Several independent producers have added to their commodity hedges this summer, taking advantage of unexpectedly strong spring prices to guarantee income in 2003. XTO Energy Inc. has restructured its gas hedges for next year, concentrating on the first quarter of the year. It now has 500 million cubic feet (MMcf) of gas per day hedged for the first quarter of 2003 at an average Nymex price of $4.05 per thousand cubic feet (Mcf). No additional hedges are in place for the rest of 2003. Prior to this restructuring, XTO had 100 MMcf per day hedged at $4.06 per Mcf for all of 2003. "While we remain confident in the longer-term gas-price outlook, market dynamics create near-term vulnerability to lower prices," says Bob Simpson, chairman and chief executive officer. The company had hedged more than 90% of its expected gas production for the remainder of 2002 at $3.59 to $3.77. "Now, we've hedged more than 90% for the first quarter of 2003 at an even higher price and look forward to being opportunistic with our ongoing hedging efforts," Simpson says. Energen Resources Corp. has added gas hedges for 2003 representing 4.8 billion cubic feet (Bcf) of production at an average Nymex price of $4.10 per Mcf. Including the new hedges, the producer now has 6.7 Bcf, or approximately 13% of its estimated 2003 gas production, hedged at an average of $4.07 per Mcf. Vintage Petroleum Inc. is more hedged in gas than in oil. About 30% of its gas is hedged through 2002, mostly through collars in the high-$4 to low-$5 range. "Like others, we're surprised at how strong gas prices have been," says S. Craig George, president and CEO. "On oil, we don't have many hedges on. We think there's a significant war premium on oil prices right now, and I don't think it's going to go away soon. We would rather lock in hedges when prices are in the $25 range as a result of demand, and not political factors." Dan Dinges, chairman, president and CEO of Cabot Oil & Gas Corp., says he would be willing to hedge up to 75% of the company's production at the right price. In March, Cabot initiated hedge positions covering 162,000 million Btu (MMBtu) per day of its gas production for May through August. The hedges are in the form of costless collars based on a Nymex equivalent average floor and ceiling price of $2.40 and $3.00 per MMBtu, respectively. This translates into a floor price of $2.59 per Mcf and a ceiling price of $3.24.
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