Hedging Haircuts and Big Basis Moves


Another fantastic article by the folks over at Petronerds. You would think with the price of WTI rising operators would now be turning a profit but a deeper dive into the company reports can reveal a lot about how companies in US unconventionals fund their exploration, completions and production. Now that the price is in the $70 range a lot of operators are missing out on the upside to higher oil prices because they are hedged in at a much lower price. 

Outstanding swap and collar positions are on pace to cost the 25 E&Ps covered in this report roughly $1.5 billion in Q2 2018

So potentially the higher oil prices now go, there seems to be a chance it could negatively impact US Oil production. As companies slowly start to unwind their hedges over the next few quarters there may be a push back on producing too much until there's a better chance of capturing higher commodity pricing. 



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