RISK APPETITE: A HUNGER FOR THE UNKNOWN OR STRANGLEHOLD ON GROWTH?

2005 ◽  
Vol 45 (1) ◽  
pp. 203
Author(s):  
B.K. Johnson
Keyword(s):  
Oil Prices ◽  
Foreign Exchange Rates ◽  
Value Drivers ◽  
Production Variability ◽  
Risk Appetite ◽  
The Board Of Directors ◽  
Exploration And Production ◽  
Degree Of Confidence ◽  
Financial Consequences ◽  
Earnings Targets

The recent extreme volatility in the petroleum markets has introduced a level of volatile earnings for exploration and production companies (E&P) that has not been seen since the Gulf war in 1990–91. Many companies have reduced their hedging activity to increase exposure to rising oil prices and have consequently benefitted considerably. Rapid increases in oil prices historically have been followed by just as rapid decreases. Although oil prices are a key value driver for E&P companies so is exploration and development success, production variability, operational management, and, for companies who do not report in $US, foreign exchange rates. All these value drivers contribute to top line revenues and earnings so hedging oil price in isolation from other value drivers can have adverse financial consequences. The quarterly focus by investors of listed companies on meeting earnings targets/guidance creates the pressure for the board of directors of E&P companies to focus on the degree of earnings stability that is acceptable to the market. This is reflected by a company’s aversion to risk, or risk appetite. The collective management of the value drivers as a portfolio of risks allows companies to understand the potential for earnings variance, or earnings at risk during reporting periods. This, in turn, can provide companies with a degree of confidence in meeting earnings targets and the opportunity for companies to increase their transparency in terms of disclosure/communication of how effectively it is managing core value drivers of the business.

An Empirical Investigation of Factors Affecting Stock Prices in Vietnam

2014 ◽  
pp. 74-89 ◽  
Author(s):  
Vinh Vo Xuan
Keyword(s):  
Exchange Rates ◽  
Crude Oil ◽  
Foreign Exchange ◽  
Stock Prices ◽  
Global Financial Crisis ◽  
Oil Prices ◽  
Foreign Exchange Rates ◽  
Factors Affecting ◽  
Crude Oil Prices ◽  
Before And After

This paper investigates factors affecting Vietnam’s stock prices including US stock prices, foreign exchange rates, gold prices and crude oil prices. Using the daily data from 2005 to 2012, the results indicate that Vietnam’s stock prices are influenced by crude oil prices. In addition, Vietnam’s stock prices are also affected significantly by US stock prices, and foreign exchange rates over the period before the 2008 Global Financial Crisis. There is evidence that Vietnam’s stock prices are highly correlated with US stock prices, foreign exchange rates and gold prices for the same period. Furthermore, Vietnam’s stock prices were cointegrated with US stock prices both before and after the crisis, and with foreign exchange rates, gold prices and crude oil prices only during and after the crisis.

scholarly journals Time-Gap effects of crude oil prices on the foreign exchange rates: Evidence from Nigeria

2021 ◽  
Vol 3 (3) ◽  
pp. 31-44
Author(s):  
Nenubari Ikue John ◽  
Emeka Nkoro ◽  
Jeremiah Anietie
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Crude Oil ◽  
Foreign Exchange ◽  
Oil Prices ◽  
Cointegration Analysis ◽  
External Information ◽  
Garch Models ◽  
Foreign Exchange Rates ◽  
Crude Oil Prices

There is a pool of techniques and methods in addressing dynamics behaviors in higher frequency data, prominent among them is the ARCH/GARCH techniques. In this paper, the various types and assumptions of the ARCH/GARCH models were tried in examining the dynamism of exchange rate and international crude oil prices in Nigeria. And it was observed that the Nigerian foreign exchange rates behaviors did not conform with the assumptions of the ARCH/GARCH models, hence this paper adopted Lag Variables Autoregressive (LVAR) techniques originally developed by Agung and Heij multiplier to examine the dynamic response of the Nigerian foreign exchange rates to crude oil prices. The Heij coefficient was used to calculate the dynamic multipliers while the Engel & Granger two-step technique was used for cointegration analysis.  The results revealed an insignificant dynamic long-term response of the exchange rate to crude oil prices within the periods under review. The coefficient of dynamism was insignificantly in most cases of the sub-periods. The paper equally revealed that the significance of the dynamic multipliers depends greatly on external information about both market indicators which are two-way interactions. Thus, the paper recommends periodic intervention in the foreign exchange market by the monetary authorities to stabilize the market against any shocks in the international crude oil market, since crude oil is the main source of foreign exchange in Nigeria.

Amoco Corporation

2017 ◽  
pp. 1-28
Author(s):  
Susan Chaplinsky ◽  
Luann J. Lynch ◽  
Paul Doherty
Keyword(s):  
Oil Prices ◽  
Cash Flows ◽  
Production Costs ◽  
British Petroleum ◽  
Uncertain Environment ◽  
Exploration And Production ◽  
Future Cash Flows

This case is one of a pair of cases used in a merger negotiation. It is designed to be used with “British Petroleum, Ltd.” (UVA-F-1263). One-half of the class prepares only the British Petroleum (BP) case, and one-half uses this case. BP and Amoco are considering a merger, and are in the process of negotiating a merger agreement. Macroeconomic assumptions, particularly forecasting future oil prices in an uncertain environment, and assumptions about Amoco's ability to reduce exploration and production costs make Amoco's future cash flows difficult to predict.

Dual and single hedging strategy: a novel comparison from the direct and cross hedging perspective

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Yun Feng ◽  
Yan Cui
Keyword(s):  
Exchange Rates ◽  
Foreign Exchange ◽  
Oil Prices ◽  
Performance Criteria ◽  
Foreign Exchange Rates ◽  
Hedging Strategy ◽  
Content Type ◽  
Advantages And Disadvantages ◽  
Cross Hedging ◽  
The Cross

PurposeThe purpose of this paper is to deeply study and compare the dual and single hedging strategy, from the direct and cross hedging perspective.Design/methodology/approachThe authors not only first consider the dual hedge of integrated risks in this oil prices and foreign exchange rates setting but also make a novel comparison between the dual and single hedging strategy from a direct and cross hedging perspective. In total, six econometric models (to conduct one-step-ahead out-of-sample rolling estimation of the optimal hedge ratio) and two hedging performance criteria are employed in two different hedging backgrounds (direct and cross hedging).FindingsResults show that in the direct hedging background, a dual hedge cannot outperform the single hedge. But in the cross dual hedging setting, a dual hedge performs much better, possibly because the dual hedge brings different levels of advantages and disadvantages in the two different settings and the superiority of the dual hedge is more obvious in the cross dual hedging setting.Originality/valueThe existing literature that deals with oil prices and foreign exchange rates mostly concentrates on their relationship and comovements, while the dual hedge of integrated risks in this setting remains underresearched. Besides, the existing literature that deals with dual hedge gets its conclusions only based on a single specific background (direct or cross hedging) and lacks deeper investigation. In this paper, the authors expand the width and depth of the existing literature. Results and implications are revealing.

US midstream energy may see consolidation

2015 ◽  
Keyword(s):  
United States ◽  
Environmental Policy ◽  
Oil Prices ◽  
The United States ◽  
Content Type ◽  
White House ◽  
Oil Exports ◽  
Processing Plants ◽  
Exploration And Production ◽  
Keystone Xl

Significance The shale revolution in the United States created an explosion in upstream exploration and production (E&P) activity, as well as unprecedented demand for infrastructure to connect newfound resources with refineries and processing plants. Even a brief pause in shale revenue and drilling could imperil investment in this midstream sector. Impacts Keystone XL may be traded by the White House for environmental policy from Congress. The decline in oil prices will hit the Texan economy, as well as the presidential hopes of former Governor Rick Perry. Although oil exports may not be permitted, swaps with Mexico will ease oversupply of light crude.

Open-access midstream infrastructure and its effects on the Australian gas market

2017 ◽  
Vol 57 (2) ◽  
pp. 493
Author(s):  
Steve Lewis ◽  
Jon Serfaty ◽  
Michael Brooks ◽  
Ben Smith
Keyword(s):  
Service Industry ◽  
Unit Cost ◽  
Oil Prices ◽  
Transport Infrastructure ◽  
Spare Capacity ◽  
Capital Costs ◽  
Gas Processing ◽  
Large Joint ◽  
Exploration And Production ◽  
Gas Market

Australia’s energy industry has evolved around a vertically integrated structure with exploration and production (E&P) companies carrying out production, processing and development of associated infrastructure, such as pipelines. We suggest the next innovation for productivity improvements is a ‘North American model’, whereby a midstream service industry develops, owns and operates shared gas processing and transport infrastructure, allowing the E&P sector to direct limited capital to focus on exploiting and marketing the resource without necessarily building or operating the associated infrastructure. E&P companies are being challenged by the lower oil prices, and balance sheets are under strain from high debt levels. Large joint ventures are no longer the natural owners of gas processing facilities as the original gas reserves decline and other reserve owners seek to use spare capacity. Junior explorers are also challenged as capital is redirected elsewhere while oil prices remain low. Herein we demonstrate that collaboration in shared infrastructure will restore value. Benefits to E&P companies include minimising upfront capital, lower unit cost through scale and sharing of risks with other projects and partners. Midstream infrastructure owners and operators can provide additional benefits because they typically have lower rates of return expectations, lower capital costs and debt premiums, have specialist knowledge and enable sharing of production and transportation costs. Through case studies, we outline the key commercial considerations from the perspective of both the explorer and the asset owner, demonstrate the potential financial benefits and promote further debate on what is stopping the development of this midstream service industry in Australia.

Bank for International Settlements

1948 ◽  
Vol 2 (1) ◽  
pp. 163-163
Keyword(s):  
Board Of Directors ◽  
Annual Report ◽  
Foreign Exchange Rates ◽  
International Bank ◽  
The United Kingdom ◽  
National Economic ◽  
The Board Of Directors ◽  
Bank For International Settlements ◽  
Foreign Lending ◽  
Post War

The seventeenth annual report of the Bank for International Settlements, which reviewed the period April 1, 1946, to March 31, 1947, covered such topics as 1) the transition from war to peace economy, 2) price movements, 3) recovery of foreign trade, 4) foreign exchange rates, 5) the production and movements of gold, 6) post-war settlements and new foreign lending, 7) internal credit condition, and 8) national economic plans in Europe. Reference was made to the fact that as a result of informal discussions between the President of the International Bank for Reconstruction and Development and the Chairman of the Board of Directors of the Bank for International Settlements, a memorandum had been worked out regarding the bases for cooperation between the two organizations. As of June, 1947, the Board of Directors of the Bank included representatives of Belgium, France, Italy, the Netherlands, Sweden, Switzerland, and the United Kingdom. Because of the war Germany and Japan were not represented but were still technically considered to be members.

Centralising forces undermine Kenya security push

2015 ◽  
Keyword(s):  
Oil Prices ◽  
County Level ◽  
Content Type ◽  
Northern Kenya ◽  
Security Personnel ◽  
Energy Projects ◽  
University College ◽  
Exploration And Production

Significance Linda Boni was launched in September, targeting Somalia's Harakat al-Shabaab al-Mujahidin and its Kenyan network, in particular the Jaysh Ayman militia linked to attacks on civilians and security personnel in Lamu county in 2014 and 2015. The security response has seen a shake-up since the Garissa University College attack in April 2015, but has not moved away from centralised structures. Impacts Low oil prices have tempered industry appetite for exploration and production in northern Kenya, but Kenyan expectations remain high. Infrastructure, particularly Lamu Port and energy projects in Marsabit and Lamu counties, will extend central elite interest in these areas. As the early 2017 elections approach, 2016 will see increasing jockeying for positions at county level, with tensions likely to emerge.

Risk appetite and oil prices

2020 ◽  
Vol 85 ◽  
pp. 104595 ◽  
Author(s):  
Mahmoud Qadan ◽  
Yasmeen Idilbi-Bayaa
Keyword(s):  
Oil Prices ◽  
Risk Appetite
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