Vaalco Energy (EGY)

[littlejohn]

All companies sell oil at the current

market price...

Hedging transactions are external

financial contracts to mitigate against

gains or losses against sale amount...


You either sell a call and buy a put...

or...

You sell a put and buy a call...

Selling either of those collects a

premium that is then used to buy

the opposite side contract position...

thus the elusive costless up front...

So they can't gain more than the

average of those two contracts,,,

so the $96 per barrel average seems

a good guess on the locked in price

on those barrels sold...

Have actually made a guess that they

picked up their new credit facility

to help facilitate hedge transactions...

A credit facility in place would allow

then to still have full access to cash

flow and have the credit facility to

back up hedge transactions...

It takes a lot of money to do them...

Or a big credit line to back it up...


So we watch...LJ