2.1 b as in BILLION HIT!!
For the second quarter of 2022, EOG anticipates a net loss of $1,377 million on the mark-to-market of its financial commodity derivative contracts. During the second quarter of 2022, the net cash paid for settlements of financial commodity derivative contracts was $2,114 million, of which $1,328 million was related to the early termination of certain contracts. Such early termination payments included $307 million to terminate contracts scheduled to settle in the second half of 2022 and $1,021 million to terminate contracts scheduled to settle after December 31, 2022. >>> THAT IS REAL AND THEY ARE SPECTACULAR!
For the quarter ended June 30, 2022, NYMEX WTI crude oil averaged $108.42 per Bbl, and NYMEX natural gas at Henry Hub averaged $7.17 per MMBtu. EOG's actual realizations for crude oil and natural gas for the quarter ended June 30, 2022, differ from these NYMEX prices due to delivery location (basis), quality and appropriate revenue adjustments. EOG's actual realizations for NGLs are influenced by the components extracted, including ethane, propane, butane and natural gasoline, among others, and the respective market pricing for each component. >>THAT IS GOOD INFO, ADJUST MODELS ACCORDINGLY
In connection with its financial commodity derivative contracts, EOG had $1,651 million of collateral posted at July 11, 2022. EOG expects this collateral to be applied to the settlement of financial commodity derivative contracts if market prices remain above contract prices. The amount of posted collateral will increase or decrease based on fluctuations in forward NYMEX WTI and Henry Hub prices.
https://investors.eogresources.com/sec- ... d=15941127
MORAL OF STORY:: Hedges do matter and that's why I like unhedged producers
eog update , threw in towel on some hedges
Re: eog update , threw in towel on some hedges
Upon reviewing the specific actions on closed out contracts, It looks like they terminated some of their crap oil hedges in Q4
I give management credit for adjusting their strategy based on the new normal.
Most of these guys do nothing even when fundamentals change.
This in my mind means they are bullish on back end of crude curve ,which is in backwardation, and feel that prices will be higher than the price they covered at.
October - December 2022 87 MBbld at 88.85; current price about $ 94 So they made $ 5 bucks 40 m already
I give management credit for adjusting their strategy based on the new normal.
Most of these guys do nothing even when fundamentals change.
This in my mind means they are bullish on back end of crude curve ,which is in backwardation, and feel that prices will be higher than the price they covered at.
October - December 2022 87 MBbld at 88.85; current price about $ 94 So they made $ 5 bucks 40 m already
Re: eog update , threw in towel on some hedges
Hindsight is 20/20 and every upstream company wishes they were unhedged when oil & gas prices go up and wishes they were hedged when commodity prices go down.
EOG still has a lot more unhedged production than they have hedged, and the unhedged percentage goes up each quarter. Plus, they produce and sell a lot of natural gas from Trinidad that sells at much higher international gas prices. For example, with HH gas averaging $4.48 in Q1 2022, EOG's actual average realized ngas price (net of cash settlements on their hedges) was $5.65/mcf in Q1 2022.
Also, for our new members, all of my forecast/valuation models do include the impact of each company's hedges.
Net of the cash settlement on their hedges, EOG has and will continue to generate a lot of cash flow from operations.
2020 Actual operating cash flow was $4.856 billion ($8.32/share)
2021 Actual operating cash flow was $9.309 billion (15.91/share)
2022 Forecast operating cash flow s/b $14.570 billion ($24.87/share) and free cash flow from operations s/b $9.8 to $10.2 billion.
FCF yield per share is on pace to be over 16% this year, which is darn good.
My Point: Each company's hedges must be considered in the valuation of their stock, but hedges are just one of many factors. Others are proven reserves, balance sheet strength, production growth rate, quality of leasehold and drilling inventory ("running room") and very important to me is the ability of the company to fund a sustainable growth strategy with operating cash flow. EOG gets an A+ grade on all of the above.
EOG still has a lot more unhedged production than they have hedged, and the unhedged percentage goes up each quarter. Plus, they produce and sell a lot of natural gas from Trinidad that sells at much higher international gas prices. For example, with HH gas averaging $4.48 in Q1 2022, EOG's actual average realized ngas price (net of cash settlements on their hedges) was $5.65/mcf in Q1 2022.
Also, for our new members, all of my forecast/valuation models do include the impact of each company's hedges.
Net of the cash settlement on their hedges, EOG has and will continue to generate a lot of cash flow from operations.
2020 Actual operating cash flow was $4.856 billion ($8.32/share)
2021 Actual operating cash flow was $9.309 billion (15.91/share)
2022 Forecast operating cash flow s/b $14.570 billion ($24.87/share) and free cash flow from operations s/b $9.8 to $10.2 billion.
FCF yield per share is on pace to be over 16% this year, which is darn good.
My Point: Each company's hedges must be considered in the valuation of their stock, but hedges are just one of many factors. Others are proven reserves, balance sheet strength, production growth rate, quality of leasehold and drilling inventory ("running room") and very important to me is the ability of the company to fund a sustainable growth strategy with operating cash flow. EOG gets an A+ grade on all of the above.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: eog update , threw in towel on some hedges
I agree 100 % with your comments.
I own AR that is partially hedged
I own AR that is partially hedged
Re: eog update , threw in towel on some hedges
If ngas stays over $6.00 thru year-end (I think it goes over $7.00 in Q4), AR is going to report STUNNING increases in operating cashflow.
AR has a good chance of going up over 1,000% from 1/1/2021 when it traded at $5.45 to more than $55 per share by 12/31/2022. Quite a 2-year run!
My current valuation is $65/share based on conservative assumptions.
AR has a good chance of going up over 1,000% from 1/1/2021 when it traded at $5.45 to more than $55 per share by 12/31/2022. Quite a 2-year run!
My current valuation is $65/share based on conservative assumptions.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: eog update , threw in towel on some hedges
There is very little hedging for the larger shale co's in '23 and that's a little concerning. It's a little like how the options thread popped up right at the top for Sweet 16/XOP.
Re: eog update , threw in towel on some hedges
Some hedged at 50-60 and they didnt hedge when it hit 120
Thats why i believe dont hedge at all or just buy puts if you want insurance to downside
Thats why i believe dont hedge at all or just buy puts if you want insurance to downside