uploads///SGY Q Hedging Effectiveness

Gauging Stone Energy’s Hedging Effectiveness

Nicholas Chapman - Author

Aug. 18 2020, Updated 5:15 a.m. ET


According to Stone Energy’s (SGY) 2Q16 earnings release, SGY reported a total (non-cash and cash) loss of ~$0.61 million on its derivative instruments. When divided by Stone Energy’s oil and gas revenues of ~$89 million, this comes to a hedging effectiveness of about -1%. In other words, in 2Q16, losses on hedging activities caused Stone Energy’s oil and gas revenue to decline by ~1%.

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Other upstream players

Almost all upstream companies are involved in hedging, but their hedging effectiveness varies due to derivative coverage, hedge types, and hedge prices.

Upstream peers Devon Energy (DVN), Range Resources (RRC), and Memorial Resource Development (MRD) have derivative coverages of ~32%, ~80%, and ~100%, respectively, of their forecasted crude oil production for 2016.


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