RE:Lash look at it this way?soundandfury wrote: You sell your house that you lived in for 40 years for $ 800,000.00.........your a happy camper right?.........but then you hear that that same house was sold a week later for $1.2 million..........this is basically what cpg did with its hedges.......imo........and you recently put new shingles on the roof to
that's not a good analogy at all. A better analogy is it costs you 20 bucks to make a pair of shoes and full retail price is 50 bucks. The shoes go on sale for 40 dollars and are sold. The transaction doesn't include a sale for 50 bucks with a 10 dollar offset for an unrealized gain. It simply includes a 40 sale against a cost of goods sold of 20. 20 bucks profit
in the oil industry realized prices are typically unstable so companies hedge to guarantee cash flow. They also hedge in some circumstances because lenders demand it to ensure the company can make its loan payments. Cdn oil and gas companies are on the verge of getting out of debt and we should see less hedging rolling forward. But cpg didn't "lose" money. They didn't make as much as they could had they realized the wti price on a hedged barrel. They lose "real" money when the netback is negative