Environmental and price risk are real in energy. Here is how we manage both.
Yes, environmental risk is real.
Yes, commodity volatility is real.
That is exactly why our strategy is built around mitigation.
We do not invest offshore.
We prioritize strong insurance coverage.
We use modest acquisition leverage, typically 15 to 25 percent.
On commodity risk, we hedge pricing.
We structure deals assuming volatility will happen.
With low leverage and price protection in place, oil would need to fall below $40 per barrel for a sustained period before we face potential capital impairment.
The goal is not to predict perfect markets.
The goal is to survive imperfect ones.
If you are allocating capital, ask how the downside is engineered before you look at the upside.
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Episode 75: https://www.youtube.com/watch?v=S-Vp0afz7M0