Hedging a “$7.6 billion lifeline” for North American producers in 2020

| By Mark Young

Evaluate Energy’s latest report shows that 72 U.S. and Canadian companies gained a combined $7.6 billion thanks to settled oil and gas derivatives in 2020. This represented a much welcome 11% boost in revenues, which – on a pre-hedging basis – had fallen from $100 billion in 2019 to just $70 billion in 2020 after prices crashed.

“This 11% boost was a lifeline for struggling producers in 2020,” said Isabelle Li, report co-author and Senior Analyst at Evaluate Energy. “Of course, this 11% average is across the whole year. When prices hit rock bottom in the second quarter, hedging was an even more important crutch, boosting revenues by over 35% in that three-month period alone.”

Early 2021 came with oil price increases, however, and will likely see focus shift from these 2020 hedging gains to derivative-related losses being recorded.

“Our data shows that hedging will cause some producers to miss out on short-term gains that could have been made with oil prices climbing at the start of 2021,” continued Li.

“It is, however, tough to criticise any company taking a cautious approach to 2021 before year-end 2020 even if losses are now recorded. As we’ve made clear throughout our report here, favouring long-term planning over potential short-term gains is a strategy that may well appeal much more to some investors given the prices and volatility witnessed only 12 months ago.”

The new report includes:

  • Top 10 companies – % increase in revenues thanks to 2020 derivative settlements
  • Average prices of oil derivatives in 2021
  • Average volumes of oil hedged under swaps, collars and three-way collars in 2021
  • The expected impact of 2021 positions on impending Q1 2021 results and the rest of the year to come.


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