uploads///CNX Hedges

Analyzing CONSOL Energy’s Hedging Advantage

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Jan. 18 2016, Updated 9:06 a.m. ET

CONSOL Energy’s hedging advantage

For 3Q15, natural gas hedging activities increased CONSOL Energy’s (CNX) average realized natural gas price by $0.60 per Mcf (thousand cubic feet). As we have seen in the previous part of this series, the 3Q15 average realized price for CNX’s natural gas production was $2.46 per Mcf. This means that the commodity hedging activities increased CNX’s average realized natural gas price by ~32%.

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CNX’s 2015 hedges on natural gas

As shown in the above chart, for 4Q15 and 2015, CNX had hedged 43.1 Bcf (billion cubic feet) and 123.6 Bcf of natural gas volumes at hedge prices of $3.42 per Mcf and $3.62 per Mcf, respectively, which includes hedging against NYMEX natural gas price volatility as well as changes in basis differential. For 4Q15 and 2015, CNX had also hedged 20.2 Bcf and 49.9 Bcf of natural gas volumes at hedge prices of $3.5 per Mcf and $3.75 per Mcf. These figures are hedged against NYMEX natural gas price volatility only and exclude any basis differential risks.

CNX’s 2016 hedges on natural gas

CNX has hedged its 2016 natural gas production as well. As shown in the above chart, for 2016, CNX has hedged 182.9 Bcf of natural gas at a hedge price of $3.3 per Mcf, which includes hedging against NYMEX natural gas price volatility as well as changes in basis differential. CNX has also hedged 41.1 Bcf of natural gas volume at hedge prices of $3.58 per Mcf, which is a hedge against NYMEX natural gas price volatility only and excludes any basis differential risks.

As of September 30, 2015, CNX had derivative coverage for ~57% of forecasted gas production for 2016.

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CNX’s production costs

For 3Q15, CNX’s gas and liquids total production cost was $2.63 per Mcfe (million cubic feet equivalent), which is ~16% lower when compared with 3Q14. In 3Q15, CNX’s LOE (lease operating expense) was $0.31 per Mcfe. CNX’s total 3Q15 cash cost for coal production was $43.4 per ton, which is ~30% lower from 3Q14.

Oil and gas producers

Murphy Oil (MUR), Pioneer Natural Resources (PXD), and EOG Resources (EOG), other S&P 500 (SPY) upstream companies, have LOEs of $9.62 per boe (barrel of oil equivalent), $6.82 per boe, and $5.60 per boe, respectively.

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