Peyto Exploration & Development Corp T.PEY

Hedging losses

[BeEm1]

As Peyto keeps repeating in its quarterly reports, when gas prices are on the rise, their strategy produces hedging losses, but when gas prices fall, there are healthy HEDGING GAINS.

In spite of recent hedging losses, profitability has soared due to high prices on unhedged production.

I will be happy to endure future hedging gains.

[TerribleEng]

The issue is that the market is demand driven now and is in backwardation. Hedging is very expensive in a market like this because even if Natural gas prices remain flat... you lose because you are always hedging out 18-24 months at large discount prices. Even if it were perfectly flat, market goes up and you lag the market and get punished. Prices fall, and you get punished for because your debt

[Quintessential1]

I look at hedging like mortgage insurance.  As long as you have a mortgage you should have mortgage insurance but no one ever wants to cash in on that policy.   Eliminate the mortgage and you also eliminate the need for the insurance.   The faster debt can be reduced the better for the company and for shareholders. GLTA

[Yasch22]

This post has been removed in accordance with Community Policy

[Oldnagger]

Patience is the word for this stock. But don't forget the asset values. They will come to the fore in less than geological time or even climate extinction time !! Mean while , I was about to post some good news concerning a third La Nina. But that would be rubbing salt in the wounds, so I will post it on the BIR board !!

[uncutgems]

what? you know who doesn't need mortgage insurance? people that paid CASH. you know who doesn't need mechanical hedging to protect their balance sheets? Companies with FORTRESS balance sheets. When was the last time someone complained about TOU hedges?

[SecondhandGnus]

Ironically enough TOU has plenty of bad nat gas hedges, but they came with companies that took them on due to too much debt and thus over hedges before selling out to Tourmaline on the cheap. For those piling on Quint, calling mortgage insurance an inverted analogy, Uncut is correct in saying that highly levered mortgages (and by extension O&G producers) need them, so less indebted companies

[Quintessential1]

So people that do not have mortgages do not need mortgage insurance. Brilliant.  I am pretty sure that is what I said. GLTA Longs 

[uncutgems]

your thinking is muddled. not a surprise. petyo is like the buyer that can't afford a DOWN PAYMENT for something they want. so the bank asked for PROTECTION and more MONEY. that's mortgage insurance, you know the thing smart people tell you to AVOID? In Peyto's case that protection is HEDGES. BAD HEDGES. TOU is like the rich guy down the block who sees a house and goes and buys it

[borne2run]

WRONG analogy !!!  Mortgage insurance is to protect the lender, not the buyer / homeowner.  Example:  10% down, condo bought at market peak.  Housing market crashes by 20% (condos even more).  Buyer loses job and defaults.  Bank reposesses the property and liquidates, then is made whole by collecting on the mortgage insurance policy.

[Quintessential1]

Hedges are there to protect the lender too.  That is why they require them and that is why debt has to be reduced so that the hedges can be reduced or even better eliminated. GLTY and all.