The Aneth production is hedged via swaps and therefore they are locked into the swap arrangement and do not have an option. In this case they are swapping 53% of Aneth production for a fixed US50.05/bbl price until 2020. Therefore we have an opportunity cost whenever the spot is greater then US50.05
Grieves is hedged via options so what you say above is correct but only for Grieves production. Hope this clarifies, I have added explanations from the half yr report below.
"p.23 Half Yr Accounts: Under this program the Elk Petroleum Aneth entered into Oil price swaps at US$47.45/bbl for 27% of its share of forecast oil production from the Aneth Project during the calendar year 2018 and at US$50.05/bbl for 53% of its share of forecast oil production from the Aneth Project during calendar years 2018 to 2020"
P.20 Half Yr Accounts: During FY2017, the Company implemented an oil price hedging program to underwrite a strong oil price going forward for the Grieve Project. Under this program the Company purchased put options at US$45/bbl for 75% of its share of forecast oil production from the Grieve Project during the calendar year 2018 and 2019. The put options provide the Company with a US$45/bbl floor price for the hedged volumes without capping the oil price the Company may actually receive if oil prices are higher than US$45/bbl.
ELK Price at posting:
9.2¢ Sentiment: Buy Disclosure: Held
