Energy Prospectus

These are estimates based on their Q2 10Q reports. They may have hedged more gas since those reports were filed. Plus, the dollar amounts are rough estimates since their hedges are combinations of Swaps and Collars. Also, remember that these companies do have very good marketing teams that often can take advantage of spikes in spot market prices within their regions.

Antero Resources (AR): ~92% of 2H 2021 ngas hedged at $2.77 and 46% of 2022 ngas hedged at $2.50
Antero does have high BTU gas that sells for a $0.15 to $0.25 premium to HH prices

Comstock Resources (CRK): ~42% of 2H 2021 ngas hedged with Swaps at $2.53 and another ~28% hedged with collars at $3.04. For 2022 they have ~20% hedged with Swaps at $2.65 and another ~21% hedged with collars that have $3.53 ceilings.

EQT Corp. (EQT): ~20% of 2H 2021 gas hedged at $2.80 and ~30% of 2022 gas hedged at $2.85

Range Resources (RRC): ~83% of Q3 2021 gas hedged at average price of $2.85 and ~72% of Q4 2021 ngas hedged at an average price of $2.95. For 2022 they have ~41% of their dry gas hedged at an average price of $3.05. Range also produces over 103,000 bpd of unhedged NGLs.

Cimarex Energy (XEC) + Cabot Oil & Gas (COG): On a combined basis they have less than 10% of their 2H 2021 ngas hedged at an average price around $2.70. For 2022 none of COG’s gas is hedged, making this a very well timed merger for Cimarex and Cimarax has only ~18% of their gas hedged at about $2.90. On a combined basis they only have about ~6% of their ngas hedged for 2022.

So, if you want to take advantage of the spike in gas price it looks like EQT and XEC/COG are the best bets.

Thanks Dan!

Dan or others, would you mind educating me on the swap vs collars and the potential upside, lets say using CRK as an example. I am not that well versed in hedging programs. Are we saying CRK has the floor set for 2022 at $2.65, but has upside to $3.53 based on the percentages hedged. Are we also saying that the remaining ~60% is unhedged at the moment?

Thank you

A Swap is a fixed price contract. A Collar has a floor and a ceiling. If a company hedges with a collars the are guaranteed to get no lower and the floor price, but they can get no more than the ceiling price.

If the NYMEX contract the collar is tied to settles at a price between the floor and ceiling that is the price they get; no cash settlement is made.

The floor is a purchased Put Option and the ceiling is sold Call Option. Collars can be "costless" if the sold Call pays for the purchased Put. They are often called "Costless Collars".

Dan, thanks...

It appears at least for now, that CRK has roughly 50% hedged for 2022? Seeing how the NG futures are now hitting $5, I am thinking they should leave the remaining unhedged to get the upside on pricing which based on your coverage it appears to be quite good in the winter and spring months. The faster they pay down their debt, the better.

I think CRK and the other gassers should use collars to hedge for 2022 and 2023. Today the could probably set costless collars with $3 floors and ceilings over $6.

Historically, spikes in the natural gas price have been short lived.
See 25 year chart here: https://tradingeconomics.com/commodity/natural-gas

However this time it might be different. Why?
> "Historically" the US has always had plenty of gas supply and we did not export much gas.
> I think we now have a structural change because of the HUGE increase in US natural gas export capacity, which is still growing.
> Demand for US ngas and NGLs has tripled over the last twenty years.
> We may be seeing the Marcellus/Utica shale play reaching peak production.

If I am right, the peak prices this coming winter won't last much past the winter heating season, but we may see the new "Right Price" for US natural gas start with a $4.

CRK doesn't have a near-term debt problem. They have restructured their long-term debt and have plenty of liquidity. See page 11 of our August profile on CRK, which you can find under the Sweet 16 tab on our website.