Summary
EOG Resources, Inc. (EOG) filed a Form 8-K on May 2, 2001, to disclose its entry into commodity price risk management activities. Specifically, the company entered into natural gas price swap agreements and price collar agreements to enhance the certainty of future revenues. These hedging strategies are designed to mitigate exposure to volatile natural gas prices and provide greater predictability in financial performance. The disclosed transactions include price swaps for June 2001 at a fixed price of $4.61 per MMBtu for a notional volume of 200,000 MMBtu/d, and price collars for July to November 2001 with a floor of $4.40 and an average ceiling of $6.15 per MMBtu, for the same notional volume, at a premium of $0.15 per MMBtu. Both sets of contracts will be accounted for using mark-to-market accounting, meaning their value will be adjusted to current market prices periodically.
Key Highlights
- 1EOG Resources entered into natural gas price swap agreements for June 2001.
- 2The swaps cover a notional volume of 200,000 MMBtu/d at an average price of $4.61 per MMBtu.
- 3EOG also entered into natural gas price collar agreements for July to November 2001.
- 4The collar agreements establish a floor price of $4.40 per MMBtu and an average ceiling price of $6.15 per MMBtu.
- 5These collar agreements cover a notional volume of 200,000 MMBtu/d and were entered into at an average premium of $0.15 per MMBtu.
- 6The company's objective is to enhance the certainty of future revenues through these hedging strategies.
- 7All swap and collar contracts will be accounted for under mark-to-market accounting.