Expectations of strong LNG demand for months boosted U.S. futures to a 12-year high in early October, with prices nearly doubling from last year to trade around $4.94 per million British thermal units (mmbtu) on Friday.
Eleven operators analyzed by Rystad stand to lose more than $5.2 billion in 2022 if the average price at the Henry Hub benchmark terminal remains at $4 per mmbtu, an amount that could double to about $9.8 billion if prices average at $5 per mmbtu.
“Given that the whole strip for 2022 currently remains above $4 per MMBtu…, the current state of the programs is likely to impose a material downward pressure on corporate cash flows of gas producers next year,” said Artem Abramov, head of shale research at Rystad Energy.
Rystad said operators had already hedged more than half of their 2022 production when they reported second-quarter results. Prices were trading much lower than the currently inflated levels then.
By the end of September, as much as 64% of their projected production was hedged, the report said.
The significant rise in hedged volume since the second quarter of 2021 was primarily driven by operators including Southwestern (SWN.N), Chesapeake (CHK.O), Range Resources (RRC.N) and Comstock Resources (CRK.N).
The share of hedged production for a bulk of those 11 companies was in the 45% to 75% range, while the weighted-average floor price varied in the $2.5 to $3.1 per mmbtu.