japan courts mauritania for its oil, page-23

re: announcement mauritania - 618 hedging My comments on hedge from 4th
Some other news 618 is that China is thinking of doing a Northern Pipeline from PNG. Looks like China thinks they will have some demand for some time to come. That's one long pipe and capital expenditure- so much for the paperless office and everything run off solar we saw in forward looking magazines a few years back as we for many years will still have a oil based ecconomy it seems.

Subject re: oil price rise=hedging opportunity??
Posted 04/01/06 11:52 - 369 reads
Posted by Teddyward
IP 138.130.xxx.xxx
Post #133678 - in reply to msg. #133654 - splitview

Otaw- I had asked this question of HDR previously and was told that HDR needed a period of time of not only regular production but offload and delivery to port. I was slightly confused as I thought you would just sell spot , forwards or futures but was informed from elsewhere that if you want to write physical delivery contracts and not put up margin / risk capital you need a production and delivery history or you get screwed on the price you receive (huge discount , country risk etc). I am sure that the partnership will have been approached with various offers of supply contracts but unless it was locked in with a major processor the bank probably would prefer more standard forwards contracts as a hedge before allowing major part of drawdown. Drawdownm finance facility may well have different risk penalty rates / limitations attached if it drawn before reasonable hedging coverage is achieved. HDR seemed only interested in doing the minimum hedge to enable the facility with bankers so as to remain exposed to oil price upside and not to get cornered / squeezed if there is a production delay or delivery failure.

Just another hurdle but a couple of months of production months , several sucessful offloads and deliveries at various facilities without any political unrest and HDR should be able to start implementing some hedge coverage. I think bankers will determin the coverage level and HDR unfortunately will probably do the minimum hedge. I would personally like a larger hedge as it would pull HDR through any short term oil price volatility and ensure HDR have cash to fund further developments which they could then run a little more naked. Would also place a floor under current price and take out a few of the ever present traders who manage to sell and short this stock.

Hopefully there will be some details in the quarterly not just bland WPL edited notes!!!!!!