Hedging programs for producers typically aim to secure revenue and mitigate price risk. Therefore, it was important for AEGIS to help this natural gas producer re-examine their hedging goals and current hedging program.
AEGIS immediately leveraged its Recommend module to the client based on the challenges uncovered with meeting their current goals. Recommend is a powerful market analytics capability within the AEGIS platform that enables a company to mathematically align its hedging strategy with market conditions and targeted financial objectives.
For this client, Recommend translated natural gas prices to a range of revenue outcomes with specific confidence levels based on the client's assets and market data.
Empowered by this advanced functionality within the platform, the management team used bottom-line financial success metrics to drive hedge decisions rather than the prior pitfall of price picking.
For example, this client established a minimum revenue target with a 95% confidence level to trigger hedge decisions.
When market changes result in revenue estimates below the minimum threshold, the AEGIS Recommend module calculates specific hedge recommendations that lift the minimum revenue to acceptable levels while quantifying the cost-benefit of different strategies.