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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: Dennis Roth who wrote (178591)	5/27/2013 6:21:18 AM
From: Dennis Roth	3 Recommendations Read Replies (1) \| Respond to of 206168

E&P Stock Perspectives Per Underlying Commodity Price Drivers Natural Gas Hedges Should Boost E&P Company Cash Flows Again This Year, But To A Much Lesser Extent Than In 2012 23 May 2013 ¦ 17 pages ir.citi.com Natural Gas Hedges Continue To Provide Strong Uplift To Cash Flows – Our E&P coverage group hedged nearly 50% of their natural gas production in 2012 which, along with oil price hedges, yielded a ~$7.3bn aggregate hedging gain. This in turn boosted after-tax operating cash flows by ~12% last year. Notably, ~$6.5bn of this uplift (~90%) was due to natural gas price hedges. Meanwhile, our coverage group has now hedged ~42% of projected full-year 2013 natural gas production, up from ~35% at the start of the year, as companies such as *Ultra, Sandridge* and *Southwestern* took advantage of the stronger year-over-year prices to sharply increase their hedge positions during Q1’13. Interestingly, much less, or 33%, of projected 2012 natural gas production was hedged at this juncture one year ago. Our coverage group has also now hedged ~53% of projected 2013 oil production, up from ~47% at the beginning of the year. And one year ago, this group had hedged just ~36% of projected 2012 oil production. Thus, producers’ have been much more aggressive in hedging both their ensuing year natural gas and crude oil production at this juncture. Based on our current commodity price forecasts ($3.80/MMBtu for natural gas and ~$90/$104/Bbl for WTI/Brent oil), we project total hedging gains for our coverage group in 2013 will total ~$3.4bn with natural gas hedges accounting for $1.5bn (44%) of this uplift, thus augmenting after-tax operating cash flows by ~5% in total. But we would note that hedges may again continue to be added during the year. Notably, Pioneer, Quicksilver, Magnum Hunter, Range and *Devon* are currently the most heavily hedged with regard to natural gas in 2013, having hedged with swaps or collars 70% or more of their 2013 projected natural gas volumes.