EOG hedges net nearly $600mn since September

OREANDA-NEWS. EOG Resources made a net cash gain of nearly \$600mn on hedges in the past six months, as the cover offered the US independent a cushion to withstand the 50pc plunge in crude prices.

The rapid fall in oil has taken its toll on the industry across the board, while companies with strong balance sheets, low drilling and production costs, and proximity to markets have managed to cope better. Hedges on future production by companies such as EOG, Devon and Pioneer Natural Resources have also played a role in helping them weather the storm.

For the first quarter of 2015, EOG received net cash of \$367.7mn after settling its crude oil and natural gas derivatives contracts. The non-cash net gain is expected to be \$76.2mn for the quarter. In the fourth quarter 2014, EOG made a cash gain of \$222.9mn and a non-cash gain of \$750.2mn, the company said in January.

EOG's strategy is in stark contrast to Continental Resources, which surprised investors by removing all its oil hedges for 2014, 2015 and 2016 in the third quarter last year. The move netted the company a one-time gain of \$433mn, but oil had plunged as much as \$30/bl since then, exposing the company to steeper losses than hedged peers.

EOG hasn't taken on additional oil hedges since it published its 2014 annual report on 18 February, but it still has two contracts remaining. One runs from 1 April to 30 June, hedging 47,000 b/d at \$91.22/bl. The second runs from 1 July to 31 December for 10,000 b/d at \$89.98/bl. One from 1 January to 31 March, hedging 47,000 b/d at \$91.22/bl, has closed.