So does buying insurance. Hedging is sound business whether it be oil price, interest rate risk, currency risk,.... Studied enough 10-Qs to note that cost for hedges is not significant. You could have a "costless collar" by simultaneously selling puts and calls to for zero outlay - caps your upside and protects your downside (or backside whichever is preferred). Could do straight swaps. Could even do 3-way collars (which I don't particularly like).
Now I think we all might be wrong on the hedging if this is still current.
http://www.rigzone.com/news/oil_gas...lity_with_BNP_for_Manora_Oil_Project/?all=HG2
That spells out a up to 30% of 1P Production hedging from Mar 2015 is required. Of course those hedges would have been handy to put in place BEFORE you need them - like in Q4. (just like buying flood insurance when a hurricane is bearing down on you - too late).
Hedging: Hedging required from approximately March 2015 for up to 30 percent of 1P production on an 18 to 24 month rolling basis for the Facility Term - See more at:
http://www.rigzone.com/news/oil_gas...nora_Oil_Project/?all=HG2#sthash.LGNbgQHb.dpu
Hedging: Hedging required from approximately March 2015 for up to 30 percent of 1P production on an 18 to 24 month rolling basis for the Facility Term - See more at:
http://www.rigzone.com/news/oil_gas...ora_Oil_Project/?all=HG2#sthash.LGNbgQHb.dpuf
How much headroom do we have though? Cash flow is at the mercy of the spot oil price.
Agree - no need for exploration spend but the JV highlights development spend hasn't finished yet. That's where the money is going isn't?
Where's the NET Cash flow coming from:
1. 3rd Party gas estimated at net AUD$17M p.a. (so ~ US$3.5M per Qtr)
2. Manora about US$35M @$50/Bbl (so ~ US$8.75M per Qtr fully ramped)
Doesn't look to me like we'd have much more than US$10M of cash flow - from which the debt repayment (principal and interest I presume) has to be made. Plus cash G&A costs. Plus whatever other obligation we way have entered into.
Would not like to see any TO.
