Team Banner
Lost Profits from Hedging of Natural Gas Production Sales and Debt Financing

Accumyn’s expert provided testimony refuting a claim for over $60 Million in lost profits and value arising from potential hedging of natural gas production sales as part of a contemplated debt financing. The enterprise would have hedged natural gas price risk by means of forward fixed price sales of physical natural gas or swaps that would have extended over a multi-year period. Accumyn addressed the plausibility of the claimed economic damages in the context of actual forward market conditions at the time the alleged damages occurred. Accumyn discovered that the cost of unwinding underwater positions associated with existing forward physical natural gas sales was disguised. Accumyn showed that cash or credit was generated by selling gas based on the lower of the first of the month or the monthly average indices, at the option of the buyer and that these imbedded ‘lower of’ options as well as additional forward fixed price sales were in violation of a temporary restraining order.

Failure to timely exercise a Termination Agreement providing for the contemplated separation and distribution of assets from an existing natural gas exploration and production joint business venture agreement allegedly prevented both the funding of bank debt financing of plaintiff’s prospective remaining business interests as well as any allegedly prospective forward hedging of any related natural gas production. Accumyn reviewed standard terms and conditions required by bank lenders to oil and gas production companies and analyzed forward fixed price sales (i.e., hedging), including terms and condition, required credit support, and previous hedging patterns.