ARC Resources Ltd T.ARX

Question for the Board what will be Risk Management Loss Q4?

[MyHoneyPot]

Last quarter they lost 524.5 million in Risk Management

Their product was 353,657 boe/day

So from a risk management perspective they lost (524.5 million /353,657 boe/day) /92 days

Per boe loss risk management = $16.12 a boe or production. 

So doesn't it totally makes sense that management want to save shelf 1/2 cycle production at Kakwa and pursue the $1 a boe in Kakwa cost reduction in declines to offset some of these losses, a good reason to pursue 2% declines at Kakwa.

The want the best Leadership minds at ARX resources tell me anyway. 

So Back to the Question, Can ARC management top their 524.5 million Risk Management loss they booked in Q3, i think that is a fair and legitimate question. 

Cheerleaders to you have any legitimate answers?

It appears that with those kinds of hedging losses Dry gas would have zero revenue, if you looked at revenue simply on a boe basis, interesting. 

IMHO

[Sunsurfer12]

The hedging loss booked in q3 must have included a mark to market for their entire hedge to the price at sept 30...since sept 30, not entirely sure but didnt think we had a substantial increase in avg natgas or oil prices..so the new hedging loss should be close to zero or maybe even a gain depending on how dec 31 prices end up. Having said that they will of course have the cashflow impact from

[Shaleguy]

No sun. If you hedge at 2.50 and the price is 5.00,,you owe the bank 2.50. so the higher the price the greater the hedging loss. But the opposite occurs if the price is 1.50.

[Sunsurfer12]

Agreed but i think there is a difference between when earnings impact is recognized in eps (which is recognized for all dated hedges on the underlying price moving up or down) and when you have the cashflow impact which occurs in the quarter that is hedged. My point was the eps impact is largely historical now unless prices move significantly higher or lower from current..

[MyHoneyPot]

The average prices for oil will be higher in the Fourth Quarter. Pursuing 2% declines in Kakwa which is the majority of the companies liquids and their highest netback boes, simply makes no sense when the CFO is creating billions in Hedging losses. That will impact the earnings for years.  Really ARX management is throwing the operational guys under the bus, reduce production costs so that

[Sunsurfer12]

Still think you need to differentiate between the hedging losses (earnings based) which has already been largely if not fully absorbed in q3 and the cashflow impact which impacts the quarter in which the hedge comes due

[MyHoneyPot]

Sunsurfer12 you are correct, and that 524.5 million is the change in liability of the Hedges based on comodity projections that has to be carried on the balance sheet. It has the same impact as add 524.5 million to the companies debt.  The actual cash cost was for Q3 was 138.9 million dollars. The liability of the risk management program increased to over 1 billion dollars based on Q3