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Canadian Natural Resources Limited Message Board

  • mmsa262 mmsa262 Sep 17, 2007 8:29 PM Flag

    Can someone explain hedging strategy?

    Can someone explain to me the oil hedging strategy employed by CNQ? I guess they are hedging to ensure stable cash flow to fund the Horizon project, but it seems like their hedging is very low (in the mid-$50's/bbl). Is this correct? Do they hedge all production or just a portion? Is there a plan to drop the heding policy in the future and let the revenues flow with the market price of oil? Seems like a lot of potential upside at $80/bbl oil if they just stop the hedging.

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    • They hedge on a graduated scale (maybe 1/2 for the next year/25% the following year).

      They are doing this to have more predictable cash flows that allow them not to have to dilute the equity should 40$/barrel come back.

      Smart folks, imho, always prepared for the storm that could occur. Easy to criticize with a rear view mirror, though.

 
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