Service Type: Physical Commodity Risk Management
Project: Creation of Upstream Hedging Strategy
Context:
A client operating in a unique geography and desired higher returns. The entity sold the majority of their production at pooling points and their well-head with incremental hedging at significant markers such as Brent. Equity investors wanted to add a marketing unit to enhance margin netback values.
Approach & Results:
We conducted a fit-for-purpose review of the client’s physical commodity portfolio and identified opportunities for expansion of the business’ direct marketing and trading activity. New hedging strategies were developed, the most effective of which was including incremental pipeline transportation investments as compared to the investment required to start a new marketing and trading organization. Our work focused on organizational design, development of a basis-trading strategy, risk management system selection, and defining the working capital requirements for the business.
