MEG, Murphy Among Q1’s Biggest Oil Hedging Winners

MEG Energy Corp. and Murphy Oil Corporation were two North American oil producers that made significant gains from hedging strategies in Q1 2020.

This is according to a new report released by Evaluate Energy that analyses the Q1 results of 65 oil-weighted producers in the United States and Canada, which is available for download here.

The report showed that as a group, the 65 producers recorded $2.4 billion in realized hedging gains from settled oil and gas derivatives in Q1 2020, a figure almost 10 times the value recorded three months earlier because of the sharp drop in oil prices seen during the quarter.

Q1 unrealized hedging gains for these producers were even higher at $12.4 billion, but these are just changes in present values of open positions rather than any movement in cash as there would be for settled derivatives.

On a per bbl of oil equivalent basis, these 65 producers saw average realized gains of $3.30/boe for all oil and gas hedging positions, according to first quarter results.

Source: Evaluate Energy Hedging Review, June 2020

“15 companies realized gains of more than $5/boe from their hedging activities, a value that would have represented an increase in price of more than 10 per cent for every barrel of oil hedged based on Q1 WTI pricing,” said Isabelle Li, co-author of the report and senior analyst at Evaluate Energy.

“Murphy Oil’s $22.10/boe in realized gains per boe is head and shoulders above any other company in our group. MEG Energy was Canada’s leading producer by this metric and MEG was also the leading North American hedger among companies that only hedged oil and liquids, realizing gains of over $9/bbl.”

Source: Evaluate Energy Hedging Review, June 2020

For full analysis on the realized and unrealized gains per barrel seen during Q1, download Evaluate Energy’s latest hedging report at this link.