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 They may need much more patience than they reckon, however,
because those hedges are a moving target. Rather than wait for their
price insurance to run out, many companies are racing to revamp
their policies, cashing in well-placed hedges to increase the number
of future barrels hedged, according to industry consultants, bankers
and analysts familiar with the deals.
OPEC officials hope that once U.S. oil companies get fully exposed
to the impact of an over 50 percent slide in crude prices since last
June, they will have to drill fewer new wells, causing U.S.
production growth to stall and putting a floor under oil prices now
testing $50 a barrel.
"There are companies which are hedged until the beginning of the
year or until the end of the year, so we need to wait at least until
the first quarter to see what is going to happen," United Arab
Emirates Energy Minister Suhail Bin Mohammed al-Mazroui told Reuters
and one other news agency last month. Yet that hope is based largely on quarterly company reports from
several months ago, when drillers last made their hedging portfolios
public. In the meantime, with the price rout showing no sign of
reversing, at least some firms have put on new hedges that will help
prevent their revenues from falling further - and allow them to
drill far longer this year than earlier expected.
 "OPEC should not expect to see any impact on U.S. shale growth in
the first half of the year and the impact in the second half is
being attenuated significantly by producer hedging," says Ed Morse,
global head of commodities research at Citigroup, one of the biggest
U.S. banks involved hedging.
CAPTURING THE UPSIDE
For the moment, it is unclear which companies are involved in the
effort. New hedging strategies are only likely to get disclosed in
quarterly earnings reports in late January.
"It's a hot topic of discussion that everyone is thinking about and
looking at," said Craig Breslau, who heads the energy derivatives
marketing desk at Societe Generale in Houston, which has been
involved in some restructuring transactions.
While the proportion of oil companies actually executing those deals
is not that high, the deals thus far have been large in terms of
volume and dollars, he said.
According to their last filings, oil companies such as EOG Resources
Inc, Anadarko Petroleum Corp, Devon Energy Corp and Noble Energy Inc
had hedged some of their 2015 production at prices of $90 a barrel
or more.
The net short position of oil producers and other non-financial
companies in U.S. crude oil futures and options markets -- used as a
rough gauge of hedging activity -- has grown from 15 million barrels
in August to more than 77 million barrels last week.
For many companies that set up "in the money" hedges prior to the
slump, the downturn offers a chance to cash in or extend their
protection.
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For example, a company that had sold swap contracts to hedge a part
of its 2015 production at $90 a barrel - essentially shorting
forward oil prices to guard against a drop - could buy them now back
at around $57 for a profit of about $33 a barrel.
Instead of just pocketing the cash, some companies are using the
funds to shield themselves against a further market slide by buying
swaps and options pegged closer to current prices.
With the December 2015 put option for $60 a barrel now trading at
around $9 a barrel, swaps cashed in now could buy a producer nearly
four times more protection at that price.
PROFITS OR SURVIVAL
Most of the half-dozen companies contacted by Reuters - those with
sizeable hedges in place - declined to comment or did not reply to
requests for comment.
A spokeswoman for EOG said that it was not selling off its hedges.
Devon Energy declined to say whether the company was restructuring
is large hedge book, but said it had not 'monetized' any of its
position.
So far only two companies have publicly confirmed winding down their
profitable hedge books.
Bakken shale oil pioneer Continental Resources pocketed $433 million
by liquidating its hedges in September - a move that left the firm
exposed to a further $20 slump, though it is not clear whether it
has set up new hedges since.
On Tuesday, tiny firm American Eagle Energy announced that it sold
off its 414,000 barrels of oil hedged at $89.59 a barrel through
last December for a profit of $13 million to improve its liquidity -
even as the firm said it would have to stop drilling until prices
improved.
That appears to be the effect that OPEC is looking for, although
thus far it is the exception rather than the rule.
"The companies' situation is strong," said an OPEC delegate from a
Gulf producer. "All this will delay the impact of the lower oil
prices."
(Additional reporting by Rania El Gamal in Dubai; Editing by
Jonathan Leff and Tomasz Janowski)
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