Best And Worst-Hedged E&Ps Beyond 2015

In a new report, analysts at Wunderlich took and in-depth look at oil and gas exploration and production (E&P) companies and their hedging positions and strategies for 2016 and beyond. Analysts point out that many companies missed out on better hedging opportunities that were available when oil prices were higher, but a handful of names are extremely well-hedged moving forward.

Apocalyptic hedging
Analysts point out that many companies that missed opportunities to hedge at higher oil prices are now scrambling to hedge against an “apocalyptic scenario” in which oil prices stay well below $50 for an extended period of time. “Back when oil prices were in the $80s and $70s per barrel, nearly everyone that we spoke with sought only to hedge ‘opportunistically’… unfortunately, that turned out to mean ‘not at all’ at those prices as the commodity continued to fall,” analysts explain.

Best-hedged 2015-2016 names
As a result of poor judgement, only a handful of E&P names have strong hedges through 2016.

A large number of companies have hedges over 70 percent of production for 2015, including Memorial Resource Development Corp MRD, PDC Energy Inc PDCE, Halcon Resources Corp HK, Bill Barrett Corp BBG, Pioneer Natural Resources Co PXD, Resolute Energy Corp REN and Rosetta Resources Inc ROSE.

Looking out to 2016, the number of strongly-hedged companies falls off dramatically. Only Pioneer (67 percent), Halcon (53 percent) and PDC (49 percent) have 2016 oil hedges of around 50 percent of production or greater.

2017 and beyond
Moving beyond 2016, very few E&P names have small oil and/or natural gas hedges in place. The report names Memorial as the most hedged company in 2017 and mentions Gastar Exploration Inc GST, Whiting Petroleum Corp WLL, Synergy Resources Corp SYRG, Gulfport Energy Corp GPOR, PDC, Pioneer and Bill Barrett as other companies with modest hedges beyond 2016.

Least hedged in 2016 and beyond
The report named the following companies as names lacking sizable hedges if low oil and gas prices persist beyond 2015:
Approach Resources Inc AREX
Chesapeake Energy Corp CHK
Cimerex Energy Co XEC
Continental Resources Inc CLR
Earthstone Energy Inc ESTE
Emerald Oil Inc EOX
Energen Corp EGN
EOG Resources Inc EOG
Magnum Hunter Resources Corp MHR
RSP Permian Inc RSPP
Denbury Resources Inc DNR
Northern Oil and Gas Inc NOG
SandRidge Energy Inc SD