HDR hardman resources limited

japan courts mauritania for its oil, page-18

  1. 4,004 Posts.
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    re: announcement mauritania - 618 hedging Hi 618

    I'm not sure you are correct with your comment on capacity of HDR to hedge. My view is that some hedging could be done now based on analogue oil quality with cash settlement of position if production does not start on time. What I mean is that if they want to hedge, the only risk is they need to produce or remain exposed to price movements in a cash sense without oil/cash flow to support movements in price.

    My understanding is that hedging is always done based upon standard products...to the extent there is basis risk in delivering a very slightly different product to the market it doesn't matter because the financial contract is not settled with physical delivery. The hedging party just settles in cash base on price movement since the contract was entered.

    I question the sense in delaying the decisions on hedging based on waiting for production to actually commence and waiting for confidence about everything. Some hedging could/should be done as soon as teh opportunity is seen to be right. Personally, I believe the company is just waiting for the price to be right. I asked the company a question on this subject a couple of weeks ago...still no reply.

    regards
    DF
 
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