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These excerpts taken from the DVN 10-K filed Feb 27, 2009. Commodity
Price Risk
Our major market risk exposure is in the pricing applicable to
our oil, gas and NGL production. Realized pricing is primarily
driven by the prevailing worldwide price for crude oil and spot
market prices applicable to our U.S. and Canadian gas and
NGL production. Pricing for oil, gas and NGL production has been
volatile and unpredictable for several years. See
“Item 1A. Risk Factors.”
We periodically enter into financial hedging activities with
respect to a portion of our oil and gas production through
various financial transactions that hedge the future prices
received. These transactions include financial price swaps
whereby we will receive a fixed price for our production and pay
a variable market price to the contract counterparty, and
costless price collars that set a floor and ceiling price for
the hedged production. If the applicable monthly price indices
are outside of the ranges set by the floor and ceiling prices in
the various collars, we will settle the difference with the
counterparty to the collars. These financial hedging activities
are intended to support oil and gas prices at targeted levels
and to manage our exposure to oil and gas price fluctuations.
Based on gas contracts in place as of February 16, 2009 we
have approximately 0.3 Bcf per day of gas production in
2009 that is associated with price collars or fixed-price
contracts. This amount represents approximately 10% of our
estimated 2009 gas production, or 7% of our total Boe
production. All of the price collar contracts expire
December 31, 2009. Our fixed-price physical delivery
contracts extend through 2011. These physical delivery contracts
relate to our Canadian gas production and range from six Bcf to
14 Bcf per year. These physical delivery contracts are not
expected to have a material effect on our realized gas prices
from 2009 through 2011.
The key terms of our gas price collar contracts are presented in
the following table.
The fair values of our and gas price collars are largely
determined by estimates of the forward curves of relevant oil
and gas price indexes. At December 31, 2008, a 10% increase
in these forward curves would have decreased the net assets
recorded for our commodity hedging instruments by approximately
$54 million.
Commodity
Price Risk
Our major market risk exposure is in the pricing applicable to
our oil, gas and NGL production. Realized pricing is primarily
driven by the prevailing worldwide price for crude oil and spot
market prices applicable to our U.S. and Canadian gas and
NGL production. Pricing for oil, gas and NGL production has been
volatile and unpredictable for several years. See
“Item 1A. Risk Factors.”
We periodically enter into financial hedging activities with
respect to a portion of our oil and gas production through
various financial transactions that hedge the future prices
received. These transactions include financial price swaps
whereby we will receive a fixed price for our production and pay
a variable market price to the contract counterparty, and
costless price collars that set a floor and ceiling price for
the hedged production. If the applicable monthly price indices
are outside of the ranges set by the floor and ceiling prices in
the various collars, we will settle the difference with the
counterparty to the collars. These financial hedging activities
are intended to support oil and gas prices at targeted levels
and to manage our exposure to oil and gas price fluctuations.
Based on gas contracts in place as of February 16, 2009 we
have approximately 0.3 Bcf per day of gas production in
2009 that is associated with price collars or fixed-price
contracts. This amount represents approximately 10% of our
estimated 2009 gas production, or 7% of our total Boe
production. All of the price collar contracts expire
December 31, 2009. Our fixed-price physical delivery
contracts extend through 2011. These physical delivery contracts
relate to our Canadian gas production and range from six Bcf to
14 Bcf per year. These physical delivery contracts are not
expected to have a material effect on our realized gas prices
from 2009 through 2011.
The key terms of our gas price collar contracts are presented in
the following table.
The fair values of our and gas price collars are largely
determined by estimates of the forward curves of relevant oil
and gas price indexes. At December 31, 2008, a 10% increase
in these forward curves would have decreased the net assets
recorded for our commodity hedging instruments by approximately
$54 million.
Commodity Price Risk Our major market risk exposure is in the pricing applicable to our oil, gas and NGL production. Realized pricing is primarily driven by the prevailing worldwide price for crude oil and spot market prices applicable to our U.S. and Canadian gas and NGL production. Pricing for oil, gas and NGL production has been volatile and unpredictable for several years. See “Item 1A. Risk Factors.” We periodically enter into financial hedging activities with respect to a portion of our oil and gas production through various financial transactions that hedge the future prices received. These transactions include financial price swaps whereby we will receive a fixed price for our production and pay a variable market price to the contract counterparty, and costless price collars that set a floor and ceiling price for the hedged production. If the applicable monthly price indices are outside of the ranges set by the floor and ceiling prices in the various collars, we will settle the difference with the counterparty to the collars. These financial hedging activities are intended to support oil and gas prices at targeted levels and to manage our exposure to oil and gas price fluctuations. Based on gas contracts in place as of February 16, 2009 we have approximately 0.3 Bcf per day of gas production in 2009 that is associated with price collars or fixed-price contracts. This amount represents approximately 10% of our estimated 2009 gas production, or 7% of our total Boe production. All of the price collar contracts expire December 31, 2009. Our fixed-price physical delivery contracts extend through 2011. These physical delivery contracts relate to our Canadian gas production and range from six Bcf to 14 Bcf per year. These physical delivery contracts are not expected to have a material effect on our realized gas prices from 2009 through 2011. The key terms of our gas price collar contracts are presented in the following table.
The fair values of our and gas price collars are largely determined by estimates of the forward curves of relevant oil and gas price indexes. At December 31, 2008, a 10% increase in these forward curves would have decreased the net assets recorded for our commodity hedging instruments by approximately $54 million. Commodity Price Risk Our major market risk exposure is in the pricing applicable to our oil, gas and NGL production. Realized pricing is primarily driven by the prevailing worldwide price for crude oil and spot market prices applicable to our U.S. and Canadian gas and NGL production. Pricing for oil, gas and NGL production has been volatile and unpredictable for several years. See “Item 1A. Risk Factors.” We periodically enter into financial hedging activities with respect to a portion of our oil and gas production through various financial transactions that hedge the future prices received. These transactions include financial price swaps whereby we will receive a fixed price for our production and pay a variable market price to the contract counterparty, and costless price collars that set a floor and ceiling price for the hedged production. If the applicable monthly price indices are outside of the ranges set by the floor and ceiling prices in the various collars, we will settle the difference with the counterparty to the collars. These financial hedging activities are intended to support oil and gas prices at targeted levels and to manage our exposure to oil and gas price fluctuations. Based on gas contracts in place as of February 16, 2009 we have approximately 0.3 Bcf per day of gas production in 2009 that is associated with price collars or fixed-price contracts. This amount represents approximately 10% of our estimated 2009 gas production, or 7% of our total Boe production. All of the price collar contracts expire December 31, 2009. Our fixed-price physical delivery contracts extend through 2011. These physical delivery contracts relate to our Canadian gas production and range from six Bcf to 14 Bcf per year. These physical delivery contracts are not expected to have a material effect on our realized gas prices from 2009 through 2011. The key terms of our gas price collar contracts are presented in the following table.
The fair values of our and gas price collars are largely determined by estimates of the forward curves of relevant oil and gas price indexes. At December 31, 2008, a 10% increase in these forward curves would have decreased the net assets recorded for our commodity hedging instruments by approximately $54 million. This excerpt taken from the DVN 10-K filed Feb 28, 2007. Commodity
Price Risk
Our major market risk exposure is in the pricing applicable to
our oil, gas and NGL production. Realized pricing is primarily
driven by the prevailing worldwide price for crude oil and spot
market prices applicable to our U.S. and Canadian natural gas
and NGL production. Pricing for oil, gas and NGL production has
been volatile and unpredictable for several years. See
“Item 1A. Risk Factors.”
Currently, we are largely accepting the volatility risk that
oil, natural gas and NGL prices present. None of our future oil
production is subject to price swaps or collars. With regard to
our future natural gas production, based on contracts currently
in place, we will have approximately 116 MMcf per day of
gas production in 2007 that is subject to either fixed-price
contracts, swaps, floors or collars. This amount represents
approximately 5% of our estimated 2007 gas production (3% of our
total Boe production). For the years 2008 through 2011, we have
fixed-price physical delivery contracts covering Canadian
natural gas production ranging from seven Bcf to 14 Bcf per
year. These contracts are not expected to have a material effect
on our realized gas prices from 2007 through 2011.
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