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Tuesday, May 17, 2011

Denbury, Losses, and Hedging -- Motley Fool

Link here.
DNR has joined the long list of oil companies that have reported losses this quarter on account of derivatives contracts. Based on this, it is clearly evident that companies never expected crude oil prices to shoot past $120 per barrel. And they will pay the price for that. Yet, Foolish investors should absolutely realize that there are more to these stocks than what the bottom lines are suggesting.
I think this is quite remarkable. "It is clearly evident that companies never expected crude oil prices to shoot past $120 per barrel."

Who would have thought that oil companies would show a loss because of $120 oil?

This article from 2008 is a nice primer on oil and hedging.  A "tip of the hat" to Don for finding this article.

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