Risk Management Solutions for Oil Refineries

Similar documents
Credit Suisse Financial Services Conference

Finaltis Risk Management June 2012

Implementing a cross asset class CVA and xva Framework

RMB EXCHANGE TRADED NOTES

Managing Oil Price Risks Against the Current Volatile Market

BBVA COMPASS BANCSHARES, INC. MARKET RISK DISCLOSURES

Contribution from the World Bank to the G20 Commodity Markets Sub Working Group. Market-Based Approaches to Managing Commodity Price Risk.

analyst book for the six months ended 31 December 2012 better together... we deliver

Atlas PRIVATE WEALTH MANAGEMENT

Sasol Limited Analyst book for the half-year ended 31 December 2011

BP Capital TwinLine Energy Fund Class A Ticker: BPEAX Class I Ticker: BPEIX. Summary Prospectus March 30, 2018

Suncor Energy UNDERPERFORM ZACKS CONSENSUS ESTIMATES (SU-NYSE)

Morgan Stanley Pathway International Fixed Income Fund (TIFUX) Objective: Seeks to maximize current income consistent with capital preservation

Chapter 20. Corporate Risk Management. Copyright 2011 Pearson Prentice Hall. All rights reserved.

J.P. Morgan Bank Luxembourg S.A. r.l. Investment Manager JPMorgan Asset Management (UK) Depositary. Trustee

Items Disclosed on the Internet. concerning Convocation Notice of. the 16th Annual General Meeting of Shareholders

ARM. A commodity risk management system.

HSBC Institutional Trust Services (Asia) Limited Ongoing charges over a year*: 0.98% Estimated annual tracking Estimated to be -1.

BBVA COMPASS BANCSHARES, INC. MARKET RISK DISCLOSURES

IFRS 13 The Impact on Derivative Valuation, Hedge Accounting and Financial Reporting. 24 September 2013 Dan Gentzel & Peter Ahlin

CEFC INTERNATIONAL LIMITED (SGX: Y35) CORPORATE PRESENTATION. October 2015

Joint IEA-IEF-OPEC Report on the Workshop. Interactions between Physical and Financial Energy Markets. 21 March 2013, Vienna

GOLDMAN SACHS BANK (EUROPE) PLC

Operational Briefing Presentation to Investors and Analysts. 17 February 2015

Condensed Consolidated Interim Financial Statements as of September 30, 2017

4 YEAR COMMODITY BASKET LINKED DEPOSIT NOTE DUE MARCH 29, 2010

Module 18 Securities and Derivatives Trading [Products and Analysis]

Hedging Sales Revenue by Commodity Production

Prospects for a Closer Brent/WTI Relationship in Europe Platts proposes adding U.S. crude to Brent assessment.

CRUDE OIL TRADING & PRICE RISK MANAGEMENT

INVESTMENT PRINCIPLES INFORMATION SHEET FOR INVESTORS HOW TO DIVERSIFY

PRODUCT HIGHLIGHTS SHEET

Interim Financial Publication for Fiscal Year Ended March 31, 2014

Global commodity outlook by the World Bank and its highlights

Commodity Derivatives

Aberdeen Standard Select Portfolio

PRODUCT HIGHLIGHTS SHEET

Disclosures: Raymond James & Associates, Inc., member New York Stock Exchange, makes a market in [this security].

wherever life takes you US cross-border investment management & financial planning

HOW TO INVEST LIKE A HEDGE FUND BILLIONAIRE 1

Best Practice Guide. Risk Management Framework and Governance. for. Energy Trading

Firm Brochure Form ADV Part 2A

Flash Note Currencies: EUR/USD

Canadian Natural Resources Limited UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Financial Hedging by Local Gas Utilities NASUCA Annual Meeting Palm Springs, California November 14, 2016

Canadian Natural Resources Limited UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Oil Market Fundamentals Haven t Been This Strong in Years

Analytical Tools for Debt Management Strategies: Cost at Risk Methodology

Ultra Petroleum Corp.

PRODUCT HIGHLIGHTS SHEET

Permex Petroleum Limited Partnership

GUIDELINES FOR THE INTERNAL CAPITAL ADEQUACY ASSESSMENT PROCESS FOR LICENSEES

Aberdeen Standard Investments ETFs Aberdeen Standard Bloomberg Energy Commodity Longer Dated Strategy K-1 Free ETF (NYSE Arca: BEF) (the Fund )

Precious Metals Make a Portfolio Shine

In this blog we focus on what lessons we can learn about the operation of UK debt management from this dataset.

10 TH ANNUAL OIL TRADER ACADEMY SUMMER SCHOOL

analyst book sasol limited forward-looking statements for the year ended 30 June 2011

Outlook Offshore Market Tianjin Offshore Forum Tianjin, PRC May th 2015

Mizuho Financial Group, Inc.

Fund Management Diary

PRODUCT KEY FACTS Samsung S&P GSCI Crude Oil ER Futures ETF A sub-fund established under the Samsung ETFs Trust

UBS AG, Mumbai Branch (Scheduled Commercial Bank) (Incorporated in Switzerland with limited liability)

Chapter 17: General Provisions Regarding Large and Excess Exposures...

AIIB Directive on Market Risk Management March 27, 2018

JPMORGAN FUNDS - EMERGING MARKETS LOCAL CURRENCY DEBT FUND Product Type Investment Company Launch Date 24 January 2008 Management

Can LOOP Ever Be a Gulf Coast Cushing? Part 2 Searching for a sour crude benchmark.

Kingdom of Saudi Arabia Capital Market Authority. Investment

Agenda. Learning Objectives. Corporate Risk Management. Chapter 20. Learning Objectives Principles Used in This Chapter

analyst book sasol limited forward-looking statements for the year ended 30 June 2010

Pairs trading: opportunities in oil. 28th January 2009 Anthony Grech Research Analyst IG Index

LyondellBasell Reports Second Quarter 2017 Earnings

FRAMEWORK FOR SUPERVISORY INFORMATION

Center Coast MLP Focus Fund Class A Shares (CCCAX) Class C Shares (CCCCX) Institutional Class Shares (CCCNX)

Global Commodities. Freight Iron Ore Fuel Oil Wood Pellets

Virginia Investment Pool Webinar: Introducing the VIP Stable Value Liquidity Pool & MYACCESS

Electricity trading and risk management in liberalised market

REYL (Lux) GLOBAL FUNDS Luxembourg SICAV with multiple sub-funds

Pillar III Disclosures. 31 December 2010

How multi-technology PPA structures could help companies reduce risk

Solvency Assessment and Management: Stress Testing Task Group Discussion Document 96 (v 3) General Stress Testing Guidance for Insurance Companies

Mizuho Bank, Ltd. Bangkok Branch As of September 2015

Husky Energy Inc. Consolidated Financial Statements. For the Year Ended December 31, 2010

Credit risk, arising from losses due to obligor, counterparty or issuer failing to perform its contractual obligations to the Group;

FLASH NOTE CURRENCIES: USD/JPY A DIFFICULT BALANCE SUMMARY. PICTET WEALTH MANAGEMENT ASSET ALLOCATION & MACRO RESEARCH 17 October 2018.

PRODUCT DISCLOSURE STATEMENT Contracts for Difference issued by Plus500AU Pty Ltd (NZ clients only) 15 March 2018

RELIANCE GLOBAL ENERGY SERVICES (SINGAPORE) PTE LTD 1. Reliance Global Energy Services (Singapore) Pte Ltd

FINANCIAL RESULTS FOR THE SIX MONTHS ENDED SEPTEMBER 2018

OTC Derivatives under Central Clearing: Risk Measures for Liquidity Constraints

PRODUCT HIGHLIGHTS SHEET

Center Coast Brings Significant MLP Experience to Brookfield s Leading Real Assets Business

Risky Business: Are You Ready for the Next Market Move? Incur less pain, more gain with a managedrisk approach to energy sector hedging

Morgan Stanley Pathway Alternative Strategies Fund (TALTX)

Emerging Challenges for Commodity Risk Managers from an Industrial Consumer's Standpoint

Designing Scenarios for Macro Stress Testing (Financial System Report, April 2016)

NOTICE. IATA Industry Accounting Working Group Guidance IFRS 9, Financial Instruments

U.S. Life Insurance. Getting to 2020: Strategies for Profitable Growth

Active Asset Allocation Fund

CHARACTERISTICS OF FINANCIAL INSTRUMENTS AND A DESCRIPTION OF

The Ultimate Guide to Choosing, Owning and Selling Master Limited Partnerships

Notes to the Consolidated Financial Statements

Transcription:

Risk Management Solutions for Oil Refineries CompuHedge Ltd. provides various strategic Risk Management solutions for corporations in the areas of currency, interest rates, commodities and energy market risks. CompuHedge experts in Risk Management Software provide an exceptional opportunity for companies looking for a complete solution for their hedging needs. Accounting and regulatory consultancy targeted at the senior executive level, and its computerized integration by the operational level. Software is continually updated to include new accounting methods and regulations. Customized computerized tools to quantitatively assess the performance of the Chief Risk Officer (CRO) This document focuses on the challenges that Energy Sector corporations face. In particular, they have to deal with extremely complex energy risk scenarios. CompuHedge provides a solution that allows for the modeling of these scenarios and thus allowing Senior Management to define and control policy objectives. The Challenges Companies that trade in crude oil (or its derivatives) or even merely consume petroleum products are exposed to market risks during the time the oil is being held in storage. These market risks include both the physical market and the futures market. Refineries are doubly vulnerable; they are exposed both to fluctuations in the price of Crude and to fluctuations in the price of its derivatives, resulting in uncertainty in the "refining margin", the core business of the oil refineries. When companies protect themselves by doing hedging activities, the difficulty in performing Exposure analysis is even more challenging. The challenges in Refineries are further compounded by the fact that the hedging itself creates new synthetic exposures, which also need to be dealt with. The intricacies of the hedging processes, coupled with the unavailability of appropriate tools, means that exposure analysis involves complex calculations. Examples include: 1. Partial hedging of a certain component creates new marginal exposures. 2. Involvement of conversion coefficients. 3. Changing portfolio. 4. Time differences. A company lacking the ability to identify exposure and treat it in real time might choose to adopt a "head-in-the-sand" approach. However even if they do try and conscientiously identify their exposure, a lack of the appropriate tools (that cover all the risks) will render them continuously and negatively surprised. Page 1

In contrast with other types of exposure in the financial markets (e.g. Currencies, Interest Rates, and Metals) which do not necessarily require individual adjustment for each company the need for customization for companies in the Energy sector is crucial. The main strategic goals for companies in the Energy sector are as follows: 1. Identification of Risk, including the ability to measure it by running different Risk Scenarios for different levels of Hedging which will help the company determine its Hedging and Trading policies. 2. Formulation of a measurable policy, including defining maximum acceptable risk. 3. Modeling and transaction-monitoring; these are both pre-requisites for Hedge Accounting. 4. Ability to manage and control all of the above from a central (online) interface. Identification and estimation of exposure is particularly difficult in the Oil and Petro-chemical industry. Even if hedging is not performed, the risks are varied and include: 1. The differences in timing between buying and selling. 2. Exposure to a number of diversified products (and not just to the price of Crude) 3. Impact on the company's balance sheet in the event of a decrease in the value of the company stockpile. 4. Impact on the company's quarterly results and on the company's value, due to changes in the Refinery Margins. If hedging is performed, then the company faces another set of risks in addition to the general market risks, including: 1. The difference between the future oil contracts to the actual crude oil price. 2. Risk of fluctuation of the time curve for the forward contracts. 3. Risk which stems directly from the difference between products traded in the physical market and between future contracts used for Hedging. 4. Risk which stems directly from the physical location (e.g. West Texas, North Sea, East Asia, Mediterranean sea etc.) 5. Risk which stems from changes in the Exchange rate (if the local currency is not in USD) 6. Correlations between the various products and the raw materials. It is very difficult to build an overall picture of the Risk involved, due to the many components (as described above). Page 2

The CompuHedge solution CompuHedge offer a software solution, tailored to your specific needs. (See the next page for screenshots of the solution that we implemented with an existing client.) The solution we offer includes: For the management: 1. Exposure and combined exposure and hedging instrument scenarios for extreme and VaR situations with different hedging strategies to present to the management in order to adopt hedging policy. 2. This unit is tailored (via advisory process) to the specific need of each refinery. 3. Policy and Compliance units tailored to each refinery. 4. Advisory services re regulation and hedge accounting policy. For operational use Front, Middle and Back-office platform: 1. A web interface to enter future trades 2. Back office and documentation. 3. Interface to Platts (on Reuters) future prices 4. Front and back office P&L reports. 5. Scenario unit to test possible trades and existing portfolio in line with company policy. 6. Hedge accounting process, documentation and auditor report tailored to the special needs of refineries. Page 3

The CompuHedge solution as applied to Refineries Some screenshots from a solution that was developed for one of our clients. Page 4

For additional information, please contact: Hezi Dimant CEO and Strategy Advisor, CompuHedge hezi@compuhedge.com 972-8-9578887 972-52-4656590 www.compuhedge.com Page 5