Value of SNE, page-68

You are both wrong.

Companies look at NPV return, IRR and VIR of recent acquisitions, judge what the M&A market is doing, and compare it against other investment options. NPV10 is a common benchmark, but when assets are trading NPV12 of NPV15 to a companies oil price assumptions they won't pay more because the benchmark is what other assets are selling for.

In the same way that return via rental yeilds doesn't drive the housing market, nor costs sunk, it is what buyers can get for the same dollar that drives the M&A market.

Note that oil companies don't use the daily oil price fluctuations in valuations either, they use a forward assumption, some have low and high case assumptions in their modelling of oil price with additional thresholds. For most companies these metrics / thesholds are top secret, but often on the conservative side. But these thresholds aren't a target for a price, they are an absolute maximum, the value of the project to the company is how much cheaper than those thresholds they can get assets.

As an example if company X values SNE at an NPV10 $60 oil price at full project of $3B, i.e. $900m for 30%, buying that 30% for $600m is viewed as creating $300m of value. Company Z on the other hand may have a $50 oil price assumption NPV10 threshold, value SNE at $2.5B, that 30% is worth $750m, so an acquisition at $600m is internally viewed as creating $150m in value. If $600m is the price set by the market (what other assets / M&A options compare at) both companies are net buyers, but neither will pay to their maximum as there are plenty of other assets on the market and they have no reason to prefer SNE over another asset, what creates the most value for dollars spent is the most important.