Air BP Managed price physical supply. Global expert, local partner.

Similar documents
Factor Leave Accruals. Accruing Vacation and Sick Leave

Introduction to Fuel Hedging. 23 rd April 2010

XML Publisher Balance Sheet Vision Operations (USA) Feb-02

Air Berlin PLC Berlin, 15 August 2012 Analysts and Investors conference call

Review of Registered Charites Compliance Rates with Annual Reporting Requirements 2016

Commodity and Interest Rate Hedging Overview

Executive Summary. July 17, 2015

Spheria Australian Smaller Companies Fund

The Financial Reporting Checklists Every Firm should be Doing

Business Cycle Index July 2010

FEDERAL RESERVE BANK OF MINNEAPOLIS BANKING AND POLICY STUDIES

Common stock prices 1. New York Stock Exchange indexes (Dec. 31,1965=50)2. Transportation. Utility 3. Finance

Development of Economy and Financial Markets of Kazakhstan

PHOENIX ENERGY MARKETING CONSULTANTS INC. HISTORICAL NATURAL GAS & CRUDE OIL PRICES UPDATED TO July, 2018

QUESTION 2. QUESTION 3 Which one of the following is most indicative of a flexible short-term financial policy?

The Oil Market Through the Lense of the Latest Oil Price Cycle: Issues and Proposals

Introduction to Futures & Options Markets for Livestock

Financial & Business Highlights For the Year Ended June 30, 2017

Performance Report October 2018

Voya Indexed Universal Life-Protector

Ground Rules. FTSE Single Commodity Index Series v1.1

Big Walnut Local School District

INTERNATIONAL INVESTING CAPTURE THE OPPORTUNITIES. REDUCE THE RISK.

FUEL PRICE RISK MANAGEMENT POLICY REPORT "FUEL HEDGE"

FUEL PRICE RISK MANAGEMENT POLICY REPORT "FUEL HEDGE"

ACTUARIAL SOCIETY OF HONG KONG CONTINUOUS PROFESSIONAL DEVELOPMENT ( CPD ) FREQUENTLY ASKED QUESTIONS

WESTWOOD LUTHERAN CHURCH Summary Financial Statement YEAR TO DATE - February 28, Over(Under) Budget WECC Fund Actual Budget

Cash & Liquidity The chart below highlights CTA s cash position at January 2018 compared to January 2017.

TERMS OF REFERENCE FOR THE INVESTMENT COMMITTEE

Option Strategies for a Long-Term Outlook

Cost Estimation of a Manufacturing Company

Recent oil market volatility

Isle Of Wight half year business confidence report

ACA Reporting E-File Errors, Penalties & Exchange Notices

Analyze the Market for a Seasonal Bias. It is recommended never to buck the seasonal nature of a market. What is a Seasonal Trend?

CITI Bank Bangkok branch. Set B Capital Item1 Capital Structure Table 2 Capital of Foreign Banks Branchs Unit : THB. Item June 30, 2009

PRESS RELEASE. Securities issued by Hungarian residents and breakdown by holding sectors. January 2019

Consumer Price Index (Base year 2014) Consumer Price Index

Division of Bond Finance Interest Rate Calculations. Revenue Estimating Conference Interest Rates Used for Appropriations, including PECO Bond Rates

Consumer Price Index (Base year 2014) Consumer Price Index

Interconnector (UK) Limited. Charging Statement related to the IUK Access Agreement and IUK Access Code Issue 10 Applicable from 01 June 2018

FDD FIRM STORAGE SERVICE NORTHERN NATURAL GAS COMPANY

1.2 The purpose of the Finance Committee is to assist the Board in fulfilling its oversight responsibilities related to:

Algo Trading System RTM

Interconnector (UK) Limited. Charging Statement related to the IUK Access Agreement and IUK Access Code Applicable from 1 October 2017

INTERIM RESULTS 2009

CPA Australia Plan Your Own Enterprise Competition

Commodity Hedging Overview November 19, 2008

OTHER DEPOSITS FINANCIAL INSTITUTIONS DEPOSIT BARKAT SAVING ACCOUNT

HUD NSP-1 Reporting Apr 2010 Grantee Report - New Mexico State Program

University of Wisconsin - Madison Retirement Association Fundamental Concepts of Investing. September 15, Jim Hamre Steve Hawk

Fiscal Year 2018 Project 1 Annual Budget

What s new in LDI Expanding the toolkit

PRESS RELEASE. Securities issued by Hungarian residents and breakdown by holding sectors. October 2018

U.S. Natural Gas Storage Charts

Top NYMEX Crude Oil Options Daily Market Update

HIPIOWA - IOWA COMPREHENSIVE HEALTH ASSOCIATION Unaudited Balance Sheet As of July 31

HIPIOWA - IOWA COMPREHENSIVE HEALTH ASSOCIATION Unaudited Balance Sheet As of January 31

TD Securities 2011 Calgary Unconventional Energy Conference July 7, Dawn Farrell Chief Operating Officer

Interconnector (UK) Limited. Charging Statement related to the IUK Access Agreement and IUK Access Code Applicable from 1 August 2017

Business & Financial Services December 2017

Contract Certainty Subscription Market Progress Update for FSA

Forecast Position. Detailed financial statements are included in the Appendix attached to this report.

Economic Activity Index ( GDB-EAI ) For the month of May 2013 G O V E R N M E N T D E V E L O P M E N T B A N K F O R P U E R T O R I C O

Leading Economic Indicator Nebraska

5. interest rate options: cap and floor

Interconnector (UK) Limited. Charging Methodology Statement related to the IUK Access Agreement and IUK Access Code Applicable from 1 February 2017

Figure 1: Change in LEI-N August 2018

Interconnector (UK) Limited. Charging Methodology Statement related to the IUK Access Agreement and IUK Access Code Applicable from 1 February 2016

EMPLOYER S MUNICIPAL INCOME TAX WITHHOLDING FORMS INSTRUCTIONS FOR FILING FORM LW-1

Retaining this Exemption request: Operator/Purchaser(s) should retain a certified/approved copy of this application. (K.S.A.

Key West Cruise Ship Data - Passenger Counts Number of Passenger Arrivals

Further information on mid-year tariff changes following the September 2010 Customer Seminars

Blackstone s 2Q 18 Supplemental Financial Data. July 19, 2018

BANK OF GUYANA. BANKING SYSTEM STATISTICAL ABSTRACT Website:

SELF-FUNDED PPO HEALTH PLAN RATE REQUIREMENTS RETIREES JANUARY 1, 2017 DECEMBER 31, 2017 COUNTY OF ORANGE JUNE 2016

Leading Economic Indicator Nebraska

SELF-FUNDED PPO HEALTH PLAN RATE REQUIREMENTS RETIREES JANUARY 1, 2018 DECEMBER 31, 2018 COUNTY OF ORANGE JUNE 2017

1. (35 points) Assume a farmer derives utility from Income in the following manner

Indexed Universal Life. Disclosure

Big Walnut Local School District

Cash & Liquidity The chart below highlights CTA s cash position at December 2017 compared to December 2016.

Historical Pricing PJM COMED, Around the Clock. Cal '15 Cal '16 Cal '17 Cal '18 Cal '19 Cal '20 Cal '21 Cal '22

Cash & Liquidity The chart below highlights CTA s cash position at March 2017 compared to March 2016.

ECON 337 Agricultural Marketing Spring Exam I. Answer each of the following questions by circling True or False (2 point each).

Home and Community Based Services (HCBS) Waiver Monthly Surplus-Deficit Report for Waiver Program Expenditures. June 20, 2016

Japan Securities Finance Co.,Ltd

Pension Switch Report. Drawdown Provider Comparison

Regional overview Gisborne

Russell 2000 Index Options

Interconnector (UK) Limited. Charging Statement related to the IUK Access Agreement and IUK Access Code Issue 11 Applicable from 01 September 2018

Cash & Liquidity The chart below highlights CTA s cash position at September 2017 compared to September 2016.

BANK OF GUYANA. BANKING SYSTEM STATISTICAL ABSTRACT Website:

Mitchell Electric Charitable Fund PO Box 409 Camilla, GA (229) or FAX:

Commodity Hedging Overview March 9, 2009

Retiready Solution 3. Fund objective. A risk level 3 fund. For customers

Leading Economic Indicator Nebraska

Air Berlin PLC Berlin, 15 November 2012 Analysts and Investors conference call

Schindler Capital Management, LLC / Dairy Advantage Program. Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

DBS Asia Treasures Membership

Transcription:

Air BP Managed price physical supply Global expert, local partner.

Making progress against price headwinds

Oil markets can be volatile. Even minor changes in world events can cause large and sudden fluctuations in the price and availability of oil and oil products. Increasingly energy resources are the focus of international competition, as the balance in supply and demand shifts. 180 160 140 120 Historical data source: Globalview Platts Jet CIF NWE US$/bbl 100 80 60 40 Brent Crude Oil 20 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 We understand the price of Jet fuel is at the core of your business. Jet fuel price volatility can have a fundamental impact on your profitability, your cash flows, your competitiveness and your overall ability to do business. Managing your exposure to the price of Jet fuel can be a daunting challenge. It requires an in-depth knowledge of the complexities of the physical and financial markets, an understanding of the available tools in addition to access to the right, real time, information. BP has over 100 years experience in the energy markets, and for the last 20 years has been helping customers apply this knowledge when managing their fuel price risk. With our combination of financial trading and physical market expertise we can help you understand the types of risk management tools available, and to help put in place the most suitable risk management programme for your business. What can be achieved with a Risk Management programme Stabilise cash flows Provide protection against extreme price changes Help determine and achieve budget targets Help to secure the company s competitiveness Provide profit margin protection Reduce the risk of financial distress

What type of risk management product is right for me? What risk management tools can be easily understood and monitored by your organisation? What type of risk are you actually looking to manage? Are you willing to give away some potential gains as well as protecting against potential losses? How active do you want to be in managing a risk management programme? What exactly is the nature of your fuel price exposure? Considering all of these questions is an important part of defining your risk management programme. We can help you understand the importance and consequences of these questions and assist you with making the best decision for your company. As one of the world s leading oil trading and marketing companies, BP has the scale and the expertise to provide 24hr market coverage, and offer some of the most competitive and comprehensive risk management products available. Being active in both the physical and financial markets enables BP to offer risk management solutions as part of your physical supply (managed price physical) or as a standalone financial product.

Managed price physical supply Air BP s commitment to our customers is a simple one: to deliver quality products consistently with outstanding levels of service throughout our global network of over 600 airport locations. With a managed price physical supply agreement we are able to combine this quality of supply with greater control for you over the price you pay. A managed price physical can be as simple as purchasing your physical fuel at a fixed price from as little as one month, or for more than a year. Other options include capping the maximum price that you will pay for your Jet fuel, while being able to benefit from lower prices if the published market rate were to move lower. Managed price physicals can remove or reduce the uncertainty of your future costs but in a way that is simple, with a single invoice from one supplier. In most circumstances you do not need complicated hedge accounting. It is important to note that for any managed price physical supply you are fixing or capping the commodity (Platts, Argus etc.) element of your Jet fuel costs. The final price you pay would be this commodity element plus the relevant Air BP differential.

Fixed price physical supply With a fixed price physical supply it doesn t matter what happens to the underlying published price. The price you pay for your Jet fuel will remain fixed. Jet Price ($mt) 1050 1000 950 900 Platts Market Price Commodity Price Customer Pays Prices are for example only Fixed Price 850 800 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Managed price physical supply Capped price physical supply With a capped price physical supply, whenever the published price moves above the Cap level you will only pay the Capped price for your Jet fuel. However, should the published price fall below the Cap level, you will continue to pay the published market price. Volumes supplied under a Capped price supply are subject to an increased Air BP differential. Jet Price ($mt) 1050 1000 950 900 850 800 Prices are for example only Platts Market Price Fixed Price Commodity Price Customer Pays Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Collared price physical supply With a collared price physical supply, whenever the published price moves above the Cap level you will only pay this Cap price for your Jet fuel. However, should the published price fall below the Cap level, you will continue to pay the published market price down to the Floor level. If the published price falls below the Floor level you will continue to pay the Floor level. Jet Price ($mt) 1050 1000 950 900 850 Platts Market Price Commodity Price Customer Pays Cap Price Prices are for example only Floor Price Volumes supplied under a Collared price supply may be subject to an increased Air BP differential. 800 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Discounted fixed price supply A discounted fixed price supply allows you to fix the price of a Jet fuel supply contract at a level that is below the standard fixed price offer. Typically this would be for a term of six or twelve months. Part way through the initial fixed price term, on a predetermined decision date, BP has the right to choose to either extend the fixed price term for a pre-agreed period, or to revert to a regular published floating price supply but with a discount applied for a pre-agreed period. Jet Price ($mt) 1. BP extends discounted fixed price 1050 Platts Market Price 1000 950 900 Discounted Fixed Price 850 Commodity Price Customer Pays 800 750 700 Prices are for example only Standard Fixed Price Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2. BP switches to discounted floating price 1050 Prices are for example only Platts Market Price 1000 Jet Price ($mt) 950 900 850 800 Standard Fixed Price Discounted Floating Price Discounted Fixed Price Commodity Price Customer Pays BP Decision Date Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Frequently asked questions How would I enter into a managed price physical? Contact your Air BP account manager to discuss potential locations, volumes and prices. This might be as part of your normal tender process or could be mid term if you have an interest in converting some of your existing floating rate supply to a managed price. Your Air BP account manager will be able to give you details of exactly what we are able to offer for the locations that you are interested in. Do I have to fix the price at the same time that I enter into a physical supply contract with Air BP? No. You can enter into a standard floating price supply agreement with Air BP as you normally would, agreeing locations, volumes and differentials as normal. At any point in the lifetime of that supply contract you can contact your Air BP account manager to discuss converting all or some of your volumes to a managed price. Can I have a managed price physical that covers more than one location? Yes. A managed price physical can cover multiple locations as long as the underlying reference price index is the same at each one and the locations are all supplied by the same Air BP supply associate company. Although we would require you to specify a volume for each location covered by the managed price contract we would consider the total volume when calculating any over or under lift charges. This can help reduce the risk of operational disruption causing a significant over or under lift as any unexpected variation at one location can be balanced by the volumes at the others covered by the same contract. Can I manage the price of 100% of my volume at one location? You can, although this could increase your chance of under lifting. Normally customers will choose to manage less than 100% of their forecast volumes at any location to allow for any unexpected drop in physical volumes (operational disruption for example). It is easier with into tank deliveries where Air BP can transfer periodically the exact quantity of fuel. If I enter into a managed price physical for less than 100% of my volume at a location, how is the remaining volume priced? During each delivery period (normally a calendar month, but could be a week or half-month) the first volumes lifted will be priced at the managed price. Once the agreed managed price volume has been lifted any additional volumes will be priced at your normal floating price rate. This would normally coincide with the delivery period (prior month for monthly period, prior week for weekly period, etc.). Fuel delivery receipts will be processed in the order in which they reach Air BP. This may not be in exact chronological order.

What happens if I lift more than my agreed managed price physical volumes? If you lift more than your agreed managed price volumes but less than your total contracted volume at that location the additional volume will be priced at the floating rate specified in your supply agreement. This would normally be a prior week, prior half-month or prior month, Platts related basis. What happens if I lift less than my agreed managed price physical volume? When you enter into a managed price physical supply contract you do this for an agreed volume each delivery period. If you lift less than this agreed volume, Air BP may charge a penalty fee to recover any losses associated with the underlifted volume. What contract would I have to sign to enter into a managed price physical? The standard Air BP supply contract covers fixed, capped and collared price physical supply. At the time you fix the price for a managed price physical a new contract confirmation will be issued that confirms the details of the managed price deal. Would a managed price physical use my current credit line? Yes, a managed price physical would use your existing Air BP credit line. Some types of managed price supply are significantly more credit intensive than a normal floating rate supply. For this reason, any request to convert supply to a managed price will be referred to the Air BP credit manager. The credit manager s approval would be required before entering into any managed price physical and may require the provision of additional security by the customer, a bank guarantee for example. How would I be invoiced for my managed price physical volume? Your invoicing schedule will not be affected by the managed price contract with the exception of one reconciliation invoice each delivery period to ensure that the fixed, capped or collared volume is used in full. This is due to the fact that a delivery receipt cannot be split. This reconciliation corrects the delivery receipt where the volume changes from the fixed, capped or collared volume to the floating volume. Does BP offer standalone financial hedging? Yes. Please ask your Air BP account manager for the contact details for BP s Structured Products team.

For more information please contact your Air BP account manager or e-mail Airbp2@uk.bp.com Air BP Limited, Building D, Chertsey Road, Sunbury on Thames, Middlesex, TW16 7LN, UK Tel: +44 (0) 1442 223344 Fax: +44 (0) 1442 225951 E-mail: contactairbp@bp.com www.airbp.com BP and the BP helios are trademarks of BP plc used under licence.