October 9, 2018 / 9:58 PM / 6 days ago

EOG warns oil and gas hedges will hurt third-quarter results

HOUSTON (Reuters) - U.S. shale oil producer EOG Resources on Tuesday warned of a non-cash loss of $52.1 million in the third quarter on commodity derivative contracts in a filing with the U.S. Securities and Exchange Commission.

The Houston-based company attributed the hit to a difference between its realized price for crude oil and natural gas sales during the quarter, and the prices due at NYMEX delivery locations.

Benchmark crude prices averaged $69.50 a barrel during the quarter, EOG said in the filing. It hedged 134,000 barrels per day, or about 35 percent of its prior period’s production, at roughly $60 a barrel.

Analysts still anticipate EOG to report a profit of $1.48 per share in the third quarter compared with a profit of 19 cents in the same quarter last year, according to Refinitiv I/B/E/S.

Losses from hedging contracts will be prevalent in the third quarter across the shale oil and gas industry, said Ben Montalbano, co-founder of Denver based analytics firm PetroNerds.

“This is probably one of the less severe numbers you’ll see this quarter. A lot of their peers have hedged a larger portion of production and done so at a lower price,” he said.

For the roughly 40 companies PetroNerds tracks, the aggregate of swaps and collars were under $60 a barrel, he added.

Last quarter, several producers, including Devon Energy Corp, Anadarko Petroleum Corp and Pioneer Natural Resources, reported losses after missing bets on oil prices. Then, many had hedged around $55 a barrel, but were burned when oil climbed to more than $70 a barrel.

Reporting by Liz Hampton; Editing by James Dalgleish

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