BAKU, Azerbaijan, March 16
By Leman Zeynalova – Trend:
Even though oil prices plunged to as low as $30 per barrel this week and are likely to go even lower as OPEC+ plans to increase production from April, US shale oil operators expect to save billions in record-high hedging gains in 2020, Trend reports citing Rystad Energy, an independent energy research and business intelligence company.
Rystad Energy’s assessment is based on an analysis of a representative peer group of 30 dedicated US light tight oil firms with a combined output of about 38 percent of the total expected US oil production in 2020, excluding royalties.
“Looking at the hedging positions of the considered companies, we conclude that they hedged almost 50 percent of their guided 2020 output at an average price floor of $56 per barrel.”
The analysis shows that we might see a record-high cumulative hedging gain in the industry if the West Texas Intermediate (WTI) oil price stays below $40 per barrel. To be precise, the peer group’s hedging gains can be as high as $10.5 billion in a $40 WTI environment, potentially rising to $17 billion if WTI averages $25 in 2020.
To put the savings into perspective, the hedging gains in a $35 WTI environment are equivalent to more than 25 percent of the peer group’s capex guidance of $45 billion for 2020.
“The industry is well-positioned to mitigate the effects of an oil-price collapse in the short term thanks to the material cash flow support from derivative contracts,” says Artem Abramov, Rystad Energy’s Head of Shale Research.
Crude-oil production from seven major US shale plays is forecast to climb by 18,000 barrels a day in March to 9.175 million barrels a day, according to a report from the Energy Information Administration. Oil output from the Permian Basin, which covers parts of western Texas and southeastern New Mexico, is expected to see an increase of 39,000 barrels a day in March from February. Shale oil output from the Anadarko, Appalachia, Bakken and Niobrara regions, however, are expected to see monthly declines, the report showed. The data were released around the time of the New York Mercantile Exchange settlement for oil futures.
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