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Thank God it's Friday

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#151 Jimbo


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Posted 31 August 2009 - 05:08 AM


The big difference between current and future gas prices is probably also a consequence of the credit crunch - too much drilling meets reduced consumption.

What needs to happen is the hedgies need to come in and make short term loans to the producers so they can meet their interest bills now while they shut in production.

In return the hedgies get paid back in gas in one years time at $3 a MCF - which they can sell now on the futures market for $6 a MCF - lock in the profit now.

By relieving the producers of the financial risk and pain of shutting in production now the hedgies can gain the certainty of a big quick profit of 100%
(or lets say 50% as in reality the profits will have to be split with the producer to make it worth while to them).

Both the short term lender/speculator and the gas producer win big.

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