Shale driller posts rare negative revenue

Bloomberg

The global gas rally left a bitter aftertaste for one US shale driller that posted negative revenue after it had to write down the value of its output hedges.
Vine Energy Inc reported negative revenue of $64.5 million in the second quarter, leading to a $360 million loss for the period, according to a filing with the US Securities and Exchange Commission. The main culprit for
the negative revenue was $274 million in unrealised derivative losses in the quarter, along with $24 million in realised losses.
The loss underscores how commodity hedging can be a double-edged sword for equity investors seeking to ride the wave of rising energy prices. Even as US natural gas futures rose 50% this year, companies that locked in forward contracts before the rally are now stuck
accepting prices well below
market levels.
For example, Vine said in its earnings report it has forward-sold swaps through 2025 at prices between $2.31 and $2.62 per million British thermal units. Many of those future contracts are now priced well above $3.
“What you’re seeing is the change in the value of the hedge book,” the company said in an emailed statement. “It’s entirely non-cash so no impact whatsoever on free cash flow.”