Oklahoma Oil and Gas Interest Owners:
As yall are well aware, Berlin's finance (that's "fuhnance") prowess is on par with her triple lutz, triple toe, which is non-existent. That being said, Berlin does know that as a stockholder one has claim to the future profits of the firm. Profits can be retained by the firm or issued as dividends to the owners. If the owner of the firm thinks that the firm will be able to invest the profits more wisely than the investor can elsewhere else, he will be grateful if the company retains the profits and chooses another wise investment for his capital. On the other hand, if the investor has better uses for the company's (his) profits than the company, he will push for dividends.
In a Retuers' piece, Ernest Scheyder reports that investors in oil and gas concerns are demanding dividends and also according to the chief executive of energy investment at Tudor, Pickering, Hold & Co. “investors are looking for improving results, better returns and operational performance” (Maynard, wouldn't it be weird if they weren't?).
On one hand, at least these companies are now making a profit. On the other, it is not necessarily a vote of confidence for the stockholders to be demanding their cash. Since producing oil and gas requires that the company deplete its oil and gas reserves (read, assets), companies must always be acquiring new leases. Acquisitions and the development of these acquisitions require cash. Because it has proven difficult for companies to grow their production wedge out of free cash flows and with the owners taking their cash elsewhere, this will lead companies to the debt markets which Berlin has mentioned before is problematic.
If you think Berlin has erred in her analysis or you would like to sell your Oklahoma oil and gas mineral rights and royalties. Please drop us a line or comment below.
More to follow,
PS: Thanks to DC for his winning submission to Berlin's query regarding the meaning of "MERGE". "Must Everything Require Grand Epithet" = $10 Amazon gift card.