Karma Oil

What risks and rewards would a US private equity firm take on through a stake in an oil exploration venture in Western Africa?
Jeffrey Harris  | Fall 2009
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Private equity firm EM Ventures, looking to invest as much as 20 of its $5 billion portfolio in the energy sector, had a potential target: Karma Oil. Headed by a well-known energy executive who had assembled a top-notch team, Karma proposed exploring oil resources in Western Africa. While exploration and production companies had the possibility of tapping meaningful reserves in this largely unexplored region, they also faced a steep initial investment without any assurance of returns. In addition, political risk from corrupt governments and rebels wasn't unknown in the region. In this case students consider the risks and rewards of oil exploration and production and make an investment recommendation after examining the history of oil exploration, West African and world oil production and financial forecasts for Karma.

Case ID: 090309

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