Price rise = price risk

Rising commodity prices mean companies have had to pay more for acquisitions in the energy sector. This has led to an increase in large-scale strategic hedging as firms look to put in place downside protection. Duncan Wood reports

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Energy consumers are not the only people to have been hit by high oil and gas prices – energy producers have also had to pay a higher price for new investments and acquisitions. Rather than using long-run historical averages as a way of valuing energy reserves, companies are using the current forward price curve, which foresees oil and gas remaining expensive relative to historical levels. As a result, acquirers have become more sensitive to downside risk, and bankers have seen a big increase in

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