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© 2000 JN Natural Gas Outlook & Issues AB 1890 Implementation Group Annual Meeting November 14, 2000 ®
© 2000 JN U.S. Average Gas Prices by Sector 1985 vs (In constant 1999$) The average real price to all end users has fallen 42% under open access. In the prior decade, real prices increased 71%. -30% -37% -48% $/MMBtu
© 2000 JN ® U.S. Natural Gas City Gate Cost Decline (Billions 1999$) Source: U.S. DOE Natural Gas Annual, Table 21, and Natural Gas Monthly, May 2000 $174.2 Total savings since 1984 [Price savings volume] x
© 2000 JN ® Source: NYMEX ( close) $ $5.24 projected historical U.S. Natural Gas Spot Price Outlook (in $/MMBtu Henry Hub, LA.)
© 2000 JN ® U.S. Residential Natural Gas Prices Since 1984 (1999$/MMBtu) Source: U.S. DOE (EIA) Residentials will purchase gas this winter at real prices last paid in 1986/ /2001 Winter Estimate
© 2000 JN ® Backwardation Price Curve for Wellhead Gas ($/MMBtu) $5.15 This Winter $4.25 Next Winter $3.75 Winter 02/03 Source: NYMEX (September 11, 2000)
© 2000 JN ® Factors Influencing Natural Gas Prices uStrong Economy - Demand for Power Generation and Manufacturing uDeclining Natural Gas Production uWarmer Than Normal Winters the Past 3 Years uU.S. Gas Storage Levels Lowest in Past 6 Years uOther Heating Fuels Showing Significantly Higher Prices & Lower Stock Levels
© 2000 JN ® Increased Price Volatility has Become Common in the Gas Industry Nominal Dollars 1999 Dollars January January 2000
© 2000 JN ® Weather Economic/business conditions Stock levels Pipeline capacity Operational difficulties Lack of timely, reliable information Affects Supply Affects Demand What Are The Main Drivers Of Short-term Price Volatility?
© 2000 JN Commodity / Risk Management
© 2000 JN ® Why Hedge? uEliminate uncertainty uNot hedging, i.e. buying on spot, is the same as speculating uBuying index still leaves you at the mercy of market conditions uSmooth production costs - be able to budget effectively - costs are known up front uMinimizes exposure to cyclical cash flows
© 2000 JN ® 2000/01 Winter Price Hedging ($/MMBtu) 8/31/00 Lock-in Price for Dec. 00/Jan 01 - $4.80/MMBtu Historic 2000 prices through August Jan/Feb 2000 Hedge for Dec. 00/Jan 01 - $2.79/MMBtu JanFebMarAprMayJunJulAug 2000
© 2000 JN ® Fixed Price Index Price Volatility Less More Price Risk Continuum Many pricing options exist between fixed and index
© 2000 JN ® Commodity Products Values and Limitations
© 2000 JN ® Basic Tools: Financial Instruments uRisk Management products are all based on the following basic financial instruments - Forwards/Futures - Options: Calls and (caps) and puts (floors) - Swaps uThese instruments can be customized to address the specific needs and sensitivities of the hedging firm.
© 2000 JN ® Keys to a Successful Risk Management Program uRisk management is used to decrease uncertainty - not to beat the market uBelief that future outcomes can be changed uDoing nothing is the same as speculating uRisk management is a dynamic, iterative process uHave a view on the market and be prepared to change course
© 2000 JN ® The Future: Electronic Commerce Comes of Age
Crude and Products are also available © 2000 SW
© 2000 JN ® Regulatory Death Spiral Tight Supply Price Caps Price Surge Less Supply More Demand Regulated Shortages Brownouts Blackouts
© UB-SK-DEREGULATION Deregulation in the Aftermath of California Steve Kean EVP and Chief of Staff INGAA Analyst Conference Houston, Texas July.
1 CONTENTS Hedging Tools (slides 2-5) Swap (slides 7-17) Call / Put (slides 18-22) Collar (Cap / Floor) (slides 23-26) Options (slides 27-30) Basis Risks.
LNG Markets & Price Volatility. 2 Price determination in gas markets The portfolio approach Management of price risks Concluding remarks LNG Markets and.
Energy Risk Management Seminar New York April 5, 2001.
For Financial Professional Use Only: Not For Public Distribution 1 Understanding Leveraged and Inverse Funds Louis Mayberg President, ProFunds Group
1 CPUC Avoided Cost Workshop Generation Avoided Costs.
Energy in Todays Economy: Challenges and Opportunities Dr. Kenneth L. Lay Chairman, Enron Corp. Economy Roundtable Austin, Texas January 3, 2001 For further.
Gas Supply and Demand Issues Living in a post Katrina/Rita World Presented to Houston Gas Processors Association Regional Meeting Kingwood, Texas October.
Chapter 3 Financial Planning Investment products Mandatory Provident Fund (MPF) Credit cards 1.
© 2003 The McGraw-Hill Companies, Inc. All rights reserved. Risk Management: An Introduction to Financial Engineering Chapter Twenty- Three.
U.S. Energy Market Trends Living in a post Katrina/Rita World Presented to Senate Home Heating Fuels Study Committee Georgia State Legislature Atlanta,
1 Survivor Products: Managing longevity risk & mortality improvements Professor David Blake Director Pensions Institute Cass Business School
© 2008 Northern Trust Corporation northerntrust.com The Northern Trust Experience A C C E S S. E X P E R T I S E. S E R V I C E. Lori R. Runquist Director,
1 Georgia Senate Regulated Industries Committee Energy Hearing Atlanta, Georgia August 13, 2008 Terry Ciliske En*Vantage, Inc
Derivatives and Commodity Hedging The World Bank Treasury 1818 H Street, N.W. Washington, DC, 20433, USA treasury.worldbank.org OECD-MENA Senior Budget.
Setting Natural Gas Prices Prepared by: Mark R. Burns, President Independent Energy Consultants, Inc. July 2008.
Investment products: No bank guarantee I Not FDIC insured I May lose value Inflation Understanding one of the greatest risks to retirement savings PRESENTER.
1 Pricing Strategies in the Context of Price Regulation by Patrick Xavier School of Business Swinburne University Melbourne Australia ITUWorkshop(2)
Capital Markets Outlook 2008 The World in Transition Ben Pace, U.S. Chief Investment Officer New York, December 6, 2007.
1 FINC3131 Business Finance Chapter 2,6,8 Financial Markets, Interest, Return and Risk.
1 FINANCING FOR DEVELOPEMENT: SITUATION, CHALLENGES AND PERSPECTIVES The case of Viet Nam Le Viet Duc Ministry of Planning and Investment of Viet Nam at.
J A N U A R Y 1 9, J A N U A R Y 1 9, U R G E N T I S S U E S I N E N E R G Y F I N A N C I N G SU R G E N T I S S U E S I N E N E R G Y.
Enterprise’s Operating and Business Environment Special Emphasis on the U.S. Ethylene Industry Peter Fasullo En*Vantage, Inc May 26, 2004.
Benefits of Energy Price Stabilization 8th Africa Oil & Gas Trade and Finance Conference Marrakech, April 28, 2004 Deutsche Bank Not an official UNCTAD.
California Status Report: What Went Wrong, Why and How to Fix It Rick Shapiro Managing Director Government Affairs - The Americas ®
© 2004 Dominion Dominion Proposal January 24, 2005.
Treasury solutions Treasury Management 24 October 2013 Strictly confidential | October Strictly confidential | October 2013 |
2008 K-State Risk Assessed Marketing Workshops Grain Marketing Basics: Cash Grain Basis, Forward Contracts, Futures & Options Dr. Daniel M. OBrien Extension.
P/C Insurance Industry Overview & Outlook for 2013 and Beyond Casualty Actuaries of New England Sturbridge, MA April 4, 2013 Download at
Slides prepared by Thomas Bishop Copyright © 2009 Pearson Addison-Wesley. All rights reserved. Chapter 14 Money, Interest Rates, and Exchange Rates.
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