You are to evaluate the credit risk of Midstates Petroleum Company using the att

Question

You are to evaluate the credit risk of Midstates Petroleum Company using the attached Income Statement and Balance sheet as well as excerpts from the company's 2014 annual report. Using the Excel spreadsheet we used in class (attached below), evaluate the credit worthiness of the company by answering the following. Show your work. (15 points) 8. 8.1. FFO/Debt (I'll be nice to you here and give you that FFO was $33959 million in 2014.) 8.2. Debv/EBITDA (Hint: Remember what type of debt am I worried about the most in terms of the credit worthiness of a potential customer) 8.3. EBITD A/Interest 8.4. DebtTotal Capital 8.5. From the company report, give the company an Industry Score. Explain why you chose that rating. 86. From the company report, give the company a Competitive Position Score. Explain why you chose that rating.

Explanation / Answer

As per rules, I will answer the first 4 sub poarts of this question:

FFO/ Debt metric = 339.59/ 2009.93 = 0.17

2. Debt/ EBITDA is computed using Long term debt

= 1735.19 /652.44 = 2.66

3. EBITDA/ Interest = 652.44/ 114.87 = 5.68

4. Debt/ Total capital = Total liabilities/ Total capital

= 2009.93/ 2475.79

= 0.81

(Conclusion: The company is overburdened with Debt and interest obligations)

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