Here is update on the MAP Investors hounding them over investing equally in Downstream & Upstream assets ….. especially now that the short term market has turned against the margins / economics.
After Environmentalist and Lawyers the Accounting-Investment Analyst have to be one of the most dangerously stupid groups in the Industry.
This group is incapable of holding the concept of long term business plan & flops like fish out of water whenever this plan cuts thru the inevitable economic downturn where the justifying economics are bad. If you want to have assets in place to catch large profits available during a upturn then you have to go against the herd of oil companies being driven by this group of short-term thinkers.
Another tired and totally incorrect position these analyst like to take is that the investments in Upstream assets have a higher rate of return than the downstream assets which traditionally have only a 9-11% ROI (even though they still like to pilory them for excess Gross profits – never mind the Net profits are in this 9-11% that wont put them in the top 100 Forbes list where 33% net profit is bottom rung). Fact is that ALL integrated oil companies FORCE the profit/transfer price into the upstream sector because it has tax favorable advantage due to depletion allowance ….. separate out the downstream companies (like over-balanced upsteam companies like BP & Shell) and profits averaged over time shrink to reality. There are rough patches like non-integrated independents like Valero and others find themselves in current financial crisis. The reverse will come on the recovery (and once environmentalist are kicked away from blocking heay non-conventional crude sources…..because there is no functional alternate light conventional sources).
MAP’s investment in both Garyville and Detroit are going to be strong good paying investments over the next 20 years and far ahead of any investments in oil or gas assets that are in the governments gunsights for rape via Cap & Trade, Execessive Environmental investment requirements that will ~remove any “higher” expected profits. The downstream assets will also help to head off a supply crisis that the current liberal adminstration is creating once the recovery kicks in and demand returns to near-normal levels (and prevent US from having to import even more Anti-US crude & gasoline suppliers).
All US companies were beaten down and forced to divert most of the funds they used to put into R&D efforts, and place them into dividends which never satisfy these vultures because even when they are as high as they can get this group still beats them when they don’t match their lack-knowledge, calculator, short-term thinking projections. About the only part of R&D left in any company on the stock exchange is just the “D = Development” on things they discovered in the past when they had an “R=Research” program.
Regards
