RE: AGM questions Why did Mart not hedge future oil sales when the price was over $120+ in Q1,2012 ??? Does it not make sense to try to lock in 1/3 of your production when the price was at historical highs? Did they ever consider a hedging program ?
First off, oil wasn't at "historical highs" in Q1. That happened in Q2 2008.
Secondly, you'd be insane to hedge in a place where you are subject to sabotage and pipeline outages - imagine the cost if they had hedged in Q1 and then had a long pipeline disruption like they did late 2010? It would be a crushing loss (and I'm sure you'd be one of the first to ask why management was so stupid as to hedge).
Thirdly, because of the above, very few counterparties are willing to accept the risk - perhaps a major could find a counterparty to hedge with as the counterparty wouldn't be worried they'd be unable to collect in case of a problem. But if MMT had a long outage and a sizeable hedge in place that they couldn't deliver into, not many would want to deal with the potential for nonperformance.