October 24, 2018 / 10:05 PM / a month ago

Pioneer Natural Resources sees $135 million hit from hedges

HOUSTON (Reuters) - Pioneer Natural Resources (PXD.N) on Wednesday warned investors that it expected a $135 million hit to earnings during the third quarter due to losses on oil hedges, according to a filing with the U.S. Securities and Exchange Commission.

Many shale producers have faced losses on hedges this year after oil prices climbed above previously anticipated levels. Benchmark U.S. crude futures traded over $70 a barrel during the third quarter versus under $50 for much of the same quarter a year ago.

Some producers took out hedges in recent months to lock in profits as oil prices climbed, but those positions exposed them to potential losses if prices went too high, too quickly.

EOG Resources (EOG.N) earlier this month told investors it was anticipating $52.1 million non-cash loss on derivative contracts during the quarter. Range Resources Corp (RRC.N) this week reported a $34.6 million loss on hedges due to “increases in future commodity prices.”

Losses on oil hedging contracts are anticipated to be heavy this quarter, Ben Montalbano, co-founder of Denver-based analytics firm PetroNerds said earlier this month. Many of the companies PetroNerds tracks have swaps and collars under $60 a barrel, he said.

Reporting by Liz Hampton; Editing by Alistair Bell

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