tives without exceeding historical levels,” McConn said.
The peer group has 22% of 2018 liquids production
hedged, whereas this time last year only 17% of 2017 liquids
production was hedged.
“Hedge positions significantly influence tight-oil produc-
ers’ decisions about budgets and activity. They are particu-
larly pertinent at this stage of the year, when most companies
are wrapping up the planning process for 2018,” McConn
said. “Producers that are able to lock in prices above previ-
ous expectations may feel more comfortable with increas-
ing activity levels. Others may leave budgets unchanged and
promote higher cash-flow guidance to an investment com-
munity anxious about profits.”
The analysis also looked at gas-hedging activity, which
was more subdued than oil. Gas hedges were down 29%
from this year’s second quarter, with only an annualized 1. 6
bcfd of new gas hedges added during the third quarter. Most
were added at strike prices between $3/Mcf and $3.40/Mcf
at Henry Hub, with Range Resources Corp. accounting for
27% of new volume added.
“Gas-hedging activity has been much less volatile than oil
during 2017, partially due to lower volatility in the underlying price of the commodity. Producers have demonstrated
that—similar to oil—inflections in gas price can trigger inflections in hedging behaviour,” McConn noted.
Texas ranks highest
in oil and gas allure
Texas tops a list of 97 jurisdictions ranked by oil and gas
executives for investment allure in an annual survey by the
conservative Fraser Institute of Canada.
Venezuela ranked last in the survey, which had 333 respondents.
The survey ranks jurisdictions—states, provinces, geographical regions such as offshore areas, and countries—
according to the extent of their oil and gas investment barriers.
It evaluates jurisdictions by assigning scores on each of
16 questions about factors known to affect investment decisions. The scores yield a “policy perception index,” which
the institute applies to jurisdictions grouped by proved oil
and gas reserves.
Of the 15 jurisdictions with the largest petroleum reserves, the five ranking highest in investment attractiveness,
in descending order, are Texas, the United Arab Emirates,
Alberta, Kuwait, and Egypt.
The five least attractive jurisdictions in the large-reserves
category, starting at bottom, are Venezuela, Libya, Iraq, Indonesia, and Nigeria. They account for 41% of the oil and gas
reserves of all jurisdictions covered by the survey.
The 97 jurisdictions evaluated account for 52% of global
Stone generated the prospect, called Rampart Deep. It
holds a 40% interest in the MC 116 No. 1 well, which cut
130 net ft of pay in three primary zones. The results lower
exploratory risk of Stone’s Derbio prospect updip of Ram-
Stone says the Rampart partners are reviewing drilling
plans for Derbio.
Deep Gulf Energy III and a group of entities managed by
Ridgewood Energy Corp. hold 30% interests each in the Rampart well. They may elect to participate in the Derbio prospect
for a total interest of 60%, leaving Stone with 40%.
double down on hedging
in third quarter
Hedging activity surged in this year’s third quarter as oil
producers rushed to lock in rising prices for future production, according to Wood Mackenzie’s latest analysis of oil
and gas hedging activity.
The analysis, which looked at 33 of the largest upstream
companies with active hedging programs, found that companies added an annualized 897,000 b/d of new oil hedges during the third quarter, up 147% from second quarter.
This was the highest volume of oil hedges added in a single
quarter since WoodMac began tracking hedge additions in
Most of the new derivatives were added at strike prices at
$50-60/bbl. The recent increase in oil-price futures explains
much of producers’ eagerness to lock-in prices. Since the
downturn began, producers have demonstrated more willingness to hedge while prices rise, but that only tells part of
Andy McConn, WoodMac research analyst, said, “Many
producers have been basing long-term growth targets on
$50/bbl price scenarios. When futures prices rose above that
level, producers may have viewed it as an opportunity to
lock in prices that will enable them to hit—or maybe out-
perform—targets. Recent pressure from investors for pro-
ducers to live within cash flow is likely compelling produc-
ers to limit exposure to price risk.”
According to the analysis, Cenovus Energy Inc. and Hess
Corp. added the most oil hedges, accounting for 35% of new
volume added. But many other producers also hedged sig-
nificant oil volumes, with 14 companies each adding at least
“Oil prices have continued to rise after the third quarter.
Producers that found $50-53/bbl [West Texas Intermediate]
attractive may look to add more hedges at $53-59/bbl. But
the recent surge in hedging leaves less room to add deriva-