​TSX companies increase hedging going into Q2 by 120,000 bbl/d

Image: Joey Podlubny/JWN

The 54 active hedgers among TSX-listed oil and gas producers (see note 1) went into the second quarter with hedging contracts that covered a total volume of almost 737,000 bbls/d of oil and natural gas liquids (NGLs) production and 4.4 bcf/d of natural gas production, analysis from the CanOils hedging database has revealed.

For companies hedging oil and NGLs, this represents a significant 20 percent increase – 120,000 bbl/d – over the volumes hedged by active hedgers heading into Q1.

This increase in hedging volumes across the board – there were also three more active hedgers heading into Q2 2017 than headed into Q1 2017 – is chiefly down to the recent uncertainty in the oil price.

Even though WTI prices increased from US$38.16/bbl in Q1 2016 to US$50.60/bbl in Q1 2017, uncertainty was clearly rife enough heading into Q2 amongst oil producers to see this significant 120,000 bbl/d increase in oil and liquids volumes hedged.

In the end, Q2 2017 did of course see a drop in average WTI prices to US$48.06/bbl, so while not all of the contracts for Q2 volumes would have actually been signed in Q1, last quarter was a good time for companies to increase their risk management programs.

They would have been able to lock in at higher prices than if they had delayed a few months, which will provide greater protection against any future downward pricing fluctuations and secure their cash flow moving into the second half of 2017. For more on CanOils hedging, click here.

Read more: Why do oil and gas companies hedge?

Notes

  1. “Active hedgers” in this article are companies that headed into Q2 2017 with over 10% of the Q1 production covered by hedging contracts.
    In total, based on production and hedging data provided in Q1 2017 results, 54 companies had contracts set to be active in Q2 2017 that covered over 10% of their Q1 2017 production.