Not many hedge 100% of their production especially if they think they're in a rising commodity environment but no-one can know when the next slump comes in which is why generally speaking a hedge book is in play - to mitigate to the downside but leave enough production exposed to a possible up side - if prices rise then the % of production hedged will pull down the overall production return depending on what % of production was hedged and the rise above the hedge level.....having said that a hedge comes into its own in an environment where the commodity price is volatile or falling then it provides a cushioning depending on the % of production hedged and the level at which the commodity falls below the hedge.. in other words it is a form of income insurance.. many hedge a % of production quarter by quarter so as to be able to not get caught hedging to low going forward - its better to lose some cream on the way up then have shorters savage you on the way down in the commodity cycle especially if your carrying big debt... STO is naked which means greater returns as a % of production in a rising commodity (rising above break even) but no parachute in a falling market..
STO will make it through this next low period but it will have used cash to do it and cash that it needs to boost production to supply GLNG going forward - yes it can borrow more but that likely comes at a price to its credit rating.......
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