U.S. shale producer Occidental Petroleum will not add more oil hedges this year after volatility in crude prices following the Iran war led to lower realized prices.
Speaking on a post-earnings conference call on Wednesday, Chief Financial Officer Sunil Mathew said derivative-related losses had a partial impact on Occidental’s first-quarter profit, which still managed to beat Wall Street expectations.
In February, prior to the escalation in the Middle East, Occidental had placed “a modest amount of oil hedges using costless collars”.
Most producers hedge their sales of crude, natural gas and refined products to mitigate the risk of price changes during the time it takes to ship cargoes to customers.
However, the value of these physical shipments is not reflected in earnings until the transaction is completed.
“At that time, we saw increased downside oil price risk… we hedged 100,000 barrels of oil per day from March through December 2026,” Mathew said.
“As volatility increased, prices moved higher, we stopped adding new hedges and do not intend to do more,” Mathew told analysts on the call.
Brent crude began trading at $60.86 per barrel at the start of the year and closed up more than 94% at $118.35 at the end of March amid uncertainty about the duration of the Iran war.
While Occidental does not actively participate in hedging activities, it does hedge selectively under specific circumstances, he said.
The hedges were placed at a price floor of $55 per barrel of U.S. West Texas Intermediate crude and a ceiling of roughly $76 a barrel.
U.S. WTI began trading at $57.41 per barrel at the start of the year and closed up 76.6% at $101.38 on March 31.
During the quarter ended March 31, Occidental’s realized price for oil production fell to $69.91 a barrel, from $71.07 a year earlier.
Derivative-related timing effects have impacted earnings for several major U.S. energy companies, with larger rivals Exxon Mobil and Chevron also reporting a similar hit.
(Reporting by Vallari Srivastava in Bengaluru; Editing by Sriraj Kalluvila)