DAO Web Page of Fame

Celebrating Summer Successes Since 2006

  INDUCTEE:  Graney, Kevin

YEAR:   2009

CATEGORY:  Time Series

 

 

NRP logo for graney One of the first things Kevin noticed when he started his summer internship with National Resources Partners (NYSE:NRP) was their use of “base case/worst case/best case” scenarios when evaluating opportunities to purchase mineral rights (mainly coal) for properties through the United States.   The major sources of uncertainty for most of NRP’s investments were the future prices of coal and production levels (as a percentage of predicted production), and the three chosen scenarios often reflected a single price for coal throughout the entire future of a project.   This assumption left them with models that were unable to distinguish among proposals involving future contingencies.

In addition to introducing the firm to Crystal Ball™, Kevin incorporated a relatively simple times series model of coal prices (with extensions to account for variation in price by type of coal) into their project evaluation simulation model.   The more sophisticated models not only gave NRP a more complete picture of risk, they also allowed for the evaluation of project terms involving contingent contracts.

Kevin’s work received the following praise from Kevin J. Craig, VP-Business Development:

“The model Kevin put together using crystal ball to account for uncertainties in the coal business was useful and informative for Natural Resource Partners.  Using historic data to create a future forecast for the price of coal and production volumes will help us to evaluate acquisitions and other projects going forward.”