RE:Hedging lossesI agree JD, people get confused with hedging loss
I'm not sure people understand the fact that even with BTE hedging at these prices annualized free cash flow is over $1 billion dollars.
I think sometimes people think the banks just give you money with no conditions. Banks try to protect their investment...if they want hedges to guarantee they get paid that's the cost of doing business you have no choice.
Soon all that B.S. goes away for Cdn O&G companies....
It's like paying off your mortgage...bye bye bank...freedom.
JohnnyDoe wrote: I've read a few posts lately about hedging losses. It's important to understand that hedging losses do not mean that a company is actually losing money. It means they have not realized their revenue potential.
let's take a pair of shoes that you manufacture at a cost of 50 bucks. The MSRP on the shoes is 100 bucks. If the shoes go in sale for 80 bucks you made 30 bucks. The shoe manufacturer doesn't record a 100 dollar sale plus a 20 loss on goods sold. Oil and gas companies hedge because of the extreme volatility in commodity pricing and often times because the bankers (aka gangsters) require them to hedge in order to ensure the banks are protected from loan losses. We're making a ton of money right. We could obviously be making more. Hopefully by next year we are completely debt free and the potential to have to hedge due to banks is eliminated.