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Bullboard - Stock Discussion Forum Baytex Energy Corp T.BTE

Alternate Symbol(s):  BTE

Baytex Energy Corp. is a Canada-based energy company. The Company is engaged in the acquisition, development and production of crude oil and natural gas in the Western Canadian Sedimentary Basin and in the Eagle Ford in the United States. Its crude oil and natural gas operations are organized into three main operating areas: Light Oil USA (Eagle Ford), Light Oil Canada (Pembina Duvernay... see more

TSX:BTE - Post Discussion

Baytex Energy Corp > Hedging explained
View:
Post by BayStreetWolfTO on Jun 15, 2021 8:42am

Hedging explained

True cost and opportunity cost certainly get confused.

You don't actually "lose money" on a hedge. That's like saying if my grandson takes a 5 year fixed mortgage rate to hedge "protect " against higher interest rates he is "losing" money at 2.10 versus going with a 5 year variable at 1.59 which can rise.

To say he is losing money on a 5-year fixed term is not how most people think.

Last I checked a big majority of people are conservative and go with fixed rates for certainty.

This is what BTE management is doing. Which is completely a prudent financial decision with the debt. As the debt lessens the hedging can reduce. To suggest they shouldn't hedge is completely irresponsible and would only be suggested by those who don't understand fudicuary duty. Hedgingrefers to buying an investment designed to reduce the risk of losses from another investment. Investors will often buy an opposite investment to do this, such as by using a put option tohedgeagainst losses in a stock position, since a loss in the stock will be somewhat offset by a gain in the option
Comment by Unlucky13 on Jun 15, 2021 8:47am
They went for a single and should have gone for a home run.  Oil prices were turning and the banks forced them into such hedging to protect their loans, management was protesting their contracts with zero regard for shareholders.  We needed a home run.  Not hedging based on survival.  2022 hedges are terrible, we lose $130 million at current oil prices.  That sounds ...more  
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