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Understanding Denbury Resources’ Hedging Activities

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Denbury Resources’ hedging advantage

For 2Q16, crude oil hedging activities increased Denbury Resources’ (DNR) average realized crude oil price by $9.23 per barrel. As we saw in Part 8 of this series, excluding hedges, the 2Q16 average realized price for DNR’s crude oil production was $43.38 per barrel. This means that commodity hedging activities increased DNR’s average realized crude oil price by ~21%.

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Denbury Resources’ 2016 hedges

For 3Q16 and 4Q16, Denbury Resources has fixed price swaps on NYMEX WTI (West Texas Intermediate) crude oil for 18.5 MBoe (thousand barrels of oil equivalent) per day and 26 MBoe per day at weighted average prices of $38.96 per barrel and $38.70 per barrel, respectively.

For 3Q16 and 4Q16, Denbury Resources also has fixed price swaps on Argus LLS (Light Louisiana Sweet) crude oil for 7 MBoe per day and 7 MBoe per day at weighted average prices of $39.61 per barrel and $39.16 per barrel, respectively.

As of March 31, 2016, Denbury Resources has derivative coverage for ~68% of its forecasted crude oil production for 2016.

Other upstream players

Marathon Oil (MRO) has derivative coverage for ~50% of forecasted North America E&P crude oil production for 2H16, whereas California Resources (CRC) has derivative coverage for ~33% of forecasted crude oil production for 3Q16.

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