Hi Paul -
Here is a table of the new contract hedges that ENERPLUS RES FD (NYSE: ERF) has effective April 2008 through December 2009. You will see that most of the hedges come off or are significantly reduced after April 2009. The capped price for oil is around $85/barrel and $11.00/Mcf. For 2009 the caps come off for NG and move up to $93/barrel for oil. On average, it appears that the company has left their 2009 hedges low and can lock in much higher rates as the opportunity arises.
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Natural Gas
(CDN$/Mcf)
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April 1, November 1, April 1,
2008 - 2008 - 2009 -
October 31, March 31, October 31,
2008 2009 2009
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Floor Prices (puts) $ 7.09 $ 8.66 -
% (net of royalties) 25% 14% -
Fixed Price (swaps) $ 7.44 $ 9.35 $7.86
% (net of royalties) 20% 3% 1%
Capped Price (calls) $ 8.25 $ 11.24 -
% (net of royalties) 25% 11% -
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Crude Oil
(US$/bbl)
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April 1, July 1, January 1,
2008 - 2008 - 2009 -
June 30, December 31, December 31,
2008 2008 2009
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Floor Prices (puts) $ 71.43 $ 72.09 $ 81.36
% (net of royalties) 38% 35% 16%
Fixed Price (swaps) $ 79.95 $ 79.97 $ 100.05
% (net of royalties) 18% 19% 2%
Capped Price (calls) $ 85.09 $ 85.48 $ 92.98
% (net of royalties) 24% 22% 12%
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>>
ERF hedges a portion of their production so then can guarantee their cash flow that is needed to cover their current and future oil exploration expenses.
I noticed that other companies are a bit more aggressive with these hedge contracts which if not managed carefully can blow up. In ERF's case, they took a small net loss on their 2007-2008 hedges vs the market rates in a very volatile price environment.
EKS |
