| Show ' Iffllll I The Salt Lake Tribune Sunday September New Firm May Save Oil Producers by Guaranteeing Prices Peter G Chronis The Denver Post Wildcatters have always lived with risks but the crazy gyrations of crude-oi- l prices since early 1986 are adding further dangers to an already risky industry Oil producers who have borrowed money to buy producing properties for example can be hurt if prices drop so low that they can’t make loan payments Jittery lenders demanded that loan balances be paid when oil prices plunged below $10 a barrel in the spring of 1986 with disastrous results for several oil companies Now a joint venture between an Oklahoma City oil company and a New Jersey risk management concern is offering to insure producers against drops in oil prices Called Hadson Energy Risk Management the joint venture between Hadson Jorp of Oklahoma City and Mount Lucas Associates Inc of Princeton NJ started offering the coverage June 1 Currently about 10000 barrels a day of oil production are covered by the program said Alan Kaufman senior vice president of Mount Lucas That's a tiny part of domestic production of about 82 million barrels a day Five companies — all in Texas and Oklahoma — have signed up Kaufman said “I think it’s an excellent idea” said Ward Merrick president of Merrico Inc an oil and gas company based in Ardmore Okla “All we did was give up 75 cents a barrel on the upside at the time we locked the price in to protect a $17 floor for the next 12 months” The posted price at the time Merrico made the deal was $1950 a barrel By If a program like Hadson's had existed in 1983 to 1986 Merrick said many oil companies that vent under might have survived Selling the program in the early 1980s however might have been difficult because oil prices were in the $35 to $36 a barrel range said Jordan "Digger” Smith chairman of Energetics Inc of Englewood Colo The program called energy asset insurance grew out of a plan that Mount Lucas developed for Hadson “We re an investment advisory firm” Kaufman said “Our business is developing and implementing risk management strategies for various asset groups traditionally bonds stocks and commodities" "The principles are not new they're just new to the energy area” Kaufman said Oil producers reap the benefits of traditional futures contract hedging but without the hassle Kaufman said By hedging a producer sells his production in the futures market to lock in a certain price in case he misjudges what oil prices will do The new insurance program gives oilmen “a simple format the producer can understand and utilize — and without an uncertain outcome” Kaufman said “It’s pretty simple from the producer’s standpoint” Kaufman cited an example that assumes a current posted price of $19 a barrel An oil producer wants to buy an existing oil field but needs to get at least $16 a barrel for the oil for at least three years “In order to feel really comfortable he wants to guarantee a minimum but not forsake the upside potential” Kaufman said “He enters Illinois U Readies Class to Help 'City Folk ’ Understand Farmin’ (UPI) — If you eat you’re involved in agriculture say the organizers of a University of Illinois course aimed at helping city folks understand farmers and farming course called The weekly two-ho“Our Food and Fiber — How Agricultural Issues Affect All Of Us” begins Sept 17 Faculty members will cover topics ranging from myths about the family farm to grain quality in a competitive world Anne Heinze Silvis who is coordinating the course said agriculture has changed dramatically in the last 50 years — fewer farmers bigger equipment better crops and more chemicals URBANA 111 Farming no longer is just “riding a tractor and feeling the soil between your fingers” she said “It’s hard enough for farmers to understand” said Silvis “If you’re on the outside looking in it’s really difficult to comprehend why agriculture is the way it is” The course will explore the depression in agriculture in the 1980s the impact of declining farmland values on local property tax collections federal subsidy program and the impact of science and technology on agricul- barrel" The program can be structured so if culture among city people has creased significantly in- CARNEGIE COURSE® Camvgfs Managmnt(!J for information Transfer Credit by F7 some sort of 'black-box- ' approach where we re betting against the oil industry" he said Much in the way that Lloyd's of London lays off risks by reinsuring with other companies Hadson Energy Risk Management does the same with its oil price policies — except instead buying other policies it uses options futures comand cash market modity contrc-’ts Novell Network System 00 PAGE 1000 TURBO XT MB HARD DRIVE MONITOR INCLUDED Price Includes: 20 MHz TURBO 477-- 360K FLOPPY 640 K RAM 85 ’v ft e —PRINTER SALE! 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