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Understanding Denbury Resources’ Hedging Losses

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Denbury Resources’ hedging losses

According to Denbury Resources’ (DNR) 1Q17 earnings press release, it made payments of ~$27 million on settlements of commodity derivatives. Because of this, DNR’s average realized crude oil (USO) price fell $5 per barrel.

As we saw a little earlier in the series, excluding hedges, DNR’s 1Q17 average realized price for its crude oil production was $50.31 per barrel, meaning that commodity hedging activities decreased its average realized crude oil price by ~20%.

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Denbury Resources’ 2Q17 hedges

For 2Q17, Denbury Resources has fixed price swaps on NYMEX WTI (West Texas Intermediate) crude oil for 22 MBoepd (thousand barrels of oil equivalent per day) at a weighted average price of $43.99 per barrel.

For 2Q17, Denbury Resources has fixed price swaps on Argus LLS (Light Louisiana Sweet) crude oil for 7 MBoepd at a weighted average price of $45.35 per barrel.

Other upstream players

For 2Q17, DNR’s peer Murphy Oil (MUR) has fixed price swaps on NYMEX WTI for 22 MBoepd at a weighted average price of $50.41 per barrel. 

For 2Q17, Devon Energy (DVN) has fixed price swaps on NYMEX WTI crude oil for 74.6 Mboepd at a weighted average price of $53.34 per barrel.

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