Clients often request a fair market valuation of their assets for many reasons. An independent survey on company CAPEX assets could be used for the following purposes:
- Security to a financial institution
- Securing financing from a lending institution
- Financial independent cost or depreciated values reported in the company corporate financial statements
- Insurance purposes
- Providing pertinent values of assets to an interested party that may wish to purchase or acquire the company assets
- Cost analysis in order for liquidation of said assets
- Assess hardware condition and determine depreciation of equipment in use
- Preventative Maintenance development or structuring
Considerations in any appraisal of an asset include; market conditions, type, age/remaining expected lifetime of equipment, second hand sales, new building cost, replacement costs, income and earning capability, Net Present Value (NPV) of cash flows from applicable contracts and, Return on Investment (ROI).
That a unit is committed on contract or on terms better than one can obtain in today’s market, is also a consideration. As a consequence of lack of reliable data from more traditional valuation techniques, drilling rigs are typically appraised based on perceptions of potential buyers and sellers in the market.
A Fair Market Valuation is based upon extensive review of:
- Rig specification
- Technical specifications and equipment inventories
- Recent investments for each unit
- Asset list and book value
- Details of purchase
- Manufacturer reports
- Maintenance service records
- Operational manuals & certification
