Hedged Production

[KGardiner]

I noticed the other day that Reuters was surprised that most producers have significant hedges in place in the $40 range. I guess I'm surprised as well, but in the sense that I would expect most major oil investors to know this, and as a result the hedges are already fully priced in.

So my question is: Can this seemingly old news move the Sweet 16 down?

Especially when considering the European and India Covid news have already placed plenty of downward pressure on a market that was due for consolidation.

[dan_s]

All of the Wall Street Gang knows about the hedges. Hedges do impact near-term results, but only a small fraction of each company's total proved reserves are hedged, so they have a minor impact on PV10 valuations.

I show each company's hedges at the bottom of my forecast/valuation models and they are priced into the "realized commodity" prices used in each model.

Most of the banks require hedges to secure the credit facilities.

[KGardiner]

I appreciate that all of your profiles include the hedges info.
It seems important so as not to court disaster.
Thanks
Kevin

[dan_s]

Investors always love hedges when oil & gas prices are heading down and hate them when commodity prices are going up.

IMO all upstream companies should have a hedging program that locks in enough cash flow to cover debt service for at least a year. What happened last year was a lot of "panic hedging" that locked in low oil prices for quite a few companies.

MGY and CLR have very little of their production hedged.