What is the primary purpose of these disclosed contracts?

The primary purpose of these disclosed financial price swap and collar contracts is to enhance the certainty of future revenues for EOG Resources by hedging against potential price volatility in the natural gas and crude oil markets.

How does mark-to-market accounting affect EOG's financial reporting?

EOG accounts for these contracts using the mark-to-market method. This means the value of the contracts is adjusted to their current market value at the end of each reporting period. This can result in recognized gains or losses on the income statement, potentially leading to fluctuations in reported earnings that are not directly tied to physical commodity sales.

What are the key price ranges for natural gas hedging in 2004?

For natural gas price swaps in 2004, the average prices range from $5.57/MMBtu in January down to $4.80/MMBtu for most of the remaining year, with a slight dip to $4.78/MMBtu in September. The collar contracts for the first quarter of 2004 have floor prices around $5.05 - $5.25/MMBtu and ceiling prices around $6.06 - $6.25/MMBtu.

How does EOG manage price risk with its crude oil contracts?

For crude oil, EOG has entered into financial price swap contracts for the second half of 2003. The average prices for these swaps decrease from $25.90/Bbl in July to $24.47/Bbl in December, indicating a hedged position at these declining rates.

EOG 8-K SEC Disclosure — Sep 10, 2003

Summary

EOG Resources Inc. (EOG) has filed an 8-K report on September 10, 2003, disclosing its financial commodity price swap and collar contracts for the latter half of 2003 and for 2004. These agreements are designed to enhance revenue certainty by hedging against price volatility in natural gas and crude oil markets. The company employs mark-to-market accounting for these derivatives, meaning their value is regularly adjusted to reflect current market prices, impacting reported earnings and potentially causing significant fluctuations in the "mark-to-market" line item on their income statement. Investors should note that while these hedging activities aim to provide a degree of price stability, the mark-to-market accounting method introduces sensitivity to closing NYMEX prices at the end of each reporting period. This could lead to volatility in reported financial results independent of the company's operational performance. The filing provides detailed breakdowns of volumes and average prices for natural gas and crude oil swaps, as well as natural gas collars, offering transparency into EOG's risk management strategies for the upcoming periods.

Key Highlights

1EOG Resources disclosed its natural gas and crude oil hedging positions through financial price swap and collar contracts for the second half of 2003 and all of 2004.
2The company utilizes mark-to-market accounting for these derivative contracts, which can introduce volatility to reported earnings.
3Significant volumes of natural gas are hedged in the second half of 2003 with average swap prices ranging from $4.70 to $5.49/MMBtu.
4Natural gas hedging continues into 2004 with an average swap price of $5.57/MMBtu for January and gradually decreasing to $4.80/MMBtu by October.
5Crude oil hedging for the second half of 2003 shows average swap prices declining from $25.90/Bbl in July to $24.47/Bbl in December.
6Natural gas financial collar contracts are in place for both 2003 and 2004, setting floor and ceiling prices to manage risk within defined ranges.
7The company warns that mark-to-market computations are sensitive to NYMEX closing prices and could differ significantly from current market conditions.

EOG RESOURCES INC 8-K Report (Sep 10, 2003)

Summary

Key Highlights

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