So, what gives? A look at recent presentations by the CEOs at corporate shale producers, like this one from Encanas Doug Suttles, shows a focus on responding to demands by investors that these companies dedicate more of their resources towards actions that will increase returns on investment capital, a pressure I wrote about in early November. One result of this investor pressure has been the announcement of a wave of stock buy-back programs since August. Investors are also pressuring companies to change executive compensation programs that have been, in their view, too focused on increasing production at the cost of profits.
Well I guess I know the answer. Worked with some investors who were only interested in IRR. To satisfy them we would settle loans for 50% quickly instead of the 90% we could have gotten if we worked them. It just brought profits in early and the knucklehead investment managers got bonuses but were fired at the end when the IRR got negative. But the knuckle head investment managers would then go get other knucklehead investors and sell them on the IRR they got for the first knuckle head investors.
Ahhhh. Another you are describing another chapter from a book called Ponzi.
Shale is hard to understand but I have said for many years it too is a chapter from a book called Ponzi though it does return capital and quickly it does not produce enough lasting cash flow stream to fund more drilling. It is a treadmill that pumps money in and out until you get off the treadmill.
Looks like my position taken so long ago is becoming apparent to more.