EOG Resources received net cash of $193.4mn from its oil and gas hedges in the second quarter, helping the independent cushion the fall in revenue from the drop in crude prices.
Hedging strategies have been key to earnings of US producers like Pioneer, Devon and Oasis Petroleum, helping them in part to secure funding from lenders to boost liquidity as a 50pc drop in crude prices squeezes cash flow. But a unclear oil market outlook has kept many of them away from locking-in fresh cover for coming years, posing a new funding challenge.
In its second quarter update, EOG said it hasn't entered into any new oil or gas contracts so far.
EOG, which made a net cash gain of $367.7mn from hedges in the first quarter and $222.9mn in the fourth quarter of last year, is looking "to put some hedges in going into next year," chief executive Bill Thomas said.
For the period 1 May through 30 June, EOG has hedges for 47,000 b/d at a weighted average price of $91.22/bl. For 1 July through 31 December it has contracts in place for 10,000 b/d at an average price of $89.98/bl.
During the first quarter, EOG increased its natural gas hedges and now has about 22pc of its forecasted North American output covered for the rest of the year. For 1 June through 31 December, EOG has hedges in place for about 203,500 mmBtu/d at an average of $4.31/mmBtu.
So far, Pioneer Natural Resources is the only mid- to large-sized independent that has announced new hedging contracts for 2016. It has 100,514 b/d covered for next year at a Nymex WTI ceiling price of $77.21/bl and a floor of $66.92/bl. It also added 15,000 b/d of expected 2017 output at a ceiling of $73.01/bl and a floor of $65/bl.
EOG reports second quarter earnings on 7 August.
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