EXCO Resources Inc (XCO), Chesapeake Energy Corporation (CHK) : Will Hedging Mean Ruin for This Natural Gas Company?

Based on the moves of some of EXCO Resources Inc (NYSE:XCO)’s peers, this is more likely to happen. During Ultra Petroleum Corp. (NYSE:UPL)‘s most recent conference call, management stated that it is keeping much of its gas production open because it sees greater upside potential to gas prices. Also, WPX Energy Inc (NYSE:WPX) has only hedged 19% and 46% of its anticipated 2014 natural gas and oil production, respectively. With its peers going in the opposite direction of Exco, it is not far-fetched to question how the next few months will turn out for the company.

What a Fool believes
While there are certainly some concerns regarding how this deal will shake out and how EXCO Resources Inc (NYSE:XCO) will handle the debt it took on to make it happen, there are some very good things to like about this deal. It netted the company a strong, oil-heavy acreage position in one of the fastest-growing shale plays in the U.S., and it helped to add some balance to its previously gas-heavy production mix. As next summer rolls around, though, keep an eye on oil prices and how they relate to the company’s hedging position as it will be a big determinant on its bottom line.

The article Will Hedging Mean Ruin for This Natural Gas Company? originally appeared on Fool.com.

Fool contributor Tyler Crowe has no position in any stocks mentioned. You can follow him at Fool.com under the handle TMFDirtyBird, on Google +, or on Twitter, @TylerCroweFool.The Motley Fool recommends and owns shares of Ultra Petroleum and has the following options: long January 2014 $30 calls on Chesapeake Energy, long January 2014 $30 calls on Ultra Petroleum, long January 2014 $40 calls on Ultra Petroleum, and long January 2014 $50 calls on Ultra Petroleum.

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