“At the heart of this double deal is a striking disconnect between how the equity markets are valuing oil and natural gas reserves and how companies are valuing them. The companies can argue that the commodity markets are on their side, by pointing to strong futures prices for both oil and natural gas. Anadarko shows how this divergence can be put to use. It is hedging 75 per cent of the production it is acquiring, thereby locking in those advantageous prices. True, that still leaves more than half of the combined production unhedged, but it should help soothe nerves by removing a chunk of the financial risk.”
[composed and posted with ecto]
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