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03 Dec 2015
A holistic approach can rein within the overall risk-reward proposition for investors, employees and management.

Almost all commodity-price hedging by small, and midsized exploration and production companies is strategically ineffective. Equity investors typically express ambivalence about hedging policy, and management teams often express frustration with both the process and results.

Secured-debt investors include the only participants that seem genuinely enthusiastic about hedging; however, because they often are commercial banks which might be bundling hedging services with loans, it's not obvious whether their enthusiasm is driven by improved risk management or by additional fee capture.

It is time for the industry to abandon...