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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Wyätt Gwyön who wrote (28336)	3/18/2005 5:35:27 PM
From: Elroy Jetson	Respond to of 306849

Ironically, the slippage rate at Chevron has remained nearly constant over long periods of time. Humans appear to be overly-optimistic in a uniform way, regardless of the date. New technology can bump a Tier One project, requiring a 14% return, up to a Tier Two or Tier Three requiring a 19% or 28% return. It is common for project proponents to argue that their new technology actually makes the project less risky, but Excom (the executive committee) is always unmoved by this argument and assigns a higher tier until the technology is proven. In practice many risky wildcat projects are done by or shared with independents. I worked on a JV with Michel T. Halbouty from Houston, who recently died at 95, in the Rocky Mountain Overthrust. Halbouty discovered the famous Spindletop Dome in Texas and gambled that wealth on risky wells over the rest of his life from his office building across the street from the Houston Galleria. One a Halbouty makes a discovery, it is typical for a major oil company to either buy out his leases or step-out from this discovery with him or without him in similar but now more likely geographic areas. Big oil companies aren't bet the company types like Halbouty. aapg.org You will also notice that in lowering the cut-off rates for each risk tier, they subtracted 4% from each rate rather than reduce each cut-off rate by say 20%. The effect is to maintain the absolute return difference between tiers rather than keep them in proportion. In effect this makes riskier projects less approve-able when interest rates are low. The basis behind this has to do with the way inflation tends to bail out bad projects. .