Forward Sales Contracts...........So if you look at the 1st Quarter Press Release there is no disclosure about the forward sales agreements. If you look at the first quarter Financials Report there is no discussion about the Forward Sales Agreements. If you look at the First Quarter MD&A dated May 12, 2022 filed at www.sedar.com you will find this:
Hedges Prime use fixed price forward sales contracts to hedge commodity price risk in order to ensure stability in cash flows and to manage volatility in oil prices. Prime’s hedging policy is to hedge between 50% and 70% of its forecast cargoes for a rolling 12 months. The average cargo lifted is for 1 million barrels of oil. As at March 31, 2022, Prime has forward sold its next 5 cargos, out of 6-8 cargoes that are expected to be lifted during 2022, at an average Dated Brent price of $78.8/bbl. The actual price will include a quality adjustment which means the realized price will be different to the hedged prices. To date in 2022, Prime has lifted 5 cargoes with an average realized price of $68.8/bbl.
So can any of you figure out how there numbers are not "material" transactions for AOI and our 50% holdings of Prime. When you look at the AOI financial statements they talk about Credit Risk and Financial Risk, and Market Risk filed on SEDAR May 12, 2022. All in the notes. Market Risk is the Price of commodity of course. Credit Risk is the counterparty risk.
The disclosure and discussion about these "risks" in virtually NIL. It's like AOI and Prime are saying "Trust us". Total BS. Everyone knows no bank or lender would let you hedge more than 70% of forward sales as part of a lending agreement because there is always the market risk that production falls, or their is "force majour" from war, fire, etc. etc. so you can get really stuck and be forced to buy volumes at higher or lower than the "hedge" price on the market in order to meet your "delivery" commitment. BUT somehow KH and Prime are consistently selling forward 100% of their near term production volumes without having to disclose the counterpary risk or the market risk or the financial risk of these contracts in their financial reporting...........sounds like PwC as their auditor is not doing a very good job for shareholders to verify IF these forward sales agrements exist, at what volumes and what prices, and to whom the counter party is.
Most EVERY other oil company I know hedges thru WTI and NYMEX and then creates differential hedges if they care to to Brent or WCS or whatever. And they are "Financial" hedges that are disclosed in the financials contract by contract and a summary of volumes and prices also disclosed somewhere....