Advanced Energy Finance Analytics

Corporations involved in the energy sector need executives who understand the extreme volatility of global energy markets and how to manage the financial risks created by changing energy prices.  This PetroKnowledge training course is designed to give participants an in-depth understanding of energy finance by addressing three areas of finance in an energy context:  Pricing, asset valuation and risk management.  The training course will increase your comprehension of the energy markets, as well as demonstrate how to model and forecast energy and forward/futures prices.  The PetroKnowledge training course will build knowledge of energy-related derivatives, including the different derivative products and how to apply them in the energy markets to develop hedging and risk management strategies.

This training course will develop an understanding of pricing, risk management, asset valuation and derivatives within the energy markets:

• Learn to use financial models to analyze and forecast energy prices; extrapolate forward prices beyond the liquidity tenor
• Understand the risk of and return from futures and options contracts on energy commodities
• Manage and optimize your organization’s energy risk exposure
• Learn to estimate and calculate volatility in energy prices
• Utilize real options theory to value energy assets; use information from futures/option prices to make optimal production decisions: Optimal timing for extraction, optimal rate at which to extract oil (gas) from a field; value oil fields, pipelines and storage facilities, power plants

The objectives of this training course are to give an introduction into the basics of energy trading as well as price formation mechanism in the oil and gas industry and to introduce delegates to the manner by which energy corporations manage their business risk (esp. price) exposures, and the derivative securities which can be utilized for this purpose:

• General overview about trading (terminology, tools, etc.)
• Overview of energy markets
• Principles of risk management: Objectives and tools
• Proper role of derivatives in firms' risk management
• Differences between exchange and OTC Markets

This training course is designed for individuals working in financial analysis, valuation, trading, marketing,  risk management or quantitative analysis positions with oil and gas exploration companies; investment and commercial banking, consulting, and financial services firms working in the energy sector; production and distribution companies; energy trading firms; and corporations outside the energy industry with a significant cost exposure to energy prices, such as energy-intensive manufacturing industries, transportation including air, coal companies and oil-field services.

In terms of job titles, these individuals include:

• Financial analysts
• Quantitative analysts or researchers
• Energy traders dealing with commodities
• Risk Managers dealing with commodities
• Commercial and investment bankers dealing with commodities
• Consultants in the commodity arena
• Government and regulatory officials, esp. those with responsibilities for the energy sector

The training course will be presented through a combination of four methodologies:

• Clear presentation of notes with the requisite supportive analytics
• Detailed presentation of the relevant empirical regularities/stylized facts of the energy markets
• Presentation of three case studies designed to exemplify the application of risk-management and valuation principles
• Interspersed in the lectures are relevant problem-sets, designed to afford participants with the opportunity to apply the principles conveyed and see their implementation

This executive training course is designed to provide participants with an understanding of pricing, risk management, asset valuation and derivatives within the energy markets: 

• Use financial models to analyze and forecast energy prices; extrapolate forward prices beyond the liquidity tenor
• Understand the risk of and return from futures and options contracts on energy commodities
• Manage and optimize their corporations’ energy risk exposure
• Estimate and calculate volatility in energy prices
• Apply option valuation techniques to the energy markets
• Understand and use derivative products to mitigate energy price risk; use structured products to enhance firm value; understand exotic structures unique to oil (e.g., average option) and gas and power (e.g., swing options, weather derivatives)
• Utilize real options theory to value energy assets; use information from futures/option prices to make optimal production decisions: Optimal timing for extraction, optimal rate at which to extract oil (gas) from a field; value oil fields, pipelines and storage facilities, power plants
• Apply Value-at-Risk to the energy industry

The skills acquired in this course include:

• Understanding the main terminology used in the industry
• Understanding the formation of oil and gas prices
• Understanding the linkage between physical and financial oil & gas markets
• Understanding the role of financial markets as efficient conveyors of information and assessors of risk
• Understanding the valuation and role of futures contracts and swap agreements
• Understanding the principles of option and derivative-claim valuation, hedging and uses
• Understanding the structuring, reverse engineering and valuation of OTC derivatives