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Old 06-03-2010, 12:17 PM   #21
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Originally Posted by haha View Post
Is it even remotely possible to know anything about the energy or geopolitical situation of the world 30 years hence?
No, of course it's not. In fact, it's probably not possible to do it for 30 years.

My point is that in order to justify an NPV calculation, you must attempt to assume something realistic about the rest of the payment stream. You can't just lop it off and ignore it, without justifying why you are doing so, as it can have a significant contribution to the NPV.

Most analysts use some kind of transition period to a steady-state period which they assume lasts forever to make the NPV calculable, so it becomes a 3-period model, where the last period (the steady-state period) can be calculated with the Graham-Shapiro model, and then that number is discounted back to today, and added to the PV of periods 1 and 2.

For example, if we assume dividend grows at the inflation rate (0% real growth) after 30 years, the PV of the rest of the payment stream is the dividend in year 31 (about 3.20) divided by 0.03 which equals 106. Discounting this back to today at 3% real, gives you another $44, so the NPV would be about 88.

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Old 06-03-2010, 01:08 PM   #22
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Originally Posted by FIRE'd@51 View Post
What about the dividend stream beyond 30 years? That could add quite a bit to the NPV. For example, if the dividend were to grow at 2% forever, and you continued to discount it at 3% real, the NPV would be given by the Graham-Shapiro model:

P = 1.76 / (0.03 - 0.02) = 176 per share

Unless you are assuming that XOM will go out of business after 30 years, it seems you may have ignored a large portion of the NPV
That is correct I do ignore the large portion. My goal is not to compute the true NPV of the company. I have a different set of rules to winnow my selection of what constitutes a suitable dividend stocks, from those selections I need a way of insuring a conservative selection process for what stocks to purchase for the value of the dividends to me - the useful life of the asset is limited to my expected use!

Over time I have beeen able to find the dividend stocks that meet the selection process and give me an unemotional basis to purchase the stocks as well as when to sell or switch the stock.

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Old 06-03-2010, 02:38 PM   #23
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Originally Posted by MasterBlaster View Post
I differ with your post.

After the majors had their late-80's massive layoffs technical expertise was available independent of the majors everywhere. A very modest cash outlay will get whatever is needed. So the technical area is covered by the (now-many) small oil-related technical businesses. If finances are needed there are many who will finance such programs at much better terms than the majors. Deals such as that keep the sovereign resource in-country. They don't have to give away large percentages of their oil anymore.

Name some countries that have recently cut deals to the majors ?

Regarding downstream - aren't all the refineries in this country running flat out ? Where is that business dwindling ?
Fair enough.

I don't have time to go through annual reports, but I can tell you what I know as an upstream engineer (I might be a little biased). My company is laying off people in Downstream (they call it "downstream acceleration" or something). Their financial performance has been poor, and my feeling is that if someone strolled by with the right amount of cash, they could take all our refineries. look at any major's earnings from down stream and then from upstream. as prices rise, margins get smaller and downstream suffers...

As far as countries giving concessions to majors - angola, kazakhstan, kuwait (sort of), Iraq, russia, china, thailand, indonesia, malaysia, brazil...i could go on and on. I'll agree that the concessions of chevron and ibn saud are long gone, but the experience is with the majors. what would be more interesting is to name a country which doesn't give concessions to the majors. i'll name one, saudi arabia. even eni needs to partner with the majors to make most of their assets work.
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Old 06-03-2010, 04:08 PM   #24
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OK, so why did natgas futures and onshore producers (UPL, RRC, CHK, BBG, GDP, etc.) Go batsht today? Is this just the markets realizing that natgas is probably the "least evil" hydrocarbon in an atmosphere where the administration is suddenly applying tons of pressure to coalminers, offshore producers, etc.? Why today?

Not that I am compaining, mind you...
"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."

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Old 06-03-2010, 05:11 PM   #25
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I think it was the lower than expected storage numbers and a higher than expected weather forecast.
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Old 06-04-2010, 10:26 AM   #26
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I heard it was because the President said atomic and natural gas was our way away from oil. First time he has endorsed natural gas.
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Old 06-04-2010, 02:05 PM   #27
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Originally Posted by perrytime View Post
I heard it was because the President said atomic and natural gas was our way away from oil. First time he has endorsed natural gas.
If the GULF drilling provides something like 40% of our oil ( I think that was what I read, and probably repeated here), it would be many years before NG or anything else can replace that oil. I'll say it again, conservation of energy can happen far quicker, easier than alternate energy.

I see I am in the 'stock picking' forum, so I'll share:

Put a bit less than 2% of my NW into BP today. I figured the price must (hah!) be beat down far enough by now. Looks like current divs are ~ 8%. I got in @$37.83, sold JUNE $40SP calls against it at $1.35. If I get called out on JUNE18th, that's 9.3% in a few weeks. If not, that's 3/6% in a few weeks for the option premium, and I'll try to sell CCs again and try to collect the divs and just wait and see. Haven't bought an individual stock in quite a while.

There, I jinxed it. - ERD50

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