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DVN » Topics » Change in Fair Value of Derivative Financial Instruments

This excerpt taken from the DVN 10-K filed Feb 28, 2007.
Change in Fair Value of Derivative Financial Instruments
 
The details of the changes in fair value of derivative financial instruments between 2004 and 2006 are shown in the table below.
 
                         
    2006     2005     2004  
    (In millions)  
 
Option embedded in exchangeable debentures
  $ 181       54       58  
Non-qualifying commodity hedges
    —       39       —  
Ineffectiveness of commodity hedges
    —       5       5  
Interest rate swaps
    (3 )     (4 )     (1 )
                         
Total
  $ 178       94       62  
                         
 
The change in the fair value of the embedded option relates to the debentures exchangeable into shares of Chevron Corporation common stock. These expenses were caused primarily by increases in the price of Chevron Corporation’s common stock.
 
In 2005, we recognized a $39 million loss on certain oil derivative financial instruments that no longer qualified for hedge accounting because the hedged production exceeded actual and projected production under these contracts. The lower than expected production was caused primarily by hurricanes that affected offshore production in the Gulf of Mexico.
 
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