They stand to lose more on a big WTI drop then they can gain on a price increase. Protecting the downside right now is probably more important then trying to squeeze the last $ out of WTI.

Yes, agreed. As a firm believer in peak oil (eventually), I read Jeff Rubin's book (Your World Is About To Get A Lot Smaller) and although there was very little in the book that I didn't already know, having studied dozens of similar books, I did take interest in the way he laid out possible future oil pricing.

Rubin's explanation was that he believes there will be a series of price plateaus followed by drop-offs. For example, last year we popped to around $147, then of course that set the world into recession and the price dropped like a rock and bottomed back out in the $30's. He figures the next leg up will take the price definitely back up into the double-digits and possibly to $200, followed by another recession. This contradicts the approach that other forecasters have suggested with a gradual but never-ending upward pressure on price. I believe Rubin's sawtooth forecast makes much more sense. Look at the stock market pricing during the Great Depression - the same sort of concept with a roller-coaster series of rises and falls.

I'm not sure that $200 will be reached on the next leg up. I agree that it is possible, and a year and a half ago I would have said very likely. But right now, my view has been tempered by the fact that the world economy is too fragile. I think that pricing above $120 will once again set off a series of events that causes things to come crashing back down, leading to stimulus 2.0. Of course, something other than energy prices will be said to derail the economy, perhaps the disintegration of the commercial real estate market. And I think that rather than the auto industry being the big victim in the next step, it will be the airlines.

Anyway, so if we assume that the price of oil and the economy both end up taking a sawtooth pattern in the coming years, until a longer-term (and not very positive) equilibrium is eventually reached, then we have to assume that oil will once again get up over $100 before another crash. So yes, timing is everything when it comes to hedges. I'd love to see hedges in place at $100 for the next couple years, even if it is possible that oil could pop up much higher. And I'd be satisfied with a hedge over $80. The downside risk is more of an issue than the upside potential. We have to be able to survive a potential disastrous economy for the next 18 months, until Algar is well past full-steam ahead and Connacher can sit and catch its breath and come up with a viable long-term strategy.

Right now, I feel that they are just "taking things one step at a time." I'm not thinking they are taking the wrong steps, I just feel that it's an environment where management needs to say, "let's get the basics in place and not focus too much on future dreams." However, I feel that half a year after Algar is running properly, management should take the time to present a very detailed and specific long term plan to shareholders. At that point, they could provide a blueprint for their vision. Not just a vague "50/50 in '15" slogan, but details. For example, "We envision, subject to updates of course, the following items in 2012: a, b, c, d. The following items in 2013: a, b, c, d. The following items in 2014: a, b, c, d." etc. A detailed plan about the timelines for drilling out each of the areas currently identified as being potential pods. A detailed plan about desired timelines for the next three plants or expansions (admittedly risky considering the time for the EUB to issue approvals, but this kind of strategic planning can be issued with caveats).

Let's just have some confidence that we can make it to 2011 even if the walls come crashing down around us again. More hedging at a decent price would boost that confidence. I want to put more money into this company, but I want to know that a judgement error in over-confidence by CLL management is not going to cost me the equivalent of a dozen vacations on beautiful Caribbean islands.