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Gold/Mining/Energy : Strictly: Drilling and oil-field services
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To: SliderOnTheBlack who wrote (55471)11/26/1999 6:20:00 PM
From: Gameboy  Read Replies (1) of 95453
 
Slider, I'm guessing much of the hedging we're encountering is due to requirements by creditors who wanted to make sure that they got their money back. Hedging serves to keep the producer's pumps running and gives the producer a "guaranteed" income.

You can guess what happens when the price of oil climbs to $25.00/barrel. The first chance he gets, the producer will want to get the "credit" monkey off his back as much as possible by renegotiating his credit facilities (witness OEI - earns $28.8 million third quarter and turns around and shells out $24 million for their new credit facility - they're not doing it for the fun of it they're doing it for one simple reason, the payoff will be greater than $24 million).

Of one thing I'm certain: if buyers are willing to pay $25/barrel for oil, producers like OEI will find a way to accommodate them. OEI didn't get to be a billion dollar company sitting on its hands.
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