Hedge Trackers Comments On Canadian Producers Hedging Oil
Devika Krishna Kumar, writing for Reuters
“It was not immediately clear which Canadian companies were hedging, but they are putting on hedges incrementally, a cautious approach “given recent memory of how quickly the market can unravel,” one banking source said.
Earlier this month, MEG Energy said it would add to its hedge book in coming days.
‘Given where prices are and we’re seeing the strip for 2019, and frankly, into 2020, we’ll continue to layer on opportunistically further hedges to protect the cash build and the cash balance,’ Chief Financial Officer Eric Toews said during an earnings call.”
This illustrates a classic use of a hedging strategy to lock in predictable costs and protect margins. For further reading, take a look at Picking the Right Hedge for the Right Exposure.
Hedge Trackers Director, Foreign Currency and Commodities, Karen Gubler,
For some businesses the hedged component is critical and central to the business, in this case, oil. However, you can protect your margins even though you’re not in a commodity business. In fact, most of our clients hedge components that are ancillary to their area of business, such as foreign currency, in order to mitigate the risk of impacting their operating margin.