Commodity Price Risk Sample Clauses
The Commodity Price Risk clause is designed to address and manage the financial exposure that parties may face due to fluctuations in the prices of commodities relevant to their contract. Typically, this clause outlines mechanisms such as price adjustment formulas, hedging requirements, or caps and floors to stabilize costs and revenues when commodity prices change unexpectedly. By clearly allocating the risk of price volatility, the clause helps both parties plan more effectively and avoid disputes arising from unpredictable market movements.
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Commodity Price Risk. Leviathan ▇▇▇▇▇▇ a portion of its oil and natural gas production to reduce its exposure to fluctuations in the market prices thereof. Leviathan uses commodity price swap transactions whereby monthly settlements are based on differences between the prices specified in the commodity price swap agreements and the settlement prices of certain futures contracts quoted on the NYMEX or certain other indices. Leviathan settles the commodity price swap transactions by paying the negative difference or receiving the positive difference between the applicable settlement price and the price specified in the contract. The commodity price swap transactions Leviathan uses differ from futures contracts in that there are no contractual obligations which require or allow for the future delivery of the product. The credit risk from Leviathan's price swap contracts is derived from the counter-party to the transaction, typically a major financial institution. Leviathan does not require collateral and does not anticipate non-performance by this counter-party, which does not transact a sufficient volume of transactions with Leviathan to create a significant concentration of credit risk. Gains or losses resulting from hedging activities and the termination of any hedging instruments are initially deferred and included as an increase or decrease to oil and natural gas sales in the period in which the hedged production is sold. For the quarter and six months ended June 30, 1999 and 1998, Leviathan recorded a net gain (loss) of $(0.4) million, $0.6 million, $(0.7) million and $1.4 million, respectively, related to hedging activities. As of June 30, 1999, Leviathan has open sales swap transactions for 10,000 MMbtu of natural gas per day for calendar 2000 at a fixed price to be determined at its option equal to the February 2000 Natural Gas Futures Contract on NYMEX as quoted at any time during 1999 and January 2000, to and including the last two trading days of the February 2000 contract, minus $0.5450 per MMbtu. Additionally, Leviathan has open sales swap transactions of 10,000 MMbtu of natural gas per day at a fixed price to be determined at its option equal to the January 2000 Natural Gas Futures Contract on NYMEX as quoted at any time during 1999, to and including the last two trading days of the January 2000 contract, minus $0.50 per MMbtu. At June 30, 1999, Leviathan had open crude oil ▇▇▇▇▇▇ on approximately 500 barrels per day for the remainder of calendar 1999 at an average ...
Commodity Price Risk. Prices for grain will vary depending on a multitude of factors, including domestic and global market influences. CBH Grain Pool strategy incorporates participation in domestic and global markets, and CBH manages commodity price risk via a mix of domestic and global market sales, including hedging in a variety of related instruments. CBH Grain maintains extensive global supply and demand analysis to form an understanding of the global picture, as well as closely observing pricing behaviour across a multitude of related markets in order to make appropriate risk management decisions in physical and derivative markets. Depending on the state of the market, our activities could include executing sales or derivative strategies designed to protect the pool from loss, or to capture additional value by increasing exposure to the market. At all times, the relevant Pool will operate within the prescribed physical hedging mandate, which is designed to reduce exposure to commodity price risk over time.
Commodity Price Risk. The Partnership ▇▇▇▇▇▇ a portion of its oil and natural gas production to reduce its exposure to fluctuations in the market prices of oil and natural gas, and to meet certain requirements under its revolving credit facility. The Partnership uses commodity price swap transactions whereby monthly settlements are based on differences between the prices specified in the commodity price swap agreements and the settlement prices of certain futures contracts quoted on the New York Mercantile Exchange, or NYMEX, or certain other indices. The Partnership settles the commodity price swap transactions by paying the negative difference or receiving the positive difference between the applicable settlement price and the price specified in the contract. The commodity price swap transactions used by the Partnership differ from futures contracts in that there are no contractual obligations which require or allow for the future delivery of the product. The credit risk from the Partnership's price swap contracts is derived from the counterparty to the transaction, typically a major financial institution. Management does not require collateral and does not anticipate non-performance by this counterparty, which does not transact a sufficient volume of transactions with the Partnership to create a significant concentration of credit risk. Gains or losses resulting from hedging activities and the termination of any hedging instruments are initially deferred and included as an increase or decrease to oil and natural gas sales in the period in which the hedged production is sold. If the Partnership had settled its open natural gas hedging positions as of December 31, 1999 and 1998, based on the applicable settlement prices of the NYMEX futures contracts, the Partnership would have recognized a loss of approximately $3.8 million and $2.6 million, respectively. For the year ended December 31, 1999, the Partnership recorded a net loss of $2.3 million related to its hedging activities. At December 31, 1999, the Partnership had two outstanding natural gas sales swap transactions for the calendar year 2000. Under one of the swaps, the Partnership will receive a fixed price of $1.6686 on 10,000 MMbtu/d, and pay the monthly natural gas futures contract price on NYMEX. The second swap provides for similar pricing terms, notional quantity and contract period. On January 18, 2000, the Partnership fixed the contract price under the swap whereby it will receive $1.8050 on 10,000 MMbtu/d from ...
Commodity Price Risk. In the normal course of business, the Company enters into long-term firm price sales contracts with one of its customers. In order to hedge the risk of higher prices for the anticipated aluminum purchases required to fulfill these long-term contracts, the Company enters into long futures positions. At October 31, 1998, the Company had open futures contracts at fair values of $3.3 million and unrealized losses of $369,000 on such contracts. These contracts covered a notional volume of 5,511,557 pounds of aluminum. A hypothetical 10% change from the October 31, 1998 average LME ingot price of $.60 per pound would increase or decrease the unrealized pretax losses related to these contracts by approximately $330,000. However, it should be noted that any change in the value of these contracts, real or hypothetical, would be significantly offset by an inverse change in the cost of purchased aluminum scrap.
Commodity Price Risk. A majority of the revenues from the gathering and processing business are derived from percent-of-proceeds contracts under which the Partnership receives a portion of the natural gas and/or NGLs or equity volumes as payment for services. The prices of natural gas and NGLs are subject to market fluctuations in response to changes in supply, demand, market uncertainty and a variety of additional factors beyond the Partnership’s control. In an effort to reduce the variability of our cash flows, the Partnership has entered into derivative financial instruments to hedge the commodity price associated with a significant portion of its expected natural gas, NGL equity volumes and condensate equity volumes through 2018 by entering into financially settled derivative transactions. Historically, these transactions have included both swaps and purchased puts (or floors) and calls (or caps) to hedge additional expected equity commodity volumes without creating volumetric risk. The Partnership ▇▇▇▇▇▇ a higher percentage of its expected equity volumes in the earlier future periods. With swaps, the Partnership typically receives an agreed upon fixed price for a specified notional quantity of natural gas or NGLs and pays the hedge counterparty a floating price for that same quantity based upon published index prices. Since the Partnership receives from its customers substantially the same floating index price from the sale of the underlying physical commodity, these transactions are designed to effectively lock-in the agreed fixed price in advance for the volumes hedged. In order to avoid having a greater volume hedged than actual equity volumes, the Partnership typically limits its use of swaps to hedge the prices of less than its expected natural gas and NGL equity volumes. The Partnership’s commodity ▇▇▇▇▇▇ may expose it to the risk of financial loss in certain circumstances. The Partnership’s net income and cash flows are subject to volatility stemming from changes in commodity prices and interest rates. To reduce the volatility of our cash flows, the Partnership has entered into derivative financial instruments related to a portion of its equity volumes to manage the purchase and sales prices of commodities. We also monitor NGL inventory levels with a view to mitigating losses related to downward price exposure.
Commodity Price Risk. The Company has attempted to mitigate a portion of the commodity price risk through the use of various financial derivative and physical delivery sales contracts as outlined below. The Company’s policy is to enter into commodity price contracts when considered appropriate to a maximum of 50% of forecasted production volumes for a period of not more than two years. Derivatives are recorded on the balance sheet at fair value at each reporting period with the change in fair value being recognized as an unrealized gain or loss on the consolidated statement of opera- tions, comprehensive income and retained earnings.