Vanguard Natural Resources’ hedging program
In this article, we’ll look at Vanguard Natural Resources’ (VNR) hedging program for 2016 and 2017. Vanguard Natural Resources gained $169.4 million from commodity derivative contracts in 2015, an increase of 3.6% over the $163.4 million in 2014.
The partnership has hedged 78% of its 2016 natural gas (UNG) production, at $4.15 per MMBtu (British thermal units in millions). The 22% unhedged volumes are exposed to natural gas price fluctuation. The partnership’s natural gas exposure is expected to increase in 2017, as only 49% of its 2017 natural gas production was hedged as of December 31, 2015. Plus, considering the current price environment, the new hedges would be at lower prices.
VNR has hedged 67% of its crude oil (USO) and 22% of its NGLs (natural gas liquids) for 2016, at a weighted average price of $67.52 per barrel and $30.31 per barrel, respectively. The partnership’s average crude oil price assumption of $36.30 per barrel for 2016 is higher than the EIA’s (U.S. Energy Information Administration) WTI (West Texas Intermediate) crude oil forecast of $34.60 per barrel. While VNR has hedged 21% of its 2017 crude oil production volumes, its NGLs are completely unhedged.