Asset Valuation

As an outgrowth of our due diligence practice, B&C has been engaged for numerous valuation studies of facilities in the midstream, refining, and petrochemical sectors. We bring a unique blend of engineering, operating, and financial backgrounds and perspectives that can provide important insights to our clients requiring independent valuations of facilities. Depending on our client’s requirements, we generally utilize one or more of these estimating approaches in our valuation determinations:

Income Approach 
This method uses projected future cash flows and a discount rate to generate a value which a prospective buyer would be willing to pay for the facility being valued.  The first step is to develop a cash flow model for the facility to be valued.  Contract, yield, pricing, and other data to drive the model can be either provided by the client or obtained by B&C from public sources.  Next, a rigorous method is used to generate a Weighted Average Cost of Capital (WACC) for the particular segment of the energy or chemical industry with which the facility being valued is most closely aligned.  The cash flow model and the WACC are then merged into a discounted cash flow model from which the projected income-based valuation is produced.

Market Approach 
Another method is to survey recent transactions for comparable facilities and determine a common basis on which facilities of various throughput capacities can be valued.  Clearly, the applicability of this method is highly dependent on the existence of a sufficient number of comparable prior transactions from which a correlation can be developed.  B&C has the expertise to determine the transactions that are applicable for a market approach valuation and the proper methodology for relating the various transactions on an equivalent basis.

Cost Approach
As the name of this approach implies, the cost method involves calculation of either the replacement cost for the facility its depreciated replacement cost.  B&C has software that can accurately estimate these costs for almost any facility in the business sectors in which we consult.  The detail of the cost estimate is dependent upon the client’s needs and the relevance of the cost approach for that specific asset.

Asset valuations usually include an on-site inspection visit to confirm the reported equipment condition, gather engineering and operating data, and conduct informational interviews of the staff responsible for operation and maintenance of the subject facility.