Quote:
Originally Posted by Leondros
Yes and no, all they are saying is that the current NBV of their PPE is not supported by their reserve evaluations which are a point in time test. These tests are super sensitive to discount rates and the forward strip in which they are using. I also find reserve evaluators strips are typically less accurate than the actual forward strip and the bank's strips.
I won't bore everyone but your NBV of your PPE includes random items such as asset retirement obligations, capitalized G&A, overhead allocations, etc. To effectively 'accelerate' their depletion through impairment does not necessarily mean their economics are in turmoil.
|
Thanks. If you are using a forward curve at a time when there is so much fundamental uncertainty like in 2020 then it is not indicative of future value. Using a $30/bbl oil price to evaluate non-cash ceiling test impairments is a lot different than $60. Under US GAAP you are unable to write up the assets in the latter scenario if they have already be written down. Net earnings and ROCI are only useful in a stable environment.