In an effort to lock in high commodity prices, Energen Corp. has increased its 2007 and 2008 hedge positions for natural gas, oil and natural gas liquids (NGL). The Birmingham, AL-based holding company said it sold New York Mercantile Exchange (Nymex) contracts and swaps on the output of its oil and natural gas development subsidiary Energen Resources Corp.
“We have now hedged almost 60% of our total estimated production in 2007 at attractive commodity prices and have more than doubled our 2008 oil hedge position in today’s strong price environment,” said CEO Mike Warren.
Energen hedged 5 Bcf of San Juan Basin-specific gas at a Nymex-equivalent price of $9.25/Mcf, 348,000 bbl of oil at $75.42/bbl, 160,000 bbl of sour oil at $75.42/bbl and 31.8 million gallons of NGL at an average price of 98 cents/gallon. Energen also added hedges for 1 million bbl of its 2008 sour oil production at a Nymex-equivalent price of $74.99/bbl. Energen’s total 2008 oil hedge position is now 1.9 million bbl at a Nymex-equivalent price of $66.89/bbl.
“During recent years, oil and gas prices have been both high and very volatile,” said Warren. “Energen’s practice of hedging production has locked in commodity prices for substantial portions of our production and helped protect earnings and cash flows. That strategy has served us well in the past, and it is even more important today.”
Average oil and gas revenues per unit of production for Energen Resources’ production associated with Nymex contracts as well as for unhedged production will reflect the impact of basis differentials. Average NGL revenue per unit of production will be net of transportation and fractionation fees. For production associated with basin-specific contracts, Energen Resources will receive the contracted hedge price.
Over the last 10 years, Energen Resources has invested $1.7 billion in property acquisitions and development for which it has gained 2.2 Tcfe of proved natural gas, oil and NGL. The subsidiary plans to invest $1 billion in property acquisitions alone over the next five years. Its production has grown from less than 10 Bcfe in September 1995 to more than 87 Bcfe today, with cumulative production over the last 10 years of approximately 600 Bcfe. Energen Resources’ major areas of operation are in the San Juan Basin of New Mexico, the Permian Basin in West Texas and the emerging Black Warrior Basin in Alabama.
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