AEC boosts natural gas hedge
Lily Nguyen
CALGARY -- Alberta Energy Co. Ltd. has hedged nearly two-thirds of its gas production in a move that signals that the largest producer of natural gas in Canada continues to be pessimistic about gas prices despite a recent upturn.
Calgary-based AEC said yesterday that it has hedged an additional 267 million cubic feet of gas a day during the first nine months of the year, in addition to 733 million it had hedged in December and January.
That means it has hedged between 63 and 66 per cent of its expected average gas sales, based on its 2002 sales forecast of between 1.525 and 1.575 billion cubic feet a day.
"This is by far the largest amount we've hedged," said Alan Boras, a spokesman for the company. He said the last time AEC hedged any of its gas production was in 1996.
"It's telling you they're still anticipating more weakness in the natural gas price," said Brian Prokop, an analyst with Peters & Co. in Calgary.
Mr. Prokop said that runs counter to the recent price jump in the commodity.
The U.S. benchmark price for natural gas on the spot market crossed the $3 (U.S.) per million British thermal units mark late last week for the first time in over four months.
AEC said its hedges consist of a contract to sell 623 million cubic feet of gas a day in Canada at $3.90 (Canadian) per 1,000 cubic feet, a contract to sell 303 million cubic feet of gas a day in Wyoming for $2.64
(U.S.) per 1,000 cubic feet, and a contract to sell 74 million cubic feet of gas on the New York Mercantile Exchange at $3.08 per 1,000 cubic
feet. (One thousand cubic feet is roughly equivalent to a million British thermal units.)
Mr. Prokop also noted that the company's hedges expire by the fourth quarter of the year and it has not entered into any hedges for 2003. That shows AEC expects prices to pick up by late this year, he said.
While many senior petroleum producers routinely hedge a portion of their production, Mr. Boras said AEC has traditionally turned away from
that strategy.
Copyright 2001 The Globe and Mail |
