Key Factors behind Vanguard Natural’s Improved Hedge Position


Jul. 21 2016, Updated 3:31 p.m. ET

Vanguard Natural Resources’ hedges

Vanguard Natural Resources (VNR) added a few hedge positions in the second quarter of 2016. As of June 1, 2016, the partnership had hedged 82% of its crude oil and 81% of its natural gas production for the remaining quarters of 2016, at a weighted average price of $67.52 per barrel and $4.18 per MMBtu (British thermal units in millions), respectively. This indicates a slight improvement in Vanguard Natural’s hedges over the last two quarters.

VNR’s peer Memorial Production Partners (MEMP) has hedged a significant 89% of its 2016 production, while EV Energy Partners (EVEP) has hedged ~80% of its remaining 2016 natural gas production, ~60% of its crude oil volumes, and 60% of its NGL (natural gas liquid) volumes.

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Crude oil 

US crude oil prices recovered slightly in the second quarter of 2016 after touching multi-year lows in the first quarter. The slight recovery in crude oil prices was mainly due to the decline in drilling activity. The average WTI (West Texas Intermediate) price in the second quarter of 2016 was $45.50 per barrel, compared with $34 per barrel during 1Q16.

Natural gas 

NYMEX (New York Mercantile Exchange) near-month Henry Hub natural gas futures prices also recovered during the second quarter of 2016, driven by a strong demand from power utilities and a slight decline in natural gas production. The average price for natural gas in 2Q16 was $2.30 per MMBtu (million British thermal units), versus $2.01 per MMBtu during the first quarter of 2016. This slight recovery in natural gas and crude oil prices is expected to improve VNR’s average realized price for the second quarter.


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