RE:RE:Hedging lossesWildfury wrote:
Yes JD, it does mean a company is losing money, period. They are leaving millions of dollars for the traders that booked their hedges. What does this mean? It means the FCF should have been much greater, more money for buy backs, more money towards debt. Don't talk about shoes compared to oil prices. All that I'm saying is the street knows this and it's a big reason why we're not in the $8.00 range. You guys can't take any criticism as if your actually insiders and the facts remain. Why is it that so many other energy companies have no hedging? Look at CVE, they took a massive hit to get rid of their hedges and Baytex management has dropped the ball knowing that we're in a supply crunch. It's okay to to own a stock and critisize their mistakes, doesn't mean I hate them, it means that I want them to acknowledge their miscalculations and correct them, that's all. If everyone only posts rosey comments about Baytex then why would they ever change their strategy? Without dialogue we're nothing, so all I'm asking management is, pick up your socks or we will replace you because this oil situation will not last forever and the window could close without warning.
wildfury, there's a difference between losing money and not making money. To be honest with you, I am self employed and it took me a long time to come to terms with this concept even though I knew it to be true. Everytime I took a day off, I was losing money in my mind. Reality is I wasn't making money. I have an accounting background. I certainly wasn't recording days off as losses.
Note the language in this quote "Cenovus says it expects to post a realized loss of about $970 million on its risk management positions for the three months ending March 31. It expects losses for the current quarter due to hedging to be about $470 million"
The difference between that and baytex is the word "realized" Cenovus paid to close the hedge. If you have 10,000 barrels hedged at 10 bucks less than spot, it costs you 100k to close the hedge. If you choose to do that, you would need to believe that oil is going higher. If the difference went to 15, but you bought them out, you'd actually realize an additional 50k in profit. But, you'd have to have the cash to buy out the hedges. Cenovus had that cash. Baytex did not.
I do understand your point of view and I 100% agree with you that it would be better if there were no hedges. But this is a company that 2 years ago was dangerously close to not surviving. Today they're doing great. Could they be doing better? In theory yes. But when hedging is a condition of loan guarantees it is what it is.
I've been in and out of baytex several times since 2012. I bought in again in the spring of 2020 and have been buying off and on since. I've done very well. My standard isn't to own the BEST returning company because I don't have a crystal ball and holding that standard wouldn't be good for my health. I also own a basket of other mid cap oil plays and they've all generally done well. Recently sold some non dividend payers to move more money into CJ. And I own CVE. Bought it at the bottom. A couple of coppers more than 3 bucks and I'm quite happy with that one too. I reiterate that I understand your point of view and agree we'd be better off without the hedges. But we have them and soon they'll be retired. Perhaps you might be happier moving along to another player in the patch. They're all doing well.