Common use of Commodity Hedging Clause in Contracts

Commodity Hedging. If the aggregate amount of the Loans exceeds 35 per cent. of the lower of (a) the applicable Total Commitments and (b) the applicable Borrowing Base Amount, the Obligors shall be required to enter into a hedging agreement covering: (a) at least 40 per cent. of its projected production volumes for the immediately following six months as set out in the then-current Banking Case; and (b) at least 30 per cent. of its projected production volumes for the subsequent period of six months as set out in the then-current Banking Case. The Obligors shall comply with the following requirements in relation to any such hedging arrangements: (c) no more than 100 per cent. of the most recent unmodified forecast 2P reserves related to the Borrowing Base Assets that constitute “Proved plus Probable Reserves” in accordance with the June 2018 SPE / WPC / AAPG / SPEE / SEG / EAGE / SPWLA Petroleum Resources Management System may be hedged in respect of any period using any commodity hedging transaction including (but not limited to) any transaction which is a forward rate agreement, option, future, swap, cap, floor and any combination of the foregoing; (d) the maximum tenor of each commodity hedging transaction must not exceed five years, unless an extension of that period is approved by the Majority Lenders; and (e) each commodity hedging transaction must be in the ordinary course of treasury management and not for speculative purposes.