Treaty may have done very well in negotiating the

Treaty may have done very well in negotiating the sale of the Mitchell #3 and #4. There are several principles I recall in Finance class in college called the "present value of a dollar, future value of a dollar and compound interest" which you may want to Google to see calculations and examples. It appears Treaty will be paid now for the money they would have received over a period of time now in return for a discount so that TNC would earn a particular interest over that same period of time. This is a smart move for any company needing cash to reinvest into other projects. So, don't be so quick to condemn Treaty. I am sure this is exactly what they have been doing when they were selling off percentages of their wells.

"Time Value of Money Principle: A dollar today cannot be compared to a dollar in the future. Given a choice of receiving a dollar today or a dollar at some point in the future, a rational person will always choose to receive the dollar today."


Quote:

"There are three reasons why a dollar tomorrow is worth less than a 
dollar today
• Individuals prefer present consumption to future consumption. To 
induce people to give up present consumption you have to offer them 
more in the future. 
• When there is  monetary inflation, the value of currency decreases over 
time. The greater the inflation, the greater the difference in value between 
a dollar today and a dollar tomorrow. 
• If there is any uncertainty (risk) associated with the cash flow in the 
future, the less that  cash flow will be valued. 
Other things remaining equal, the value of cash flows in future time 
periods will decrease as 
• the preference for current consumption increases. 
• expected inflation increases. 
• the uncertainty in the cash flow increases."