Quote:
Originally Posted by puckhog
This is completely irrelevant to the situation in Alberta. The Western Canadian Sedimentary Basin is aging; new wells are becoming more complex and riskier, so the rate of return on wells drilled here is a lot lower than elsewhere. All companies have a hurdle rate of return that must be met in order to obtain approval for the expenditure of funds, and the higher royalty rates push the return on investment below the line for many marginal wells in Alberta. Simply put, Shell and BP are going to continue to make their record profits, whether they invest here or elsewhere. The question we have to answer is whether we as Albertans want them to put their dollars here - always keep in mind that you can't collect royalties on a well that isn't drilled.
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That "hurdle" you describe - is that a minimum hurdle on profits or revenue? If it's a benchmark for profits, then what exactly will that "hurdle" cover in terms of operating expenditures? I have little sympathy for any oil company that says they need to make a
minimum amount of profit.