It's called risk management for a reason. Firstly a producer...

It's called risk management for a reason.

Firstly a producer hedges to INSURE THEIR CASH FLOW!! We are producing a commodity where we are a price taker and not a price maker. E&P companies need to have some stability around their Capes commitments - hedging production achieves that.

Secondly, a banker will generally require hedging of the E&P's production up to a certain amount to INSURE THE CASH FLOW such that they know they are going to be paid their cash flow stream (i.e. interest and debt amortization).

Thirdly - I believe that HEDGING WAS REQUIRED by the banking syndicate (100% sure we've had this discussion). The Feb 27 annc gave the details of current hedging put in place of 40% of production.

From 28 April 2014 announcement wrt Bank Paribas debt facility"
"Hedging required from approximately March 2015 for up to 30% of 1P production on an 18 to 24 month rolling basis for the Facility Term."

Clear enough. Bank require hedging. Troy implemented what was necessary. Bad news of course is the hedges you get now aren't as good as the hedges you would have gotten back in Oct '14.

Not enough foresight to insure your cash flow early in the game when the greatest risk is present. Could have bought Puts instead of Swaps. Could have gone with a Collar as Autosime suggested. All in all a hedge book is just a derivative instrument and it could have been traded away if in excess of needs.

Lots of franking credits available too as was noted.

There is one name on that shareholder destroying list that will NEVER get my vote, ex NEN and BCC.