Pengrowth Corp., a Calgary, Alberta-based oil and gas producer, has entered several forwards to hedge its oil price exposure and will likely enter more at year-end. Dan Belot, manager in investor relations, said the corporate has hedged 55% of this year's oil contracts, factoring in an average price of USD27 per barrel. Pengrowth has further offset risk for 30% of next year's oil contracts, and may increase this percentage, he said. Several forward contracts currently in place, which have an average lifespan of one year, are also set to expire at year-end and it is likely that the oil firm will renew some of these, he added. New York's benchmark light sweet crude contract for July was trading at USD30.67 a barrel on Wednesday.
A couple of years ago Pengrowth's board decided it needed to take a more aggressive stance regarding its hedging of oil prices and ruled that it may hedge two-thirds of its risk, Belot explained. While the outlook for gas prices is that they will continue to rise, oil prices are volatile, he noted, adding that lower prices can hit Pengrowth's cash flow.
The energy firm works with several counterparties for its hedging activities with all of these required to have an investment grade credit rating, said Belot, declining to name the firms.
