(Bloomberg) -- Hess Corp. said it got rid of the portion of its oil hedge that limits its exposure to sky high oil prices less than six months after doubling the volumes protected under the program.
The company paid about $325 million to remove its $100 WTI and $105 Brent oil hedges “in light of recent high volatility and liquidity risk in the oil markets,” Chief Executive Officer John Hess said in a virtual address to the Scotia Howard Weil Energy conference on Tuesday.
That's nearly double what it cost to put on the hedge in the first place, as the cost to trade in options has surged amid a blistering rally in crude prices after Russia's invasion of Ukraine. The 2022 hedge program cost about $161 million, Chief Financial Officer John Rielly said in October.
The move comes as U.S. shale producers' appetite to hedge -- or lock in prices to protect against sudden drops and act as insurance -- has faded. Balance sheets in the industry are the healthiest in years and investors have asked companies to retain exposure to commodity prices.
Hess still has protection if oil prices drop below $60-$65 a barrel and dissolving the call options it had allows the company to realize gains from a further rally in prices.
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