E&P Oil Hedges Provide Some Cover During a Perfect Storm

In the wake of the concurrent COVID-19 demand shock and OPEC+ supply war, E&P hedge books will provide vital liquidity on the path to recovery. Enverus’ latest analysis reveals 2.5 MMbbl/d of aggregate 2020 oil-hedge volume among publicly traded North American E&Ps at an effective hedge price above $50 WTI. Most oil-weighted E&Ps have hedged between 25% and 90% of anticipated oil production for the year. We estimate the value of these financial-derivative assets (in conjunction with gas and NGL hedges) exceeds 10% of respective enterprise values for the majority of E&Ps.

Estimated Oil Production Hedged in 2020

Hedged oil volumes decline by 85% after 2020. If oil prices fail to recover by year-end, 2021 could prove even more challenging for E&Ps than 2020.

The full report was jointly authored by recently-united Drillinginfo and RS Intelligence teams. For information on how to access the report and the datasets associated with it, please contact your Enverus account manager.