Friday, February 22, 2013

Low Gas Prices: Step 6 is Acceptance

For all of those with rosy expectations about the price of gas rising in 2013 (are there any of you out there anyway?), see below from a short piece in the Wall Street Journal about gas producers accepting the inevitability of low gas prices:
"Another sign of E&P companies accepting that gas prices are low and staying that way is hedging activity. On Thursday, self-described "champion of natural gas" Chesapeake Energy CHK said it had hedged half of its projected 2013 gas output at a price of $3.62. This time last year, it hadn't hedged any—and paid a heavy price as cash flow was crushed. Devon Energy, DVN another big gas producer, has hedged 60% of its expected output at $3.87. This time last year, it had hedged only a third, at $4.73."
Of course, looking at it from a glass-half-full perspective, as Chesapeake usually does, you can call locking in these hedeges solidly in the mid-$3 range as "downside hedge protection."

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