RE:Egina premium vs brentLoneGaurdian19: Your getting close.......to the truth. These are not financial hedges or cash hedges.............Just read the disclosures. These are forward sales contracts with 3rd party traders/refiners/marketers.
Engina is worth a premium to Brent. It has always been my feeling that the Forward Sales Prices disclosed by AOI in their financial reports under these "contracts" for "cargoes" were not at competitive bid prices. Prime owns the oil, and does the deals, but we own 50/50 with Prime and have half the BOD there, so at a minimum KH and the braintrust at AOI look like they are going along or participating in this Forward Sales Contracts 100%. Never heard a word that anyone at Africa Oil did not agree with the partner on this.
So, where am I going with this?? The envelope has always looked a little LIGHT! Like it was not really a competitive bid situation at all on these "Contracts". So all you really have to ask yourself on these contracts is:
1) Who benefits from a lack of competitive biddding on these Forward Sales?
2) Why is the disclosure by Africa Oil so lacking about the specific terms of these contracts as they have rolled forward over the past few year if they are material items on contracts, which they are. No specifc disclosure about WHO they counterparties are, WHAT is the price for each contract, or the specific volumes involved.
3) Why does it appear that Prime/ Africa Oil hedges 100% of their near term volumes at these lousy prices and hedges almost NO volumes at 6 months to 2 years out?
So, IF you were going to cheat your public shareholders out of some of the $$$ on the sales of the oil in W. Africa for offshore oil loaded to a FPSO, where a person I know has reconciled the volumes with the Nigerian govt, and the royalties the same has collected, how would you do it?
Remember, your not the operator, and neither is your JV partner.