A. Using the method of multiples based on enterprise value to EBITDAX, the P/E ratio, and the enterprise value to EBITDA ratio, what should the acquisition price be for Burlington Resources shares? Use the following companies as comparables for your analysis: Chesapeake Energy, XTO Energy, Devon Energy and Apache. Year-end 2004 balance sheets and income statementsummary information as well as market capitalization data are provided in Exhibit P8-13.1 (see attachment)for Burlington Resources and each of the comparable firms.

B.Which of the four firms used as comparables do you think is the best comparison firm for Burlington Resources? Why?

C.) Based on your analysis of comparables, did ConocoPhillips pay too much or find a bargain? Explain your answer.

D. What additional information would help you with this analysis?

Valuing ConocoPhillips' Acquisition of Burlington Resources Given Exhibit P8-13.1 Income Statement and Balance Sheet Values ($ Thousands) XTO Energy Chesapeake Energy Ticker Period Ending Income Statement ($000) Total Revenue Cost of revenue Gross Profit Operating Expenses Selling, general, and administrative Depreciation, depleletion, and amortization Others Operating income or loss Income from Continuing Operations Total other income/expenses (net) Earnings before interest and taxes Interest expense Income before tax Income tax expense Net income from continuing operations Nonrecurring Events Effect of accounting changes Net income Preferred stock and other adjustments Net income applicable to common shares Balance Sheet ($000) Assets Current Assets Cash and cash equivalents Short-term investments Net receivables Inventory Other current assets Total current assets Long-term investments Property, plant, and equipment Goodwill Other assets Deferred long-term asset charges Total assets Liabilities Current Liabilities Accounts payable Short/Current long-term debt Other current liabilities Total current liabilities Long-term debt Other liabilities Deferred long-term liability charges Total Liabilities Stockholders' Equity Preferred stock Common stock Retained earnings Treasury stock Capital surplus Other stockholders' equity Total stockholders' equity Total liabilities and stockholders' equity Other Financial Data Exploration expenses (thousands) Shares Outstanding (millions) Year-end 2004 Closing Price Market Capitalization (millions) Devon Energy Apache Burlington Resources XTO 31-Dec-04 CHK 31-Dec-04 DVN 31-Dec-04 APA 31-Dec-04 2,709,268 204,821 2,504,447 9,189,000 1,535,000 7,654,000 5,332,577 946,639 4,385,938 5,618,000 1,040,000 4,578,000 165,092 414,400 11,830 919,290 896,290 615,822 992,335 1,616,000 2,334,000 ### 3,704,000 173,194 1,270,683 162,493 2,779,568 215,000 1,137,000 640,000 2,586,000 - 919,281 93,661 825,620 317,738 507,882 (20,081) 972,254 167,328 804,926 289,771 515,155 64,000 3,768,000 475,000 3,293,000 1,107,000 2,186,000 857 2,780,425 117,342 2,663,083 993,012 1,670,071 2,586,000 282,000 2,304,000 777,000 1,527,000 507,882 507,882 ### 515,155 ### 515,155 2,186,000 (10,000) 2,176,000 (1,317) 1,668,754 (5,680) 1,663,074 1,527,000 1,527,000 9,700 14,713 364,836 47,716 436,965 5,624,378 49,029 6,110,372 6,896 51,061 477,436 32,147 567,540 136,912 7,444,384 ### 95,673 ### 8,244,509 1,152,000 968,000 1,320,000 - 143,000 3,583,000 753,000 19,346,000 5,637,000 417,000 - 29,736,000 111,093 1,022,625 157,293 57,771 1,348,782 13,860,359 189,252 104,087 15,502,480 2,179,000 ### 994,000 124,000 158,000 3,455,000 ### 11,033,000 1,054,000 202,000 15,744,000 425,173 75,534 259 500,966 2,053,911 199,753 756,369 3,510,999 872,539 91,414 963,953 3,076,405 107,395 933,873 5,081,626 1,722,000 1,378,000 ### 3,100,000 7,796,000 366,000 4,800,000 16,062,000 1,158,131 21,273 103,487 1,282,891 2,619,807 1,022,880 2,372,481 7,298,059 1,182,000 2,000 415,000 1,599,000 3,887,000 851,000 2,396,000 8,733,000 3,484 1,239,553 (24,917) 1,410,135 (28,882) 2,599,373 6,110,372 490,906 3,169 262,987 (22,091) 2,440,105 (12,193) 3,162,883 8,244,509 1,000 48,000 3,693,000 9,087,000 845,000 13,674,000 29,736,000 98,387 209,320 4,017,339 (97,325) 4,106,182 (129,482) 8,204,421 15,502,480 = Value given in problem = Formula/Calculation/Analysis required = Qualitative analysis or Short answer required BR 31-Dec-04 1,947,601 436,998 1,510,603 Solution Legend 5,000 4,163,000 (2,208,000) 3,973,000 1,078,000 7,011,000 15,744,000 599,500 332.9 $ 35.38 $ $ 11,778.00 $ 184,300 279,000 2,300,000 258,000 253.2 482.0 327.5 392.0 16.50 $ 38.92 $ 50.57 $ 45.00 4,177.80 $ 18,759.44 $ 16,561.68 $ 17,640.00 This is not the year-end price for BR. It is an estimate based on the 2004 price range. Solution (All values in thousands) a. XTO Energy Chesapeake Energy Devon Energy Apache Average Multiple for Comps Enterprise Value (EV) EBITDA EBITDAX EV/EBITDA Multiple EV/EBITDAX Multiple P/E Multiple EV based on EBITDA for BR using comps Plus: Cash Less: Interest-bearing debt Equity value Equity value per share EV based on EBITDAX for BR using comps Plus: Cash Less: Interest-bearing debt Equity value Equity value per share Equity value per share based on P/E multiple XTO Interest-bearing debt (ST<) Common equity (price x shares outstanding) Less: Cash and equivalents Equals: Enterprise value b. c. d. Enterprise Value Calculations CHK DVN APA BR Burlington Resources (BR) - Actual Burlington Resources (BR) - 2005 Forecast