Hedge or no hedge… – Commodity Research Group

March 15, 2019 by Jim Colburn Leave a Comment

During the 1990’s one of our active integrated oil customers decided to stop hedging/trading and concentrate on becoming the lowest cost oil producer… Here is a modern day, slightly different, version of the story:

Exxon doesn’t hedge price risk… Here is a recent story from SeekingAlpha:

”Exxon Mobil (XOM -0.2%) aims to cut the cost of pumping oil in the Permian Basin to just $15/bbl, thanks to its massive scale of planned drilling activity that it says will help generate $5B of cash flow from the region by 2023.

The scale means XOM can spread its costs over such a big operation that the Permian will become competitive with almost any place in the world, says Staale Gjervik, president of the company’s XTO Energy shale division.

And here is the Financial Times on Pemex, which makes a big splash in the markets when they buy puts for price protection:

Commodity Research Group (CRG), founded by veteran analyst Edward Meir, is an independent research consultancy specializing in base and precious metals, as well energy products. The Group provides research and general price analysis for these markets, along with advice to companies seeking to construct commodity hedging strategies.

Our associates bring decades of experience to the table, as they seek to help our clients understand the markets. CRG will distill the myriad of pricing variables mentioned above into coherent research that is to-the-point and tailored to a clients hedging or pricing needs. In addition, CRG is available for consulting assignments and speaking engagements. CRG does not manage money or trade for itself.

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