Shrugging off $48 Oil



Started March 16, 2017 at 08:50 am by @ShaleForum.com in Eagle Ford Shale

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ShaleForum.com
03/16/17 08:50:17AM
@shaleforum

American oil explorers who survived the worst of the 2014-2016 market rout are shrugging off the 14 percent slide in prices this year from a high of $55.24 to less than $48 a barrel Tuesday. The price would have to drop to the $30s or lower to dent the bottom line of many drillers now working U.S. shale fields, said Katherine Richard, the CEO of Warwick Energy Investment Group, which own stakes in more than 5,000 oil and natural gas wells.

That’s because many producers have already locked in future returns with financial contracts that guarantee the price of their oil for most of the rest of the decade. Such resilience poses a dilemma for countries that agreed to an OPEC-led production cut aimed at tightening supplies to raise prices and relieve their distressed national economies.

“We’re in a boom again in Texas, despite what’s happening with prices lately,” said Michael Webber, deputy director of the University of Texas’ Energy Institute in Austin. “The cowboy spirit is back. Hedging is playing a big role.”

Read more:https://www.bloomberg.com/news/articles/2017-03-14/oil-at-40-no-problem-as-u-s-drillers-snub-opec-with-hedges

Also read: How does hedging work?

Skip Peel - Independent Landman
03/16/17 08:57:33AM @skip-peel-independent-landman:

Hedging will insulate operating companies from depressed prices for a relatively short period of time, 12 to 24 months in most cases depending on the terms of the derivative contracts.  Those hedges will promote a glut of new production driving down the price of crude and reducing the royalty income of mineral owners who do not share in the benefits of hedging.  Good for managers and share holders in public companies or equity interests in private companies but not good for those who receive royalty revenue.


benny
03/16/17 11:05:54AM @benny:

Mineral owners can certainly share in the benefits of hedging. All it takes is a little education. It's not as if hedging isn't available for everyone in one way or another. :)


Skip Peel - Independent Landman
03/16/17 11:08:32AM @skip-peel-independent-landman:

I'd be interested to hear some detail on how a royalty interest can hedge their revenue stream.


benny
03/16/17 11:18:26AM @benny:

Stock market


Skip Peel - Independent Landman
03/16/17 11:19:20AM @skip-peel-independent-landman:

Thanks, but no thanks.


benny
03/16/17 11:20:26AM @benny:

Lol.......ummmm, how do you think these operators are hedging Skip?


Skip Peel - Independent Landman
03/16/17 11:25:59AM @skip-peel-independent-landman:

Hedging is basically utilizing financial derivaties:  swaps, collars, etc.  Different forms of managing risk.  Complicated financial agreements that fail as often as the succeed.  And  far beyond the grasp of 99% of mineral owners.


benny
03/16/17 11:37:06AM @benny:

Yes I am aware of what hedging is. They do it in the marketplace. The same marketplace that any individual investor can enter. Hey I qualified my response -- said "takes a little education".

Fact is, it can be done, which is what your original question was. You asked how it can be done, I answered accordingly, with a correct response. There are numerous strategies that can be carried out in the 3 markets that I replied to your question with. If a mineral owner values their royalty stream enough, they should spend the time and effort necessary to get educated on hedging strategies available to them. Better than sitting there like you're on the deck of the Titanic watching the ship go down while you do nothing.


Skip Peel - Independent Landman
03/16/17 11:44:11AM @skip-peel-independent-landman:

My disagreement is not with "can it be done" but with "can the vast majority of mineral owners manage it safely".  I think not.  Feel free to educate them and we can see what feedback you get.


benny
03/16/17 11:54:06AM @benny:

goalposts are moving now. You originally said "I'd be interested to hear some detail on how a royalty interest can hedge their revenue stream". I gave you 3 answers, which you now agree with. You agree that it can be done, which was your original question.

Now you question whether they can manage it "safely". Totally different subject. Good day sir.


Skip Peel - Independent Landman
03/16/17 11:58:19AM @skip-peel-independent-landman:

You asked, "how do you think these operators are hedging Skip?"  I provided an answer.  If you do not care to continue to expand on the topic that is your perogative, sir.


how do you think these operators are hedging Skip?

- See more at: http://shaleforum.com/shaleforum/group_discuss/64082/shrugging-off-48-oil#cm607537


Lol.......ummmm, how do you think these operators are hedging Skip?

- See more at: http://shaleforum.com/shaleforum/group_discuss/64082/shrugging-off-48-oil#cm607537

benny
03/16/17 12:06:00PM @benny:

That was a rhetorical question Skip. Sorry if it did not appear that way to you. I am pressed for time buddy. I did not think that my listing 3 ways for a mineral owner to hedge would end up with me having to teach a class! We will agree to disagree about whether a mineral owner is capable of safely hedging their royalty stream. Good day sir.


Skip Peel - Independent Landman
03/16/17 12:16:30PM @skip-peel-independent-landman:

No apology required.  Nuance is often opaque in online text.  Since you think that hedging is something that be accomplished by mineral owners maybe we can revisit the subject when you are less pressed for time.  And a good day to you also.


benny
03/16/17 11:19:13AM @benny:

Futures


benny
03/16/17 11:19:39AM @benny:

Forex


hilary2018
07/22/18 08:06:46PM @hilary2018:

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