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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: Elroy Jetson who wrote (123994)	9/2/2009 9:07:02 PM
From: JimisJim	Read Replies (2) \| Respond to of 206227

Good pts. and yes, you are correct... and I guess I should have made it clear that was the missing piece of data when PBR keeps reciting the same hurdle rate -- they've never told us (or any other outsiders to my knowledge) how they arrived at that rate--what is their target ROI (and any other factors) on any new project... And to add to your clarification, it has been rare in my experience that any E&P actually cancelled a deepwater project once they've greenlighted it, regardless of subsequent changes in the POO or hurdle rate... worst case they delay certain aspects of it... which makes sense if you take Tiber as an example: BP was paying $600,000 dayrate for Deepwater Horizon, not to mention a lot of other expenses... so despite the challenges, I'm sure BP won't back off Tiber... but they might be less aggressive initially as they try to figure out what they've actually got and how they're going to try to get it... Either way, RIG makes out, as do many other service companies... BP has already made a sizeable investment in making that hole. Now land or shallow water projects? All bets are off in this environment of huge land rig and jackup surpluses. There is a bigger, wider line now separating OSX when it comes to deepwater E&P ops vs. everything else. When I wrote about my gut feeling wrt PBR and their static hurdle rate -- I wonder if there is give and take in the ROI calcs to keep the hurdle rate constant and to maintain warm and fuzzy feelings... though I suppose Brazil's move to up their control of PBR from ~50% to ~70% might give us a clue. Regards, Jim

To: Elroy Jetson who wrote (123994)	9/5/2009 4:11:30 AM
From: elmatador	2 Recommendations Respond to of 206227

“There is always an easy solution to every human problem — neat, plausible and wrong.” H. L. Mencken I am not sure applying financial economics to the real world it works. Because "Unfortunately, this romanticized and sanitized vision of the economy led most economists to ignore all the things that can go wrong." Therefore if waiitng for a theory to appear 'neat and sanitized' one go and take the risk. Because if there is no risk, there isw no reward. Now when one take on a risk. It must deal with the consequences. If iot goes wrong, you lose. If it goes right you runaway witht he rerwards. Once you got the rewards, you don't handle to others the fruits of the risks you took. That explains why PBR want to get the riches all for themselves and why they are not to open to tell how they got there. See Paulm Krugman on economists.. How Did Economists Get It So Wrong? nytimes.com