(03-24-2022 10:52 AM)RiceLad15 Wrote:  

(03-24-2022 10:08 AM)Hambone10 Wrote:  Dude...
100% - 59% =41%. It was somewhat of a joke.

Missed that joke since the link I provided actually broke down what the other percentages were.

Since its the opinion of what 'executives' believe is the number one driver, I'm not really that interested in the details.... especially in that the term 'capital discipline' can have numerous definitions... as evidenced by the other drivers you mentioned... ALL of which in my mind could be considered capital discipline.

Quote:You said 'not quite' to 'capital discipline'... and then gave a text book example of capital discipline.... and your own quote said it was a 'two headed monster' between capital discipline and green initiatives. I simply made a joke that it must therefore be 59% capital discipline (and every other issue you mention above is another example of capital discipline) and the remainder, the 'other head' of that monster.

I said "not quite" to Owl#s saying "In other words, prices are not high enough to justify the risks."
[/quote]

Yes... which again in my mind is the definition of capital discipline. You don't tie up capital unless prices justify the investment. You seem to agree since you say...

Quote:From that questionnaire, it doesn't seem like there would be any price that would be high enough at the moment, since the executives don't believe there is certainty in how long those high prices will be maintained. That temporal element seems critical. I thought it was pretty clear that I was commenting on the lack of a temporal element to Owl#s comment.

Sorry, but this stipulation you're adding is really unnecessary.

Said simply... if a lease is expected to return 100 barrels and it costs 100,000 to develop it... then you need to sell the oil for an average price of 1,000 just to break even. If it takes time to develop the lease (which it does) then you HAVE to calculate the time value of that money (since you have to pay for it up front) and estimate the future value of oil and discount it...

Temporal elements are a given in any investment calculation.... and although you aren't developing a lease to sell oil at the current price, but instead at the price months and years into the future, certainly high short-term prices today impact the revenue from already developed leases and can give companies 'wiggle room' to take a few more more risks.... since the investment in new leases is a tax deduction against current revenues.... for now anyway. So yes, the current price DOES impact the investment decision, especially if a company will be experiencing extremely high profitability.

Quote:Based on this, I think we're in general agreement in how we're analyzing the statements and responses from these executives.

In essence, the current high prices are moot because of what many view as multip;e volatile situations that will likely result in future price and cost changes. So even is oil was at $1,000 per barrel, these executives are saying they don't trust it to stay high long enough to justify CapEx to expand production.

Not quite, but yes

I'd only add as I did that at $1,000/bb, they may now (likely) have additional tax savings from investment that can change the outcome of some borderline investments to now make sense.... and at $10,000/bb, even more would make sense. Of course its not the same impact as an expectation of $10,000/bb on the future price... which is a $$/$$ comparison, but it does add the current tax savings to the calculation.

The alternative is to pay out excess bonuses and let the investors or workers pay the taxes... but those rates are generally higher.

Bottom line, tax and timing are ALWAYS part of an investment decision... or should be.