https://enercomdenver.com/aegis-hedging/
I've been a critic of crap hedges..but this is a good briefing on hedging and I enjoyed it
What would you do? There are no right answers
Aegis hedging at enercom
Re: Aegis hedging at enercom
The vast majority of upstream companies that hedge do it because their debt covenants require it.
Even if not required to do so, this is a sector with SIGNIFICANT commodity price risk. Oil and gas prices are determined by Day Traders and geopolitical risks the companies have no control over. Oil prices are not locked in by the negotiations between the producers and the refiners. Just remember that many of the upstream companies that are alive today were saved by their hedging program.
For Example: AR would have gone bankrupt in 2020 if not for the $795 million in cash settlements they received on their hedges that year.
Even if not required to do so, this is a sector with SIGNIFICANT commodity price risk. Oil and gas prices are determined by Day Traders and geopolitical risks the companies have no control over. Oil prices are not locked in by the negotiations between the producers and the refiners. Just remember that many of the upstream companies that are alive today were saved by their hedging program.
For Example: AR would have gone bankrupt in 2020 if not for the $795 million in cash settlements they received on their hedges that year.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group