Jackson Walker partner Jesse S. Lotay, who chairs the Firm’s Commodities & Derivatives practice, shared insights about plunging U.S. oil prices and why producers should keep their hedges in place for a longer period.
“If prices drop low, that hedged payment helps them make their debt service on the loan,” Jesse said. “That’s exactly what hedging is designed to do.”
He added, “The latest drop in oil and gas prices will stress test the energy industry. Against a backdrop of global oversupply, demand contraction, and geopolitical uncertainty, oil and gas companies will face unprecedented pressure to remain profitable. The ability to establish, in advance, a minimum price that an oil and gas company will receive for its production gives it the advantage of financial certainty.”
“The latest drop in oil and gas prices will stress test the energy industry.”
To read more, view Law360‘s “Oil Prices Go Negative For 1st Time As Slump Worsens” and Houston Chronicle‘s “Experts: Companies with strong ‘hedge books’ will survive oil war.” For additional information related to hedging oil and gas production, view the article Jesse contributed to Thomson Reuters Practical Law Finance, “Hedging Oil and Gas Production: Issues and Considerations.”
Jesse S. Lotay’s practice focuses on the areas of energy, commodities and derivatives, and general corporate transactions. He represents clients on business and transactional matters and works with clients as a strategic partner to accomplish business objectives, meet critical deadlines, and maximize financial results. His practice includes advising clients on energy-related mergers and acquisitions, energy-based commodities, derivatives, and other structured products, marketing and trading activities, and financially and physically settled hedging transactions. In addition to his role as a partner and leader of the Commodities & Derivatives team at Jackson Walker, Jesse serves on the World Affairs Council of San Antonio Board of Trustees and chairs its Young Professionals Committee.