OIL & GAS HEDGING 101

Transcription

1 COURSE OIL & GAS HEDGING 101 January 19-20, 2017 Royal Sonesta Houston Houston, TX EUCI is authorized by IACET to offer 1.0 CEUs for the course EUCI is authorized by CPE to offer 12.5 credits for this course.

2 OVERVIEW Since 2014, the energy industry has been coping with an ongoing collapse of crude oil prices: from highs of over $100 per barrel to the lows of just over $29 per barrel, as well as the ongoing stagnation of natural gas prices. Companies manage risks of all types, whether operational, credit, or price as part of their everyday survival. However, at no other time has price risk management been of such importance. One of the most important strategies in managing risk is hedging. Hedging can be constructed from many types of financial instruments and derivatives. Understanding hedging strategies is a requirement for bankers, investors, private equity and energy companies. Hedging is often complex, using financial derivatives such as futures, forwards, collars, swaps, options, etc. The course will examine the building blocks of a hedge program as well as the most common hedging strategies employed by the industry. A basic understanding of the building blocks and concepts of hedge programs A better understanding of the behavior of energy prices Strategies of how to employ hedging programs and in what circumstances Pros and cons of hedging strategies In-depth look at results of some hedge programs used by large public energy companies and their results The course will de-mystify hedging while evaluating its inherent risks. These potential challenges include hedge gains and losses, cash requirements to support a hedging program, and credit risk associated with hedging. Attendees will gain insights into the accounting difficulties of reporting hedging. LEARNING OUTCOMES Provide an overview of risk management Describe the behavior of energy prices Define important hedging vocabulary, including: contango, backwardation, mean reversion, and more Discuss the building blocks of risk management, including futures contracts, forwards, options, and swaps Review the mechanics of hedging, including hedge profiles, fixed price contracts, typical hedge tools, and hedge examples Explain where hedging takes place Assess broker risk Discuss credit considerations involved in using derivatives Provide a closer look at large cap and small cap energy producers in this current downturn, how they use derivatives, and what impact it has had Evaluate current midstream practices Describe the regulatory environment for derivatives WHO SHOULD ATTEND Oil and gas executives Risk management advisors and analysts Finance managers Accountants Asset managers Physical trading professionals Business analysts Business development professionals Auditors PAGE 2

3 AGENDA THURSDAY, JANUARY 19, :00 8:30 am Registration and Continental Breakfast 8:30 am 5:00 pm Course Timing 12:00 1:00 pm Group Luncheon Risk Management Overview What is hedging? When and why should companies hedge? What is speculation? What is the difference? Where does hedging stop and speculation begin? How does the CFTC and FASB define hedging? Behavior of Energy Prices Lower for longer or lower forever? You need to have a price view before deciding whether or not to hedge. What do traders know that you do not? Contango-definition and example Backwardation-definition and example Mean Reversion-what is it and why is it important Fundamental analysis: supply, demand, storage numbers forecasts Technical analysis: charts and patterns Volatility The Building Blocks of Risk Management Long position/profile Short position/profile Futures contracts - what are they and how do they differ Forwards Options Swaps Spreads Sweet/sour Brent/WTI o Crack spread o Calendar spreads Collars (2 way and 3 way) explanation and example Basis and Basis swaps Liquidity and why it is important and how is it determined Volume Open interest COTS report Greeks Options pricing using Black Scholes for the beginner PAGE 3

4 AGENDA THURSDAY, JANUARY 19, 2017 (CONTINUED) Mechanics of Hedging Who should hedge? You may not get to choose; it may be required What should be hedged? o Inventory o Fixed price contracts o Debt service Hedge profiles: o Long and short hedgers o How does it work? o How do you determine which fits your profile? Typical hedge tools: swaps, collars, futures and options o How do they work? o Pros and cons of the various strategies o How do you choose the best one? Hedge examples: o Putting all the above into practice o Long and short simple hedges using the various strategies FRIDAY, JANUARY 20, :00 8:30 am Continental Breakfast 8:30 am 12:30 pm Course Timing Markets (or Where Hedging Takes Place) OTC - it may be your bank Formal Exchanges - ICE vs CME Role of the clearing firm What is margining and how does it work? ETF s or electronically traded funds Credit Considerations Involved in Using Derivatives Broker risk they can and do go under OTC risk-swap partners in this stressed environment Bilateral contracts Formal exchanges and how they handle credit risk Current Practices A closer look at large cap and small cap energy producers in this current down turn and how they use derivatives and what impact it has had Can hedging really save your company? A closer look at midstream hedging practices Conclusions Short discussion of regulatory environment for derivatives Wrap up of concepts presented Q&A PAGE 4

5 INSTRUCTOR Deniese Palmer-Huggins Senior Energy Advisor, UT - Center for Energy Economics Deniese Palmer-Huggins began her career financing international and domestic energy transactions at Banque Paribas, Houston (now BNP Paribas). In 1983, she joined the finance department of Transworld Oil, an international and domestic energy trading company and was promoted to Treasurer in During her tenure at the company, she was part of the acquisition team when the company purchased the refining and other energy assets of ARCO in the eastern U.S. From 1988 to 1997, she held progressively more senior finance positions with various international trading companies financing commodities worldwide when she joined the New York Mercantile Exchange to head up the Houston office of this commodity exchange where she was responsible for marketing the exchange and its energy derivatives. In 2013, she joined the Center for Energy Economics at the University of Texas at Austin as a Senior Advisor on Energy focusing on the midstream in addition to other energy consulting projects and has recently co-authored a chapter in the recently published book, Managing Energy Price Risk 4th edition. PAGE 5

6 REQUIREMENTS FOR SUCCESSFUL COMPLETION Participants must sign in/out each day and be in attendance for the entirety of the course to be eligible for continuing education credit. INSTRUCTIONAL METHODS Case studies and PowerPoint presentations will be used in this program. PROCEEDINGS The proceedings of the course will be published, and one copy will be distributed to each registrant at the course. EVENT LOCATION A room block has been reserved at the Royal Sonesta Houston, 2222 West Loop S, Houston, TX for the nights of January 18-19, Room rates are $179, plus applicable tax. Call for reservations and mention the EUCI event to get the group rate. The cutoff date to receive the group rate is November 14, 2016 but as there are a limited number of rooms available at this rate, the room block may close sooner. Please make your reservations early. IACET CREDITS EUCI has been accredited as an Authorized Provider by the International Association for Continuing Education and Training (IACET). In obtaining this accreditation, EUCI has demonstrated that it complies with the AN-SI/ IACET Standard which is recognized internationally as a standard of good practice. As a result of their Au-thorized Provider status, EUCI is authorized to offer IACET CEUs for its programs that qualify under the AN-SI/IACET Standard. EUCI is authorized by IACET to offer 1.0 CEUs for the course. CPE CREDITS EUCI is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website: Upon successful completion of this event, program participants interested in receiving CPE credits will receive a certificate of completion. EUCI is authorized by CPE to offer 12.5 credits for the course. There is no prerequisite for this course. Program Level: Beginner, Delivery Method: Group-Live, Advanced Preparation: None REGISTER 3, SEND THE 4TH FREE Any organization wishing to send multiple attendees to these courses may send 1 FREE for every 3 delegates registered. Please note that all registrations must be made at the same time to qualify. PAGE 6

7 PLEASE REGISTER Please make checks payable to: PMA" EVENT LOCATION A room block has been reserved at the Royal Sonesta Houston, 2222 West Loop S, Houston, TX for the nights of January 18-19, Room rates are $179, plus applicable tax. Call for reservations and mention the EUCI event to get the group rate. The cutoff date to receive the group rate is November 14, 2016 but as there are a limited number of rooms available at this rate, the room block may close sooner. Please make your reservations early. OIL & GAS HEDGING 101 COURSE January 19-20, 2017 $1395, Early bird on or before December 30, 2016: $1195 How did you hear about this event? (direct , colleague, speaker(s), etc.) Print Name Job Title Company What name do you prefer on your name badge? Address City State/Province Zip/Postal Code Country Phone List any dietary or accessibility needs here CREDIT CARD INFORMATION Name on Card Account Number Billing Address Billing City Billing State Billing Zip Code/Postal Code Exp. Date OR Enclosed is a check for $ to cover registrations. Security Code (last 3 digits on the back of Visa and MC or 4 digits on front of AmEx) Substitutions & Cancellations Your registration may be transferred to a member of your organization up to 24 hours in advance of the event. Cancellations must be received on or before December 16, 2016 in order to be refunded and will be subject to a US $ processing fee per registrant. No refunds will be made after this date. Cancellations received after this date will create a credit of the tuition (less processing fee) good toward any other EUCI event. This credit will be good for six months from the cancellation date. In the event of non-attendance, all registration fees will be forfeited. In case of course cancellation, EUCI s liability is limited to refund of the event registration fee only. For more information regarding administrative policies, such as complaints and refunds, please contact our our offices offices at at (201) PAGE 7