Hedging lock-in limits Exxon's oil upside
The guest highlighted that Exxon Mobil failed to participate in the oil price rally to $90-$100 per barrel due to a restrictive hedging swap executed at $70.
The argument
The guest criticized the company's departure from its historical stance of not hedging its production, noting that the swap gave away volatility and capped their realized price.
The thesis, stress-tested
✓ What validates it
- ✓Exxon's upcoming quarterly earnings showing lower realized crude prices relative to unhedged peers
▸ Risks discussed
- ▸A sharp decline in spot oil prices back toward the $70 swap level, which would make the hedge profitable
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