Summary
EOG Resources, Inc. (EOG) filed an 8-K on February 23, 2001, detailing its use of commodity price swaps and physical contracts to manage revenue uncertainty. These instruments are designed to lock in prices for future production, providing a degree of predictability in a volatile market. The company's strategy aims to enhance the certainty of future revenues by hedging against potential price fluctuations for both crude oil and natural gas. Specifically, EOG has outstanding crude oil price swap contracts covering 7,000 barrels per day for periods extending through December 2001, with average prices ranging from $26.77 to $27.14 per barrel. For natural gas, the company entered into swap agreements for 100,000 MMBtu/d for April and May 2001 at $5.16 per MMBtu. Additionally, a Canadian subsidiary priced physical gas agreements for approximately 47,000 MMBtu/d for the same period, also based on NYMEX pricing with basis adjustments. All these swap contracts will be accounted for using mark-to-market methods.
Key Highlights
- 1EOG Resources is actively using commodity price swaps and physical contracts to manage revenue uncertainty.
- 2The company has hedged crude oil production for March-December 2001, covering 7,000 barrels per day at fixed average prices.
- 3The crude oil swap prices range from an average of $26.77/Bbl to $27.14/Bbl.
- 4EOG has entered into natural gas price swap agreements for April-May 2001, covering 100,000 MMBtu/d at $5.16/MMBtu.
- 5A Canadian subsidiary has also priced natural gas physical agreements for April-May 2001.
- 6These natural gas contracts cover approximately 47,000 MMBtu/d.
- 7All price swap contracts will be accounted for under mark-to-market accounting.