EOG Resources Inc. (NYSE: EOG) on Oct. 9 warned of a non-cash loss of $52.1 million in the third quarter on commodity derivative contracts in a filing with the U.S. Securities and Exchange Commission.
The Houston-based shale oil and gas producer attributed the hit to a difference between its realized price for crude oil and natural gas sales during the quarter, and the prices due at NYMEX delivery locations.
Benchmark crude prices averaged $69.50 a barrel during the quarter, EOG said in the filing. It hedged 134,000 barrels per day, or about 35% of its prior period's production, at roughly $60 a barrel.
Analysts still anticipate EOG to report a profit of $1.48 per share in the third quarter compared with a profit of 19 cents in the same quarter last year, according to Thomson Reuters I/B/E/S.
Losses from hedging contracts will be prevalent in the third quarter across the shale oil and gas industry, said Ben Montalbano, co-founder of Denver based analytics firm PetroNerds.
"This is probably one of the less severe numbers you'll see this quarter. A lot of their peers have hedged a larger portion of production and done so at a lower price," he said.
For the roughly 40 companies PetroNerds tracks, the aggregate of swaps and collars were under $60 a barrel, he added.
Last quarter, several producers, including Devon Energy Corp. (NYSE: DVN), Anadarko Petroleum Corp. (NYSE: APC) and Pioneer Natural Resources Co. (NYSE: PXD), reported losses after missing bets on oil prices. Then, many had hedged around $55 a barrel but were burned when oil climbed to more than $70 a barrel.
Russian oil output fell to 11.11 million barrels per day (MMbbl/d) in May, its lowest level since June 2018, from 11.23 MMbbl/d in April, Energy Ministry data showed on June 2.
Canada holds the world's third-largest crude reserves but its energy industry has struggled to recover from the 2014/15 global oil price crash.
The Paris-based IEA, which coordinates the energy policies of industrial nations, revised down its 2019 demand growth estimate by 100,000 barrels to 1.2 million barrels per day (MMbbl/d) but said it would climb to 1.4 MMbbl/d for 2020.