• 4 minutes Oil Price Editorial: Beware Of Saudi Oil Tanker Sabotage Stories
  • 6 minutes UAE says four vessels subjected to 'sabotage' near Fujairah port
  • 13 minutes Mueller Report Brings Into Focus Obama's Attempted Coup Against Trump
  • 15 minutes Magic of Shale: EXPORTS!! Crude Exporters Navigate Gulf Coast Terminal Constraints
  • 4 hours Trump bogged down in Mideast quagmire. US spent $Trillions, lost Thousands of lives, and lost goodwill. FOR WHAT? US interests ? WHAT INTEREST ? . . . . China greatest threat next 50 years.
  • 11 hours Why is Strait of Hormuz the World's Most Important Oil Artery
  • 12 mins Solar Cheaper than Coal
  • 14 hours Wonders of Shale- Gas,bringing investments and jobs to the US
  • 52 mins CLIMATE PANIC! ELEVENTY!!! "250,000 people die a year due to the climate crisis"
  • 2 hours Rural and Conservative: Polish Towns Go 'LGBT free' Ahead Of Bitter European Election Campaign
  • 9 hours California's Oil Industry Collapses Despite Shale Boom
  • 3 hours Global Warming Making The Rich Richer
  • 7 hours North Dakota oil output totals 1.39 million b/d in March, up 4% on month: state
  • 5 hours Misunderstanding between USA and Iran the cause of current stand off, I call BS
  • 14 hours Knock-Knock: Aircraft Carrier Seen As Barometer Of Tensions With Iran
  • 14 hours "We cannot be relying on fossil fuels to burn as an energy source at all in our country" - Canadian NDP Political Leader
  • 6 hours Compensation For A Trade War: Argentina’s Financial Crisis Creates An Opportunity For China
  • 49 mins Crude oil?
Nick Cunningham

Nick Cunningham

Nick Cunningham is a freelance writer on oil and gas, renewable energy, climate change, energy policy and geopolitics. He is based in Pittsburgh, PA.

More Info

Locked Into Hedges, Shale Misses Out On Oil Price Rally

Rig

The shale industry is set to enjoy its best year, arguably in its history, but some drillers are not benefitting as much as expected because they locked themselves into hedges at lower prices.

Shale drilling has historically been a loss-making proposition. The precipitous decline in output from shale wells meant that companies had to use the revenue from one well to drill the next well. Cash was continuously recycled back into new wells, and shareholders rarely saw any profits flow back to them.

That is set to change this year. “Higher prices and operational improvements are putting the US shale sector on track to achieve positive free cash flow in 2018 for the first time ever,” the International Energy Agency (IEA) wrote in a recent report on energy investment.

But not everyone is raking in as much money as they might have wanted. A handful of shale companies posted lower-than-expected profits in recent days, owing to the fact that they secured hedges for their second quarter production at prices that were lower than the prevailing market price.

Among the companies that undershot expectations were Devon Energy, Anadarko Petroleum and Chesapeake Energy. As Reuters notes, many shale companies hedged at around $55 per barrel in the second quarter while WTI was much higher.

Those hedges were likely secured last year, when oil traded at lower levels. The shale companies locked in those positions as a risk management strategy, guarding…




Oilprice - The No. 1 Source for Oil & Energy News