Feel like the GOM position is a good hedge against Vicki.

Sims said:

---

nu awlins ag said:

---

From the companies I just spoke with, all are projecting flat in 2024. The increases will come again from, efficiencies.

---

We're looking at a very large, unexpected RFQ from one of the names on the FT image on the previous page for 1H 2024. This is a long time customer so we're used to their purchasing habits. This doesn't scream flat 2024 to me. Anecdotal obviously but we're really excited about it.

---

Thought this was worth following up on - The RFQ was withdrawn. We spoke with the other vendor we know that received the same and they were told it was withdrawn as well. My little ray of anecdotal sunshine was ahead of its time!

Cyp0111 said:

---

Aethon had to do a bunch of agressive stuff to outrun the hedge book a few years back. Now they ran strip into ditch, god bless

---

ChatCypTranslation: Aethon hedged their product when the prices were extremely low. They thought they were preventing further price degradation by buying hedges. Prices improved, but any real gains went to the hedgers, not Aethon. To alleviate this, companies drill new wells whose capacity aren't included in any hedges.

This was the story of every. single. NAL operator coming out of covid. Banks demanded hedges. Hedgers happily obliged. This meant that oil price improvements for about a year post covid went to hedgers not oil companies, and also saw an increase of oil production with whatever cash they could scrape together.

From my buddies on the operator side, a lot of banks were playing middle man between oil companies wanting to reduce their oil price volatility and airlines wanting to limit their jet fuel cost exposure. Any more details are hazy to me as the beers started to win the battle during this conversation.

Cyp0111 said:

---

The problem with that thesis is most airlines were not hedging during that time period (2020/2021) as they were very concerned with demand projections for tickets and most were deep out of the money on hedges placed in 2019/early 2020.


A lot of groups hedged projected volumes associated with capex plans to (check notes) reduce risk. The problem with that is you now have a hedge book to outrun.

Final point, hedge providers largely use balance sheets to provide market liquidity. Shorts and longs come in but almost never at the same time. The longs/shorts from consumers and producers help the hedge provider balance the hedge book with the exchange as most producer require non-margin terms for obvious regions.

The margins relative to the working capital/interest rate and credit/default risk are not great.

---

Hey man, I'm way over my skis. Just reporting back what little info I get from very close friends who are very high up at very small oil and gas companies.

They wanted to go no hedge or way higher hedge seeing the post covid upside, but the banks wanted to see hedges or further debt issuance was off.

**Scene opens, 20th floor of dated houston high rise, a short while after covid scare has passed**
Small Oil Operator: I would like to reduce my risk of oil dropping by selling you a cut of potential profits off the top in exchange for a price floor.
Bank: Let me see if there is someone who will take the other side of this so our books aren't exposed to direct price action.
Airlines: I would like to reduce my risk of oil rallying by purchasing a potential cut of the profits off of the top of oil in exchange for a price ceiling.
Bank: I would like to make money on the time value of money at play, and for facilitating this trade. We also need to cover the cost for our new breakroom sign 'The House Always Wins.'
**End scene**