Interactive
Understanding E&P Hedging Techniques and How to Model Them
Wall Street Prep
Updated Feb 26, 2019Commodity prices are volatile. For companies in the business of producing or selling commodities, revenue and cash flow forecasts rely heavily on the price at which they can sell their commodities in the future. So heavily, in fact, that firms aggressively use hedging strategies to protect against changes in commodity prices. In this course designed for Oil and Gas investment banking, private equity, and research professionals, we'll demystify how oil and gas producers use hedges and how to adjust financial models to correctly reflect them. We will use an exploration & production company as a case study in order to: Illustrate the most common hedging structures, including "three-way collars" and "basis swaps"; Calculate the payoff of hedging structures; Demonstrate how to integrate hedging instruments into an operating model.
