Finance help
Genesis Energy's newly established operations management team decided to seek outside assistance in developing a long-term operating plan that also addresses the financial issues identified. A major consideration for Genesis Energy is assessing those short-term and long-term economic factors, which will greatly enhance the company's ability to successfully transition to a viable international business. Grasping and correctly prioritizing these economic factors, supply and demand, interest rates, inflation, unemployment, and exchange rates are pivotal, thereby requiring expert guidance. Therefore, their first major decision was to hire a respected strategy-consulting firm, Sensible Essentials.
After meeting with the client team, Sensible Essentials concluded that the operations management team would significantly benefit from a more in-depth understanding of the financial environment at Genesis Energy. This understanding needed to encompass not only sales, costs, and profitability forecast under the new strategic plan, but also the way expansion would highlight the need to manage working capital and cash flow in order to try to minimize the need for external financing.
As the lead consultant for Sensible Essentials, do the following:
• Describe and evaluate the financial environment at Genesis Energy by using ratio analysis of the company.
• Choose one ratio from each of the five categories listed in the table on page 103 of your textbook, Brigham and Ehrhardt, and do a 3-year ratio trend analysis. Compare these results to the industry averages. What do the results tell you?
• Name three specific options that are available to Genesis Energy for obtaining needed capital.
• Identify and explain two ways Genesis Energy can improve its strategy.
• Explain what specific macroeconomic factors are likely to affect genesis, i.e., inflation, interest rates, exchange rates etc. Please do a brief country risk assessment and discuss the most likely problems a company like Genesis Energy is likely going to confront when contemplating an international expansion. What would be the least risky avenue for them to get their product/service to the country you have chosen? Which entry mode is the riskiest? Explain.
Genesis Energy, L.P.
Ticker: GEL
Exchange: NYSE
Key Statistics: https://finance.yahoo.com/q/ks?s=GEL
SEC Filings: https://finance.yahoo.com/q/sec?s=GEL+SEC+Filings
Genesis Energy, L.P. is a Houston-based, limited partnership that focuses on the midstream segment of the oil and gas industry, pulp and paper mills, and other industries, catering to a specialized and diverse clientele. It consists of three divisions-pipeline transportation, refinery services, and supply and logistics-and owns assets that include refineries, pipelines, tanks and terminals, marine transport operations, and trucks and truck terminals. The hub of Genesis Energy's activities centers on the Gulf Coast of the United States, but its activities extend as far north as British Columbia and as far east as New York.
Though Genesis Energy has only been in existence since 1996, components of it have been around for years. Its Refinery Services team, for example, extends the more than 30 years of operating experience of TDC and its predecessors. The Genesis Energy Trucking component, on the other hand, has been in service since 1937.
A Hypothetical Opportunity and Challange
Now, let's get hypothetical and play the "What if?" game. Imagine for the assignments in this course that Genesis Energy wants to get a larger share of the global energy market. It realizes, however, that with only one facility outside of the United States, it will need to do a good deal of expanding before it will be able to capture the share of market it wants.
With an eye to the challanges of that endeavor, Genesis Energy has expanded its management team. This newly-expanded team, which will oversee domestic and international operating facilities, consists of a general operations manager, an accountant, a pair of energy experts, a marketing manager, a production manager, and a customer service manager. All of these individuals, with the exception of the production manager, were outside hires.
But success in the endeavor will also take time-time and a plan. In an intensive planning session, the management team and company stakeholders put together a five-year strategic plan for accomplishing the expansion. Both the team and stakeholders believe Genesis Energy provides products, services, and expertise that will attract governments and mid-sector companies around the world in both developed and emerging economies.
The management team is now charged with optimizing all company operations and expanding the company's sale of services and goods to new markets, beginning with the Caribbean and Central and South America. This will require enough capital for new facilities, resources, staff, and marketing, and Genesis Energy hopes to avoid the need to find more equity investment to fund the expansion. But it isn't clear that enough funds can be raised from expanded sales and profits, and obtaining loans from banks can be very challenging, even for established companies like Genesis Energy.