What is the purpose of these financial commodity price contracts?

These contracts are financial instruments used by EOG Resources to hedge against potential price fluctuations in the natural gas and crude oil markets. Their objective is to enhance the certainty of future revenues by locking in prices or setting limits for a portion of their production.

How are these contracts accounted for by EOG Resources?

EOG Resources accounts for these price swap and collar contracts using the mark-to-market accounting method. This means the value of the contracts is adjusted periodically to reflect their current fair market value, which can impact reported earnings.

Will the prices in these financial contracts affect EOG's 2003 revenue forecast?

While these financial contracts are in place to manage price risk, EOG Resources plans to file a separate 8-K to present its 2003 forecast. That forecast will reflect prices associated with actual 'physical commodity contracts,' which are distinct from these financial hedging instruments. The mark-to-market adjustments of these financial hedges will, however, impact earnings as they are recognized.

What is the difference between price swap contracts and collar contracts mentioned in the filing?

Price swap contracts typically exchange a fixed price for a floating price, effectively locking in a specific price for a commodity. Collar contracts, on the other hand, set both a minimum (floor) price and a maximum (ceiling) price for a commodity, providing protection within a defined range.

EOG 8-K SEC Disclosure

Summary

This SEC filing by EOG Resources Inc. (EOG) on February 3, 2003, provides an update on the company's financial commodity price contracts as of February 3, 2003, utilized for hedging future revenues. The report details natural gas and crude oil financial price swap contracts, along with natural gas financial collar contracts for 2003. These contracts are accounted for using the mark-to-market method, meaning their value is adjusted to reflect current market prices. Investors should note that EOG intends to file a subsequent 8-K to present its 2003 forecast, which will incorporate prices related to physical commodity contracts, distinct from these financial hedging instruments. This filing serves primarily to disclose the terms and volumes of the financial hedges in place, offering insight into EOG's strategy to manage price volatility for its natural gas and crude oil production throughout 2003.

Key Highlights

1EOG Resources has entered into various financial commodity price swap and collar contracts to hedge against future revenue volatility.
2The company utilizes mark-to-market accounting for these financial contracts, reflecting their current market value.
3Natural gas financial price swap contracts are detailed for March through October 2003, with average prices ranging from $4.74 to $5.19 per MMBtu.
4Crude oil financial price swap contracts are disclosed for February through December 2003, with average prices ranging from $24.47 to $27.96 per barrel.
5Extensive natural gas financial collar contracts for 2003 are presented, outlining floor and ceiling prices for various volumes and contract periods.
6EOG plans to file a future 8-K to present its 2003 forecast, which will include estimates reflecting prices from physical commodity contracts.
7Closed contracts for January and February 2003 (natural gas collars and crude oil swaps) are also noted.

EOG RESOURCES INC 8-K Report (Feb 3, 2003)

Summary

Key Highlights

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