By – Liz Hampton – Reuters – Pioneer Natural Resources’s first-quarter results will be hit by a $691 million loss on oil and gas derivatives, it said in a securities filing on Tuesday, becoming the latest U.S. shale oil company to warn of charges due to hedging. This just weeks after announcing a $6.4B deal to acquire DoublePoint Energy.
Many producers raced to lock in sales when crude oil prices rose to over $40 a barrel last year, but are now faced with losses after oil prices climbed to above $58 a barrel for the quarter.
Consultancy Enverus estimates top U.S. shale firms will report an aggregate of $7 billion in hedging losses for the quarter. Oil and gas producers use hedges as a form of insurance to lock in prices for future production.
Pioneer said it paid $321 million to settle contracts during the quarter and has a non-cash or unrealized loss of $370 million on other contracts. Offsetting some of the losses, it also will report a non-cash gain of $54 million on its investment in fracking provider ProPetro Holding Corp for the quarter, according to the securities filing.
Shares were up 1% at $150.49 in afternoon trading.
The company will report its first-quarter results on May 4.
Pioneer has 54,000 barrels per day of production tied to Magellan East Houston (MEH) swaps for the second quarter at $41.85, according to the filing. It also has 102,000 BPD of Brent swap contracts for the second quarter at a price of $46.48. Brent futures are currently trading around $66.50 a barrel.
The company also said it expects cash costs of $80 million during the quarter for natural gas sales made during a Texas winter storm that shut-in production. Most of its production was offline for a week during that storm, which prompted it to suspend contracts through force majeure notices to customers, the company said.