Show co I HAS YAR YEAR Physical Properties Are Ae NEW W YORK onic Mn MarCh h Teas Texas company t for tor in Stating of ot producing tt re- re fineries a pipe lines stations et etc may maye be e offered as a first drat caa class example example Physical properties are listed at 25 Ag Against ll this was an nn ac- ac sob d J cS Je of O sO do that hat book Mol vaU value of physical h assets tely eally t stands tand tants on the books at Physical asset asseth at are carried cried at cost regardless Beardless of ot whether te they were wel ac- ac a- a ten yews elS or 01 twenty years e ago and this t W highly Important lit In J con cou- necton with producing oil 01 and gas g properties l less SS whatever is 19 J. J necessary essary each year 1 to Ja maintain them or replace obsolescence 01 an any Thus properties tle tire are tte fully tuly maintained or ot t where here nece necessary al A digest of ot operations of this depreciation de do- predation in 1925 1025 may be b Illuminating First the t necessary depletion Hon On I tt d pro properties based On oo 1 cost coOt price is part of operating expenses es Next comes cotes the tue off write ot from profits I from Crom d dept depreciation lon l last t year this I Wits was recko reckoned ed at lit lt But yel comparison corn com parison of or accumulated late accum depreciation cm- cm ton I reserve o of at oboe close cloe of ot 1925 with wih end Ond of 1924 discloses thai tha only was requited required for main maintenance t nance of or physical sc ass assets s Thus Thou I there thea-e was wap an nn p accretion of or net nat from tr 1925 earnings which went to swell accumulated de depreciation re ue- ue serve PROPERTIES UNDERVALUED Vor the Mst time in Its t 1925 re re- re port lists book bok valuations of ot orph r ph physical assets set lau u prO prO- pr- pr oil 01 and g gg gds s properties pt equip equip- meM gaS gs pipe lit icS and ana Undeveloped fee and lease lese lan lands were lG carried car tied rIcO at This represented toughly roughly one fifth one ot of book bool v value lud oJ ot of r total physical assets and ad It St m may be bi assumed that tat de depredation of these thes properties represented about abut one fifth one I of the book Wk value of total tola ph physical l I assets and it may be assumed that thai I d depreciation of these these- properties represented rep rep- res resented about ne one fifth of t total tOtI l d de dO depreciation predatiOn reserve ve Or nb about t Thus all al of Texas exa company's prOducIng pro prO- properties and Its Is wonderful I rc ve erve holdings of ot mOre mor than han one oin 0 million acres stand on its Is h books a at the t nominal min l figure Of oe less t than n 10 O It I Is not overstating to Sa say I that these thesa add id potential I oil oi and g gas 8 ties properties plus piUs equip equip- Meat ment would easily ely find a market marlet a I. I Crude Cude rude oil oi production ao aloe alope e amounts I to b l nes Mes a flay tay gro gos groes s. s ah and J i carried on on the books at not over 5 S Sa I Ia a barrel brel of t f production SOME OTHER VALUES Pipe lines gathering system asu and ad tank farms tams stand on the booSts books at 52 52 representing cost cOt aist aga groins t which must mOst be e applied the pro proportion ph- ph o portion of total depreciation ton which 1 reserve against those Chose as kIt assets g- g sets Deducting this Texas c cOmpany cOrn cOm m pany tny has hs Its lit transportation and star stor storage sta- sta age system stem actually cu ly on the books bools a at t less than TrUnk and na gathering lines lilies tots total l labout about miles mies and nd at a nominal 1 average ot a a. milO mile mie would cost cos I I about abut to I replace place In iii ad- ad ad dlton It I ha has storage facilities I ac-I fo for iI i. i about barrels ban of or oil 01 ano and I products this b worth ii at least at f vefa con coh construction con con- cost cust st ot ol about 1 35 c cents u a I. I barrel barrei bael Thus this thid department at tb the tie S depreciated value of probably probably ab- ab ably could not be duplicated for los less S than Beyond this thet then I Is the added pipe pip line hOe lne equipment 0 of ot L miles mies of ot telephone and telegraph telegraph telegraph tele tele- graph wires wira an Book valuations as a shown In an annual an hual nual reports may inSy certainly bo hI re regarded re- re as bedrock berock Not only are ar 0 they shown a at actual tactual cost is less de tIe le- le and have be been lost n fully tuly main main- taine b by yearly d deductions from de depreciation de- de ton res reserves res of r th that t ear Sear b but I there has h not of pi property 16 tO snow show discovery disc et a values ues On this basis baiS of aC accounting a 0 highly Valuable producing proT property rt wold oOl d stand plus development on the books bOk Expenses at lease leae cost coal INVENTORIES AT COST In tile the te matter malter of ir et Inventories eO Tex Texas s also has a strong position At h Ui the 0 t close of 1925 it had a approximately 5 of of crude and an re re fined 01 oils in ito It its tanks carried on th the the 0 boOks it tOt t 9 OO or on an n average c of or t a T b barrel J for all al products This b book Ok valuation represented ci actual cost coat h who was as Ws bE ow th the re market value At let 0 bals barrels eia of ot Inventory represented oil oi most most of which the com con company ny pro pro- I I itself at li 11 i cost far fat bev in mar inkt t ket quotations Under its method metho Of bf accounting Texas company's Is t tank age department takes the crude ove over r from fiotto the producing it department n at market price irice when Hen delivered At th the e end Ond of rach ach ye year any balance of or com t c- c party par produced tide crude Cude stores during dunn g the year ci is marked down dosen to to a actual til ii cost This rep represents the th different difference O paid the producing department ht an and d that actual cost Cst 0 On ti this method metho a deduction of On 10 wa was made out of 1925 Income Thus all ail Inventories In a are O carried at tt alu values s far tar b bOlot v current prices pt es Insuring in it In- In I- I suring Curing the cOmp company a real start Mart pl wit with h ny star wih cheap heap Inventories In each new J Oa car ar r Urd Under r this method of V valuation l c oil il aton prices would wold have have to to drop tsi materially oi I IA before Inventories th they readIed reached reache the book ook va values s of A |