Author Archives: DrillingFormulas.Com

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Working in the oil field and loving to share knowledge.

Cost of Debt

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Cost of Debt (COD) is an effective rate that a company will pay on it current debt. The Cost of Debt (COD) can be measured in term before or after tax COD however the after tax Cost of Debt (COD) is often used.

After tax Cost of Debt (COD) is mathematically expressed in the equation below;

cod equation

Where;

Di = individual loan amounts

ri = interest rate of the individual loan

Dt = total loans that a company has

t = company corporate tax rate, %

Note: the interest payment on loans is classified as an operating expense and it is a tax deductible. Continue reading →

Source of Funds for Company

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Every company in any business requires sources of fund to run the business. Two ways that companies can obtain funds are Debt Funding and Equity Funding.

Debt Funding

Debt funding is to borrow money from financial instructions and the companies must pay interest and load at some stage depending on payback scheme.

Short term borrowing can come from the following sources;

  • overdraft
  • commercial paper

Long term borrowing can come from the following sources;

  • corporate bonds
  • long term loans
  • mortgages

Equity Funding

Equity often means an ownership interest in a business. The companies sell shares to equity investors as financial institutions, insurance companies, individual investors, etc and these equity investors become the owner of the companies (share holders). The equity investors expect to get regular dividends and a capital gain from the company’s growth. However, there will not guaranteed outcome of the future performance of the company to their share holders. If the company goes bankrupt, the ordinary share holders will be the last group of people who will get the money back. Continue reading →

Oil Price – Price Inelasticity of Demand

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Oil price is quite unique from other products because it cannot be easily substitute. Therefore, the demand will be less elastic because many consumers will buy oil regardless of how much it costs. For this situation, the oil price is called as a price inelastic of demand.

What is it – price elastic of demand?

Price inelasticity of demand - Oil Price Continue reading →

Role of Body Language for Oilfield Career Success

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From our informal exchanges with strangers to more formal exchanges with our associates, one can show what he/she is or is not to people with just little gestures and actions. For people who want to work in oilfield, body language is very important and it is one of getting hired by oilfield companies. There are a lot of people fail to this point.   This is can be applied to someone who has been in the oilfield but does not have any good progress in their career but their futures are not bright.

Positive body language is always a part of confident and successful people but a gentle reminder will be required for others. These are some important rules of body language that will help you progress in your job.

body-languge-for-oilfield-success Continue reading →