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To: energyplay who wrote (66021)	7/7/2005 3:01:59 AM
From: Raymond Duray	Respond to of 74559

PDVsA lives forever! VIVA LA REVOLUTION! VIVA CHE!

To: energyplay who wrote (66021)	7/7/2005 3:16:16 AM
From: Elroy Jetson	Respond to of 74559

Using the Unocal purchase as an indicator, Chevron is pretty optimistic about the future of oil prices, being willing to pay $12.50 per barrel of Unocal equivalent oil reserves. Unocal reports that their average production costs are $6.50 per barrel making a total cost of $19.00 per barrel. China's CNOOC is willing to pay 12% more, or another $1.50, for a total price of $20.50 per barrel. There are many different ways to evaluate the difference between a market price of ~$60 per barrel and a reserve price of roughly $19 per barrel. The difference is basically the time value of money. Let's take a simple, but still pretty accurate view. Over an eighteen year production life, this differential provides a return of ( $60 / $19 ) ^ ( 1 / 18 yrs ) = 6.6% return on investment Relative to what's available today, this return may seem nice, but its a little low to meet Chevron's investment hurdle rates. If nominal oil prices grow by 6% per year, reaching $171 per barrel by 2023, then the return increases to 10.6% which is closer to an acceptable return. But this is based on a pretty aggressive assumption for the increase in oil prices. I think Chevron is pricing in value for Unocal's exploration employees rather than such a high growth rate for oil prices. > In practice reserves in politically stable locations are worth more than reserves in exciting locations like Myanmar and Azerbaijan, for obvious reasons. So compare the costs being mentioned for finding oil, including production costs, and compare that with the top price of $19 per barrel that Chevron is willing to pay. Tar sands cost $20 to $26 just to produce which, at the Chevron bid price for Unocal, makes reserves of tar sands worth nothing. Basically it is tough to find reserves for less than the $12.50 per barrel Chevron is willing to pay. Unless oil reserves could all be extracted and sold in one day at $60 per barrel, the price has to be higher to justify more exploration. .

To: energyplay who wrote (66021)	7/7/2005 3:36:24 AM
From: Elroy Jetson	Respond to of 74559

As for your question about Petrobras. They're proficient at finding oil, although focused primarily on Latin America and the Gulf of Mexico - probably for obvious reasons. As for quasi state owned oil companies, don't forget Total, which along the way has absorbed Fina and Elf. They're as competent as most oil companies . . . . . . in spite of their disgusting habit of transporting their oil around the world in decrepit oil tankers, leased from scum oil tanker owners in Monaco and Greece, in order to save a few dollars. Several steps below Exxon, which inconceivably still employs drunks as oil tanker officers. total.com .