Energy Hedging & Risk Management Case Studies

Current Articles | RSS Feed RSS Feed

Natural Gas Producer is Well Hedged, Refocused on Core Business

Client

A privately held, natural gas producer.

The Challenge

For over a decade, our Client had been hedging their natural gas production with a leading natural gas marketing company and, historically, was very satisfied with the relationship as well as the hedging instruments and prices offered by the marketing company.  However, when faced with a challenging economic and lending environment, the marketing company was forced to reduce our Client’s credit line as the marketing company’s own credit lines had been drastically reduced by their lenders.  Making the matter worse, our Client’s existing hedge positions were set to expire in the coming months.  The economic environment had led many banks and trading companies to cease accepting new hedging customers and our Client had no prospects for an alternative hedge provider(s).

The Solution

Within days of the first conversation with our Client, we assessed their hedging goals and objectives, quantified their hedging requirements and facilitated introductions to over a dozen potential counterparties, none of which were previously known to our Client.  Within 60 days of being contacted by our Client, we were able to assist them in forging a relationship and line of credit with a well capitalized counterparty that also happens to offer unparalled customer service.  The new relationship and line of credit have led to the establishment of a revamped hedging program for our Client.

The Results

Working with Mercatus Energy Advisors and the new counterparty, our Client once again has a solid natural gas hedging program in place.  Knowing that their revenues and cash flow are once again predictable, our Client has been able to return their focus to their core business of drilling for and producing natural gas.

Furthermore, since engaging Mercatus Energy Advisors, our Client’s hedging program is significantly outperforming their internal benchmarks, and the company is well positioned to produce even stronger results in the future.