The silhouette of contractors are seen working on an oil exploration facility (Photographer: Luke Sharrett/Bloomberg)

Oil's Slide Has Hedging Bet Finally Paying Off for U.S. Drillers

(Bloomberg) -- The plunge in oil prices may finally make oil producers’ hedging contracts into a financial winner for 2018.

After more than a year of surging prices made the contracts a drag on profits, the slide in West Texas Intermediate crude to around $55 a barrel this month means some of the hedges are edging toward profitability, said Anastacia Dialynas, a Bloomberg NEF analyst.

A BNEF analysis based on regulatory filings by top Permian shale basin producers shows Diamondback Energy Inc. with 49 percent of its output hedged for 2018 at a weighted average price of $58.41 a barrel. Concho Resources Inc., meanwhile, has hedged 77 percent of production at an average $55.32 and Pioneer Natural Resources Co. has 81 percent of its barrels covered at $47.22, according to BNEF.

Oil's Slide Has Hedging Bet Finally Paying Off for U.S. Drillers

“These hedge prices are starting to look competitive, especially with oil dropping," Dialynas said. “Companies have locked in a price that will at least cover their production costs."

©2018 Bloomberg L.P.