Our Services
What We Will Do For You
First Keystone Energy Group will TURNKEY a system to get your organization up-and-running with state-of-the-art hedging practices. First Keystone's service is aimed to help small E&P players who do not have sophisticated in-house resources to devise and manage a hedging program from scratch.
We will overcome the daunting "learning curve" hurdles that repulse many would-be participants in hedging when they are confronted with the complexities of setting up an account. In fact, opening an account that enables trading of futures (other than just buying puts) is complicated and burdened with arcane terms. The vocabulary alone - with phrases like "ISDA", "mark-to-market", "sell the future", and "prompt" - requires a lot of effort to understand. With First Keystone, you will be outsourcing this work to a team which will install your documentation and set up your company's account with a counterparty.[1]
A crucial contribution that First Keystone makes is to guide you through putting together your application to become a counterparty in a hedge transaction. In fact, we will also bring in a technically sophisticated attorney to handle that arcane ISDA step. In order to be "qualified", you need to assemble data on your production - as well as basic balance sheet items - that show that you have the wherewithal as well as the physical delivery equivalents to justify the economics of a swap-type transaction. We guide you to transform your databases into a format that is decipherable by a major financial party that will become your counterparty.
There is more that First Keystone delivers - and it is very important. We can help you design the hedge itself. In other words, we can steer you toward determining how much production should be covered by a hedge and what kind of a hedge is appropriate to put in place. More importantly, we will explain how to put in place protective measures to ensure that you do not expose yourself in a negative way to upward swings in prices. We will explain these principles in plain English. As a key part of this element of our turnkey service, we will then facilitate your setting up an ongoing consultancy arrangement with a specialist advisory firm, with whom we ourselves work, that will guide you in specifying each trade and assisting you in its execution. This firm charges a modest consultancy fee, which in our opinion, is invaluable. We certainly employ them for our own activities!
In putting all of these key pieces together to set up a hedging program, there are plenty "gotchas" that are lurking out there. Our job is to spotlight them and see that they are addressed properly in advance.
Most important of all, all of these tasks are turnkeyed which means that FKEG is responsible for the installation of the system and your orientation. We will not force you through the long march[2] of moving up the learning curve to get this program implemented. When done, we will make sure that you are highly conversant with monitoring and managing of your positions.
Monitoring Your Performance
Once you are up and running, you will want to know the answer to these questions: "What are my cumulative gains(losses) since I started hedging?" And: "Given my current position, am I ahead or behind as compared to what I paid for it?"
Thus, we will set you up with spreadsheet reports for tracking the performance of your position and whether or not you are making or losing money on it. To keep a running tally, these calculations are much more complicated than meets the eye, but we will postion you to monitor yourself. (See Tracking Performance.)
Paperless Approach
First Keystone's administrative services also include the provision of a
WEBSITE (www.1keystone.com
Remember, we are a facilitator - we will get your own hedging program up and running – but we are not a trading firm nor are we advisors on trading.
[1] In particular, you will be able to minimize the challenges of dealing with boutique brokerage firms in this area that tend to communicate comfortably and efficiently with their sophisticated customers who are fluent in trade-speak language. You will not have to move up that learning curve!
[2] Without experience, our initial attempt took 9 months to complete. I have an MBA in Finance and it was arduous for me. Moreover, that time frame may be dangerously long for you.