Understanding Devon Energy’s Hedging Activities
Devon Energy’s hedging advantage
For 1Q17, crude oil and bitumen hedging activities increased Devon Energy’s (DVN) average realized crude oil and bitumen price by $0.50 per barrel. Excluding hedges, the 1Q17 average realized price for DVN’s crude oil and bitumen production was $37.33 per barrel. This means that the commodity hedging activities increased DVN’s average realized crude oil and bitumen price by ~1%.
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Devon’s 2017 hedges
For 2Q17, 3Q17, and 4Q17, Devon Energy has fixed price swaps on NYMEX WTI (West Texas Intermediate) crude oil (USO) for 74,600 barrels per day at weighted average prices of $53.34 per barrel, respectively.
For 2Q17, 3Q17, and 4Q17, DVN also has two-way collars on NYMEX WTI (West Texas Intermediate) crude oil for 64,342 barrels per day, respectively. In its two-way collar strategy, DVN has sold (or short) call options with a strike price of $57.96 and bought (or long) put options with strike price of $45.63.
For 2Q17, DVN’s peer Murphy Oil (MUR) has fixed price swaps on NYMEX WTI for 22,000 barrels per day at a weighted average price of $50.41 per barrel.