Hedging a Tough Call for US E&Ps Entering New Year

摘要

US independent producers have recently increased their hedging activity for 2017, seizing on price spikes in oil--inspired by Opec's deal to cut production--and in natural gas--where frigid weather has had a similar effect (OD Dec.27'16). The result is that US exploration and production (E&P) companies have more hedges on their books heading into 2017 than they did a year ago. However, the prices of 2017 hedges are lower than the 2016 ones they replaced--some of which were put in place before the mid-2014 price collapse--and that limits their impact on cash flows.