Re: CDEV Goes Totally Insane
It looks like my March 19th prediction was correct that CDEV had entered into a horrible hedge for the six months from April through September. The hedge period is now half over, so let's review.
Actually, the hedge started out great and was $4 million in the money by the end of April. It peaked on May 14th (one fourth of the way through the duration of the hedge), when it was in the money by more than $5 million.
Then the wheels fell off. By the beginning of June the hedge was only ahead by $2 million, and falling fast. It went negative on June 8th, and today the hedge is out of the money by $7.3 million. At the current oil price, the hedge is losing almost $350,000 per DAY. That's $2.4 million per week. Not good, especially since the hedge covers 60% of the company's production.
So it somehow makes perfect sense in this perverted energy sector that CDEV is UP by 255.8% since April 1st. It is by far the best performer in my test portfolio of 10 "high Beta" stocks (BTE, CDEV, CHKAQ, CPG, CRC, DNR, GPOR, LPI, NOG, OAS). GPOR is a distant second best, up 188.5%.
The only logical conclusion is that a bad hedge is a good thing.
--Z