liabilities Stockholders' Equity Liabilities + Equity O&G 6/30/22 1,300 3,975 835 6,110 392,513 8,340 406,963 8,383 155,800 9,375 173,558 233,405 406,963 Oil & Gas Corp. (O&G) is an American company focusing on drilling for and producing natural gas in the newly rediscovered shale deposits of NY. Review the following balance sheet for O&G and note: • GAAP rules for valuing natural gas reserves are considered inaccurate throughout the natural gas industry. "Proved and Probable" reserves, as estimated by a reliable engineering firm are the industry-standard measure for the amount of natural gas under a given piece of land. . . 0&G owns $700MM worth development rights to 320 million (MM) cubic feet of reliably- estimated "Proved and Probable" natural gas in NY. O&G's "Other Current Assets" could be sold today for $365,000 and its "Other Long-term Assets" are worth $6,000,000. • There is no discrepancy between price and book value for other assets or liabilities . Balance Sheet (000) FOR PERIOD ENDING Assets Current Assets Cash And Cash Equivalents Net Receivables Other Current Assets Total Current Assets Oil and Gas Development Rights Other Long-term Assets Total Assets Liabilities Accounts Payable Long Term Debt Other Liabilities Total Liabilities Stockholders' Equity Liabilities + Equity O&G 6/30/22 1,300 3,975 835 6,110 392,513 8,340 406,963 8,383 155,800 9,375 173,558 233,405 406,963

Answer rating: 100% (QA)

a Using the BalanceSheet Valuation method OG would report Total Assets of 406963000 and ... View the full answer