Summary
EOG Resources, Inc. (EOG) filed an 8-K on August 27, 2001, to disclose its entry into several commodity price swap contracts. These contracts are designed to hedge against future revenue volatility by locking in prices for natural gas. The company entered into agreements for notional volumes of 85,000 MMBtu/d for December 2001 and 50,000 MMBtu/d for the period of January 2002 through December 2002, with an average price of $3.36 per MMBtu for both periods. These transactions are significant for investors as they demonstrate EOG's proactive approach to managing commodity price risk. By utilizing these NYMEX-related swap contracts, EOG aims to enhance the predictability of its future revenues, providing a clearer outlook on earnings and cash flows. The company will account for these derivative instruments using mark-to-market accounting, meaning their value will be adjusted to reflect current market prices on the balance sheet.
Key Highlights
- 1EOG Resources entered into natural gas price swap contracts between August 24-27, 2001.
- 2These contracts are intended to enhance the certainty of future revenues.
- 3Agreements cover notional volumes of 85,000 MMBtu/d for December 2001.
- 4Further agreements cover 50,000 MMBtu/d for January 2002 to December 2002.
- 5The average locked-in price for all swap contracts is $3.36 per MMBtu.
- 6EOG will account for these swap contracts using mark-to-market accounting.