Apache Case Study
Finance 685 Energy Trading
Dr. Zahid Iqbal
By: Dennis Blacknall
Cherrie Burns
Miechelle Davis
Jamahl Grace
Winston Reed
4/5/2013
Market Data | Friday, April 5, 6:34 PM Symbol | Price | Change | APA | 74.20 | -0.80 (-1.07%) | Brent | 104.33 | +0.21 (+0.20%) | WTI | 93.05 | +0.35 (+0.38%) | Natural Gas | 4.14 | +0.01 (+0.34%) | |
Case: Risk Management at Apache
Apache Corporation, an independent oil and gas exploration and production company founded in 1954 by Raymond Plank whose primary focus was to profit in oil. Their initial investor 's capital of $250,000 in 1954 rose to over a billion dollars in acquisitions by 2001. Acquisitions over a billion included Repsol in Egypt’s Western desert and a partnership with Shell Overseas Holdings to acquire Fletcher Challenge Energy. During this period, Apache had a plethora of their resources in the United States, which some view as a disadvantage if the oil price was to rise, changing the focus to exploration of other regions around the world at lower prices. Even as the company increased profits, Apache’s management was faced with many questions regarding risk and if the company should continue to hedge revenues from acquisitions. They wanted to chart a well-defined risk management strategy to track measures in alleviating transfer risk to their shareholders to any other company or investor at a market-determined price in creating value to the shareholders. We will seek to answer questions regarding the risks Apaches faces, how and should they manage risk, is risk management valuable, what are the potential hazards to manage risk, how could Apache manage risk, and what is the goal of hedging.
Major risks that Apache faces.
Price Volatility Risk: * When the price of oil decrease cause production shifts away from the US, due to the high cost of producing oil.. * Apache had 80% of its proved reserves in the US. Within the US, deep-water drilling in the Gulf of Mexico had
Dr. Zahid Iqbal
By: Dennis Blacknall
Cherrie Burns
Miechelle Davis
Jamahl Grace
Winston Reed
4/5/2013
Market Data | Friday, April 5, 6:34 PM Symbol | Price | Change | APA | 74.20 | -0.80 (-1.07%) | Brent | 104.33 | +0.21 (+0.20%) | WTI | 93.05 | +0.35 (+0.38%) | Natural Gas | 4.14 | +0.01 (+0.34%) | |
Case: Risk Management at Apache
Apache Corporation, an independent oil and gas exploration and production company founded in 1954 by Raymond Plank whose primary focus was to profit in oil. Their initial investor 's capital of $250,000 in 1954 rose to over a billion dollars in acquisitions by 2001. Acquisitions over a billion included Repsol in Egypt’s Western desert and a partnership with Shell Overseas Holdings to acquire Fletcher Challenge Energy. During this period, Apache had a plethora of their resources in the United States, which some view as a disadvantage if the oil price was to rise, changing the focus to exploration of other regions around the world at lower prices. Even as the company increased profits, Apache’s management was faced with many questions regarding risk and if the company should continue to hedge revenues from acquisitions. They wanted to chart a well-defined risk management strategy to track measures in alleviating transfer risk to their shareholders to any other company or investor at a market-determined price in creating value to the shareholders. We will seek to answer questions regarding the risks Apaches faces, how and should they manage risk, is risk management valuable, what are the potential hazards to manage risk, how could Apache manage risk, and what is the goal of hedging.
Major risks that Apache faces.
Price Volatility Risk: * When the price of oil decrease cause production shifts away from the US, due to the high cost of producing oil.. * Apache had 80% of its proved reserves in the US. Within the US, deep-water drilling in the Gulf of Mexico had