OREANDA-NEWS. March 14, 2017. Some Appalachian natural gas producers are hedging more of their planned production as prices have risen after hitting a 17-year low during last year's market volatility.

Nymex natural gas prompt-month prices dropped to a 17-year settlement low in March 2016, below $1.65/mmBtu on mild weather and high inventories. This prompted producers to rein in their output and lower capital budgets. But as prices fell, power generation demand for gas rose. Prices reached a 22-month high near $3.34/mmBtu last month, and producers in the Appalachian Marcellus and Utica shales quickly — but cautiously — sought to drill more wells, companies and analysts have recently said.

Some producers have been loath to increase capital spending to do so, instead capitalizing on funds saved from improved drilling methods. And some are increasing the amount of expected production that is covered by hedges, which are investments to reduce the risk of adverse price movements. Producers have long used hedges to help plan the year ahead. But some producers in Appalachia have dramatically increased either the amount of production covered by hedges, or the time period covered.

Like many producers, Antero Resources is not new to hedging — it had hedged 100pc of its output through 2017 by the first quarter of 2016. But the producer has expanded its hedging program further into the future. Antero is now fully hedged through 2018 on its expected gas production, and it is 85pc hedged through the end of the decade, executives said during an earnings call earlier this month. The company is hedging its 2017 production at $3.63/1,000 cf and its 2018 output at $3.91/1,000 cf. And the producer is hedged at about a dollar premium to the current strip through 2027, chief financial officer Glen Warren said.

Antero netted a 4?/1,000 cf premium to Nymex last year, which was at the high end of its guidance. And Warren said its realized price for the first quarter was 52?/1,000 cf above its closest peer. But the producer is still relying on its hedging to ensure it will stay competitive in the coming years, he said.

Rice Energy is more than 90pc hedged for 2017, up from a little more than 80pc in the third quarter of 2016. The producer had hedged only 70pc of its 2015 production and 87pc of its 2016 output.

ConsolEnergy, EQT, Gulport Energy and Range Resources have all increased their 2017 production hedge percentages since the third quarter of 2016, BTU Analytics senior energy analyst Marissa Anderson said.

"It is worth noting that the producers that are the highest hedged are generally the ones targeting considerable production growth for 2017," she said.

Antero is seeking to increase its output by up to 25pc this year, ahead of the start-up of the 3.25 Bcf/d (92mn m?/d) Energy Transfer Rover pipeline project. The pipeline is expected to begin partial flows in mid-2017, and deliver gas from Appalachia to Dawn, Ontario.

Range is planning to raise its production levels by up to 35pc as it continues to flow gas into Enbridge's 628mn cf/d Gulf Markets expansion project, which came on line in late 2016. The producer has hedged its 2017 output at nearly 80pc, compared with less than 60pc in the third quarter of 2016.