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30-10-2007, 11:15 AM
#691
Thanks Bilo.
Why did NZO hedge the oil in the first place? Why bother with only such a small amount? It is a blessing that it was only a small contract compare to their overall output.
Having got ourselves into a debt-induced economic crisis, the only permanent way out is to reduce the debt – either directly by abolishing large slabs of it, or indirectly by inflating it away.
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30-10-2007, 11:34 AM
#692
Dr Who ,NZO sold those calls to pay for the hedges(puts) required by the lenders.
Clearasmud
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30-10-2007, 11:43 AM
#693
Originally Posted by Dr_Who
Thanks Bilo.
Why did NZO hedge the oil in the first place? Why bother with only such a small amount? It is a blessing that it was only a small contract compare to their overall output.
Dr Who
NZOG had to borrow some money for the development of Tui. The Bankers in their wisdom insisted that the loan be protected in the event that the oil price collapsed. So NZOG had to takk out some hedging; some at the low end and some at the high end. When these loans get repaid the company wont have to renew its hedging...it probably would protect itself against a slide but leave the upwards price open ended. Ok now that the price is over $US86 they will lose a little cream on a few barrels but they could use it all up now and enjoy the $US150/bbl when that madman strikes Iran.
Tis no big deal or loss.
The JV partners must be enjoying this huge oil price.
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30-10-2007, 01:34 PM
#694
hedging
I thought I explained this fairly well a couple of pages back but it seems some people still don't get it, except bermuda
if the oil price is above USD $86 then NZO lose the difference betweem $86 and whatever the oil price is - so if the oil price goes to $100, NZO lose $14/bbl on the hedged amount which is, as I have already said, 100,000 bbls over the next three yrs
put another way - NZO have sold forward 100,000 bbls at US $86. -
the amount of money NZO lose can't be determined because we don't know what the future oil price is going to be - NZO might not lose any money at all - if the oil price went to $200 tomorrow, then we lose $114/ bbl on 100,000 bbls
.
Last edited by Mick100; 30-10-2007 at 01:41 PM.
He who lives by the crystal ball soon learns to eat ground glass. (Edgar Fiedler)
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30-10-2007, 02:45 PM
#695
Member
hedging
Sorry Mick100, I don’t see this price difference as a loss for NZO. I see this as NZO just not get the ultimate Cents of the profit.
Cheers
Bixbite
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30-10-2007, 02:50 PM
#696
Originally Posted by Mick100
I thought I explained this fairly well a couple of pages back but it seems some people still don't get it, except bermuda
if the oil price is above USD $86 then NZO lose the difference betweem $86 and whatever the oil price is - so if the oil price goes to $100, NZO lose $14/bbl on the hedged amount which is, as I have already said, 100,000 bbls over the next three yrs
put another way - NZO have sold forward 100,000 bbls at US $86. -
the amount of money NZO lose can't be determined because we don't know what the future oil price is going to be - NZO might not lose any money at all - if the oil price went to $200 tomorrow, then we lose $114/ bbl on 100,000 bbls
.
Mick
Maybe you should read a book or two on risk management. I hope that your house is insured.
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30-10-2007, 03:38 PM
#697
Originally Posted by Toddy
Mick
Maybe you should read a book or two on risk management. I hope that your house is insured.
What point are you trying to make?
He who lives by the crystal ball soon learns to eat ground glass. (Edgar Fiedler)
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30-10-2007, 04:02 PM
#698
Originally Posted by Toddy
If NOG locked sales in at the current oil price (forward contracts) then the SP would more than likely be rerated. If they gamble that the oil price will stay high then the NZO SP will continue to under perform others in the same industry.
Its simple. Lock in the cashflows please.
This statment is looking rather dumb already
who in there right mind would want to lock in future oil prices at $75 / bbl
I'v watched on as two of my gold miners went bust because they sold forward future gold production at $400/oz. Problem is that costs keep going up and to top it off they didn't produce to the level expected so had to buy gold in the spot market at $650 to meet their forward sales
I know all about forward sales - they can be extremely risky, particuarly if there is a problem with production
Luckily NZO only have 100,000 bbls hedged
,
He who lives by the crystal ball soon learns to eat ground glass. (Edgar Fiedler)
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30-10-2007, 04:23 PM
#699
Originally Posted by Mick100
This statment is looking rather dumb already
who in there right mind would want to lock in future oil prices at $75 / bbl
I'v watched on as two of my gold miners went bust because they sold forward future gold production at $400/oz. Problem is that costs keep going up and to top it off they didn't produce to the level expected so had to buy gold in the spot market at $650 to meet their forward sales
I know all about forward sales - they can be extremely risky, particuarly if there is a problem with production
Luckily NZO only have 100,000 bbls hedged
,
Mick
You sound a little upset about the prospect of management minimising risk and maximising value for shareholders. You should now be asking yourself why the NZO SP is what it is today and why institutional shareholders do not want a chunk of the NZO pie.
FYI, when hedging future cashflows you can hedge future income, expenses and capital expenditure.
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30-10-2007, 04:29 PM
#700
Originally Posted by Toddy
Mick
You sound a little upset about the prospect of management minimising risk and maximising value for shareholders. You should now be asking yourself why the NZO SP is what it is today and why institutional shareholders do not want a chunk of the NZO pie.
FYI, when hedging future cashflows you can hedge future income, expenses and capital expenditure.
Toddy, please enlighten us. I too would like to know why institutions are not buying into NZO.
Having got ourselves into a debt-induced economic crisis, the only permanent way out is to reduce the debt – either directly by abolishing large slabs of it, or indirectly by inflating it away.
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