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PRES Services

2430 North Forest Road
Suite 106
Getzville, NY 14068
(716) 633-1370

Managing Market Risk

Volatile and Unforeseen Events

A snapshot of natural gas settlement prices over the last six years is quite instructive. See Market Information. In 2004, 2006, and 2007 the cost per Dth of natural gas stayed within a fairly narrow price band - $5.08/Dth and $8.32/Dth. But during 2005 (Katrina) and 2008 (speculation market), the prices really fluctuated. For the first seven months of 2005, wellhead natural gas price vacillated between $6 and $8/Dth. Then in September 2005 after Katrina hit New Orleans, the natural gas prices (and all other energy commodities) headed toward record highs. By October/November 2005 the price of a dekatherm of natural gas reached $13.91 and remained well above $11/Dth until March of 2006. In 2008, after starting out below $8/Dth, natural gas prices rose very uncharacteristically through the spring until they crested at $13.11/Dth in July. Summer is typically when demand for gas is low and prices are supposed to moderate but due to a speculative market environment the prices went up.

None of these kinds of events/price moves can be predicted even when a company has a good grasp of the fundamental information about a market. There are no crystal balls or savvy traders who can predict the market or special computer modeling that can forecast an unusual event. So what to do?

Diversification, Management, Expertise

For a large multi-facility organization the best weapon to address this kind of market risk is to structure your facility portfolio into buying groups/markets and then use different price products and variations in contract terms to reduce the overall risk. This work requires an overall strategy, on-going structuring and realignment of the company’s portfolio, continuous buying, and market and supplier knowledge.

PRES Energy Procurement is prepared to undertake these corporate assignments and leverage our knowledge derived from working for multiple clients. Savings will come from managing market risk and collaborating with a seasoned procurement expert. Clients can also conserve valuable management time and resources by assigning the analysis details to PRES Energy personnel who will serve up management level options and alternatives for corporate consideration/action and contract execution. With our customized approach to our assignments and a powerful client service orientation, this information will be provided in a format and timeframe designed to meet your needs.

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