(Reuters) – Pioneer Natural Resources’s first quarter results will be hit by a $691 million loss on oil and gas derivatives, it said in a securities filing on Tuesday, becoming the latest U.S. shale oil company to warn of charges due to hedging.
Many producers raced to lock in sales when crude oil prices rose to over $40 a barrel last year, but are now faced with losses after oil prices climbed to above $58 a barrel for the quarter.
Consultancy Enverus estimates top U.S. shale firms will report an aggregate of $7 billion in hedging losses for the quarter. Oil and gas producers use hedges as a form of insurance to lock in prices for future production.
Pioneer said it paid $321 million to settle contracts during the quarter, and has a non-cash or unrealized loss of $370 million on other contracts. Offsetting some of the losses, it also will report a non-cash gain of $54 million on its investment in fracking provider ProPetro Holding Corp for the quarter, according to the securities filing.
Shares were up 1% at $150.49 in afternoon trading.
The company will report its first quarter results on May 4.
Pioneer has 54,000 barrels per day of production tied to Magellan East Houston (MEH) swaps for the second quarter at $41.85, according to the filing. It also has 102,000 bpd of Brent swap contracts for the second quarter at a price of $46.48. Brent futures are currently trading around $66.50 a barrel.
The company also said it expects cash costs of $80 million during the quarter for natural gas sales made during a Texas winter storm that shut in production. Most of its production was offline for a week during that storm, which prompted it to suspend contracts through force majeure notices to customers, the company said.
Reporting by Liz Hampton; Editing by Marguerita Choy