Deutsche Bank Names the Best and Worst Hedged Energy Companies

With oil prices dropping daily, it sucks to be an energy company. Or does it?

In 2009 and 2010, hedges may be saviours for outfits toiling in the oilpatch. Deutsche Bank Securities picked through the companies it covers and concluded that

virtually all of the hedging portfolios are in-the-money, and despite the lack of demonstrable historical precedent, we believe outsized hedging protection this year will translate into share price outperformance.

Analyst Shannon Nome calculates that of the 22 oil and gas producers under Deutsche Bank’s watch, the average producer has 45% of estimated total production hedged for 2009 and 19% hedged in 2010. With oil prices toiling around $35 per barrel, any hedge is a good hedge.

“Given the major correction in oil and gas prices since mid-2008, most hedging portfolios have swung decidedly into the black,” the analyst said.

The best of the bunch? XTO Energy Inc. (XTO), SandRidge Energy Inc. (SD), Newfield Exploration Co. (NFX), Quicksilver Resources Inc. (KWK), Southwestern Energy Co. (SWN) and EXCO Resources Inc. (XCO).

Ah, but some missed the boat. Two producers are completely unhedged in 2009 — Continental Resources Inc. (CLR) and Delta Petroleum Corp. (DPTR), according to Deutsche Bank.

Among the least hedged, and thus expected to benefit only minimally from their hedges, are Apache Corp. (APA), Devon Energy Corp. (DVN), Anadarko Petroleum Corp. (APC), and Equitable Resources Inc. (EQT).

Comments

[searcher:]

Guess we might be buying the hedgers and any economic long term options on those not currently hedged but likely to survive.

Jan 18 12:12 PM

[dspl4Js:]

NFX,Independant oil and gas mid cap thats positioned to grow considerably when we have an energy rebound.With cutbacks in production seemingly somewhat adhered too.The pendulum is going to swing hard in the other direction before production can catch back up.

Disclosure Long NFX

Jan 18 03:33 PM

[billf921:]

they missed one probably because they dont follow it

PXP

They have 200 % coverage as they have double puts

Jan 20 08:16 AM

[PeteK:]

One little sneeze from the Middle-East will push oil price up $15-$20.
This is true throught out recent history.

Feb 28 07:58 PM