Why are the gassers down today?

[dan_s]

Maybe we now live in an upside down universe. Maybe it is just the overall FEAR in this market for things they don't understand.

The only logical explanation that I have is that money managers believe the mark-to-market adjustment on their hedges will more than offset the increased revenues the gassers are going to get in the physical market for their gas. Things to remember:
> All gas produced is sold into the physical market.
> Cash settlements on hedges are paid monthly based on the index the hedge is based on for just the volumes hedged that month. Hedges are not settled with physical gas.
> The mark-to-mark adjustments on hedges beyond the current quarter are "non-cash" GAAP accounting requirements. They have no impact on cash flow or Adjusted Net Income.

At the bottom of each forecast/valuation model (Excel version) you can find the volume of gas that each company has hedged.
> RRC has ~91% of their Q4 gas hedged at ~$3.00 and ~53% of their 2019 gas hedged at $2.83
> GPOR has ~82% of their Q4 gas hedged at $3.01 and ~73% if their 2019 gas hedged at $3.05
> AR has ~89% of their Q4 gas hedged at $3.53 and 101% of their 2019 has hedged at $3.50 < I was wrong about them being 100% hedge in Q4 because their production has surged recently.
Again, the will all benefit from the increase in natural gas prices because all of their gas is sold into the physical market.

Sweet 16 that sell a lot of gas per day:
CLR has 76% of their Q4 gas hedged but none of the their Q1 2019 gas hedged
EOG has very little gas hedged
XEC has ~40% of Q4 gas hedged

Something else to remember is that gas prices are regional. The Permian Basin gas sells at a big discount because the pipes are full. GDP's Haynesville gas sells very close to Henry Hub prices because is very close to the Henry Hub.