Very insightful. I always thought big players were the ones to watch. But, these reports from smaller companies are actually a pure play to guage regional and domestic production. Am I seeing this correctly that they took off the downside hedge? It looks extremely optimistic on higher prices.
Not seeing anything here tied to a removal of a downside hedge, but in general companies didn't hedge in the $30s, and layered in more hedges as we got to $50... so they could produce more... which creates an overhang... which hurts prices at some point... This particular company is exposed to Brent, not WTI, so they're in good shape if OPEC follows through. It gets shorted unmercifully so the squeezes are pretty intense.
They do not have any puts beginning 2018. They don't expect to sell any lower than market. The higher amount of calls in 2018 mean they have to cover expected deliveries even at higher prices.
When a company hedges their output, it's usually through a cashless collar and that's the price they receive on their production. On the put side - you're correct - they haven't locked in downside protection because they believe the market is heading higher OR the market wasn't liquid enough for them to hedge sufficient volume OR they haven't planned to produce those volumes yet so they haven't hedged them. From a company perspective, I monitor whether they're ramping up production in conjunction with hedges to secure their future cash flows. I can say that this particular company is talking a much better story these days with higher prices so as time goes on you would expect to see more volumes/hedges. Here's another link to oil (and other commodity) prices - the CME database that goes out multiple years - but you may already have this. http://www.cmegroup.com/trading/energy/crude-oil/brent-crude-oil-last-day.html
One last item is monitoring press releases to see what the drilling companies are doing - here's a snippet from PDS which suggests a recovering market: Kevin Neveu, Precision's President and Chief Executive Officer stated, "Recent actions to stabilize and improve commodity prices appear to be well received by our customers. We are seeing signs of strengthening demand for our services for the upcoming Canadian winter drilling season and improving demand in U.S. regions where we operate. Since our third quarter earnings release in October, we have added three rigs years to our 2017 contract backlog and now have an average of 45 rigs under contract for 2017. With over 110 drilling rigs currently running in North America, we are experiencing customer demand greater than the prior year for the first time in over two years and are currently enjoying our historically strongest North American market share."
wise guy. I didn't say I was long term bullish. We will probably see $20 in a recession. I am still bullish for now. We still need to see the reports roll in. I suspect there is a lot of hesitancy whether OPEC will really stick with the plan. Non-OPEC news may indicate more coordination than people want to believe.