CALGARY — Cenovus Energy Inc. is suspending its practice of crude oil price hedging and warning that it expects steep losses on its existing risk management program in its first quarter.
The company is one of several oil producers that uses a hedging strategy in order to protect itself against sudden price drops.
But in recent months, the benchmark West Texas Intermediate has surged, making hedging a losing game.
Cenovus says it expects to post a realized loss of about $970 million on its risk management positions for the three months ending March 31. It expects losses for the current quarter due to hedging to be about $470 million.
The company says its balance sheet and liquidity position are now healthy enough that it no longer needs to hedge.
Cenovus says it plans to close the bulk of its outstanding crude oil price risk management positions related to WTI over the next two months.
This report by The Canadian Press was first published April 4, 2022.
Companies in this story: (TSX:CVE)
The Canadian Press
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