* * * *
On COMPANY FINANCE.
The results of some of the established -Oil companies have recently been published in respect of last year's working, a year of over-production and declining prices. Yet nearly all the leading producers, such as Burmah, Anglo-Persian, Lobitos and Venezuelan Oil Concessions, have been able to show remarkably good earnings despite the unfavourable conditions. These results, however, are largely due to the very sound financial policy they have followed in the past, and their results provide a valuable moral for the investor in Oil shares. It has been comparatively easy in the past. for an oil- producing company. to show big profits almost from the start, but if that prosperity is to last large sums must always be spent in exploratory work and fresh drilling to provide for future production. Neglect of this means that when the producing wells go dry more capital is required to seek for and develop fresh wells. But the big companies have always devoted large sums from current revenue to the search for new wells, and most of them have big areas in reserve where the wells have been developed and can be put into production with very little expense. The cost of developing these wells having been charged against revenue, the position of the original - capital is safeguarded.- When- adverse times came and over-production is rife, as at present, the exploratory and new drilling work can be safely discontinued for the time being and profits benefit accordingly.
* *
Previous page