Oil hedges surge in third quarter as prices rise, Wood Mac says
Published 9:34 am, Wednesday, November 29, 2017
U.S. oil companies in the third quarter locked in higher prices for more than twice the number of barrels they did in the previous three months as crude rose toward $60 a barrel, Wood Mackenzie says.
The energy research firm said in a new report 33 of the largest U.S. drillers hedged nearly 900,000 barrels a day in the third quarter, an increase of 147 percent compared to the second quarter and the largest amount added in one quarter since at least the end of 2015.
The companies locked in prices ranging from $50 to $60 a barrel, a level that companies claim make many U.S. oil fields lucrative. In a statement, Wood Mackenzie analyst Andy McConn said recent pressure from oil investors to "live within cash flow" is one big driving force behind the industry's appetite for risk-mitigating moves like hedging.
The group of 33 producers studied by Wood Mackenzie has hedged some 22 percent of their liquids production for next year, compared to 17 percent this year. That could mean higher levels of oil field spending next year.
"Producers that are able to lock in prices above previous expectations may feel more comfortable with increasing activity levels," McConn said. "Others may leave budgets unchanged and promote higher cash-flow guidance to an investment community anxious about profits."