Proving again that XOM has talented contracts and negotiating teams. Any body care to share any specifics how the 2% royalties were achieved? Are Guyanese not very sophisticated and generous or is there something more to the story?
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@16g Thanks for the succinct response. Crystal clear.
Actually, Guyana is not the world's lowest royalty or government take/share. There are alot of mineral fee properties in the United states (zero royalty). Guyana has a 50% profit share (tax rate) compared to a US tax rate of 21%. Texas onshore (mineral fee land) is actually the best fiscal regime in the world with only a 30% govt take compared to about 60% govt share in Guyana. That is why we expand in Permian and bought Pioneer.
Also, US tax depreciation allows for immediate deduction of intangible drilling costs (which is over 85% of the capex on a unconventional well). Finally, oil leases ony expire when all economic production stops (more than 50 years and we have some leases approaching 100 years old). Most PSC expire in 25 years unless extended.
Inexperienced authorities in oil contracts, poorly advised (or not advised at all), facing seasoned negotiators. This is the outcome. Not to mention the potential briefcases of cash moving covertly under the table...
Well… that’s in addition to the profit splitting and taxes. So, I’d say the royalty is mostly double taxation and unwarranted.
What the insider sentiment about OP being a troll?
Made up… look it up