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Last Look - Oil tumbles nearly $2 after China stimulus disappoints
Latest Insight
Last Look - Oil tumbles nearly $2 after China stimulus disappoints
Private Equity Firm Tackles Cash Flow Certainty Among Oil and Gas Producing Portfolio Companies
MARKETS: OIL AND GAS | COMMODITY: CRUDE OIL | CLIENT: PRIVATE EQUITY

 

Situation

Our customer, an oil-and-gas developer whose investment mandate included a percentage cash return, asked for insight into how it could: 

1. Make its returns more certain through financial hedge selection and sizing

2. Estimate the chance of any shortfall to their pro forma returns 

Private Equity Firm Tackles Cash Flow Certainty Among Oil and Gas Producing Portfolio Companies

 

 

 

 

Outcome

The approach of having two, mathematically based goals created several benefits. 

First, the hedging team could be confident that in the current price environment, they had hedged the right amount. 

Second, as prices changed, they had a methodology for adjusting. Prices lower? The process double-checked that the must-have goal was secure. Prices higher? The process tested new hedges to see if they could make aspirational goals more certain.  

 

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This case study is not indicative of future performance or success. Commodity interest trading involves risk and, therefore, is not appropriate for all persons; failure to manage commercial risk by engaging in some form of hedging also involves risk. Past performance is not necessarily indicative of future results. There is no guarantee that hedge program objectives will be achieved. Neither this trading advisor nor any of its trading principals offer a trading program to clients, nor do they propose guiding or directing a commodity interest account for any client based on any such trading program. Hedge advisory services are performed by the registered commodity trading advisor AEGIS-CTA, LLC, a wholly-owned subsidiary of AEGIS Hedging Solutions, LLC. This case study is not required to be and has not been, filed with the Commodity Futures Trading Commission ("CFTC"). The CFTC does not pass upon the adequacy or accuracy of this commodity trading advisor disclosure. Consequently, the CFTC has not reviewed or approved this case study.

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