Commodity Price Risk of Tetra Technologies

Commodity Price Risk of Tetra Technologies
Tetra Technologies carries market risk exposure in the pricing acceptable to its oil and gas production. Realized pricing is mostly driven by the predominant worldwide price for crude oil and spot prices in the U.S. natural gas market. Prices received for oil & gas production have been historically volatile and unpredictable, and it is expected to proceed.

Tetra technology's risk management involved the employment of derivative financial instruments such as swap agreements, separating the influence of market price risk exposures for a portion of our oil and gas production. The Company is exposed to the volatility of oil and gas prices for that portion of oil and gas production which is not hedged. The result from the impact of the crude oil hedges is described in the table below as of December 31 2008. Each decrease in future crude oil prices $1 per barrel would result in a decrease $0.3 million in after-tax earnings. Still, each decrease of $ 0.10 per Mcf in future gas prices would result in $ 0.2 million decrease in after-tax earnings.

The Company is required to record derivatives on the balance sheet as assets and liabilities, estimated at fair value. And gains or losses which are resulted from changes in the values of the derivatives are accounted for depending on the use of the derivative and if it qualifies for hedge accounting for risk management approaches.

Tetra Technologies have an acceptable risk-management level. However, there are still the opportunities for the development of risk minimization approaches. If you want to know more about these innovative approaches you are welcome to order an essay online. Paper writing services deliver works written from scratch by professional academic writers. They take into account all your specifications and deadlines for successful custom essays.

Commodity Price Risk of Tetra Technologies 8.1 of 10 on the basis of 1786 Review.