Research On The Optimization Of Capital Structure Of SJ Company Based On Product Sharing Contract

Along with the acceleration of economic globalization in oil field,the Chinese company set up with Multinational Corporation through "going outside",and will play an important role in the field of oil exploration and production,oil supply,and oil investment.In a saturated investment environment,private capital began to aim at cooperation development in natural resource.At present,PSC(Production Sharing Contract)is the most widespread form of contract between foreign company and host country in world-wide oil exploration and development field.So how to control the management,how to organize the capital structure,and how to bring in more benefit to contractor,that's the most important issue we confronted with in the aspect of international oil and gas cooperation.This article is based on four years' exploration financial data of SJ Company for analyze,it figured that,with high risk in PSC exploration period,SJ Company has a low debt assets ratio and high equity.While during the production period,the company has capital inflow with production sharing,however,the investor will ask for different ROI under different risk level.With fixed cost,it has operating leverage to effect capital structure in different profit level.This article used the Capital Cost Comparison Method first to compare the two scenarios proposed by executive team,and find the one with lower average cost.Then this article used the Indifference Point Method to analyze optimal capital structure with different production situation.It found that,the company should use equity capital under poor situation,and if the production situation became better,the company can use more debt capital to gain more profit with tax deduction of debt.At last,give suggestions on capital structure optimization,and also give an advice on financing access choosing and safeguard measure while in investment expanding.