Developing PNG assets, page-53

When I was a first year at university, all undergraduates in commerce no matter theirvdegree focus you had to do accounting. Learn how to read a balance sheet, basic accounting, spot a under valued share etc
etc. At the time I did not appreciate at it, I thought it was pointless when I was majority in business law and management. Fast forward awhile and a few of it stuck, I'm glad I learnt it. Leo, the lecturer had one major saying. Not all debt is bad debt. Debt can be great.

A company is not like household debt
debt. Your home doesn't necessarily produce income, your new TV on your 20%interest credit card doesn't produce income.

A company does. Similar to your shares, you turbo charge it by borrowing to allow rapid expansion to bring more income in as long as it can down play that debt. Each industry has an optimal amount. Similar to mining, oil and gas gearing is quiet high. To be competitive you need gearing, you cannot expect horizon to expand without debt. No debt means it stays still and becomes less competitive.

Right now is almost the lowest credit limit in history. Lowest. In this conditions it's the time to bring on debt to expand so when the market recovers you steam a head
head. This is how Santos chews through the field when oil is above $70 a barrel. They spend more on oil field research. They're pumping costs are similar, but larger exploration costs
costs. So when the economy is pumping they can expand rapidly without buying fields at a premium.  It's why all analysis say above $70 Santos explodes away from Woodside and oil search in profit margins
margins.

You have to invest when debt is cheap! Lay the tracks before the oil rally begins, otherwise the train isn't coming to your stop.

Horizon is building the png express.