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This excerpt taken from the DVN 10-K filed Feb 28, 2007. Oil and
Natural Gas Marketing
The spot market for oil and gas is subject to volatility as
supply and demand factors fluctuate. We may periodically enter
into financial hedging arrangements, fixed-price contracts or
firm delivery commitments with a portion of our oil and gas
production. These activities are intended to support targeted
price levels and to manage our exposure to price fluctuations.
See “Item 7A. Quantitative and Qualitative Disclosures
About Market Risk.”
Oil
Marketing
Our oil production is sold under both long-term (one year or
more) and short-term (less than one year) agreements at prices
negotiated with third parties. All of our oil production is sold
at variable or market-sensitive prices.
Natural
Gas Marketing
Our gas production is also sold under both long-term and
short-term agreements at prices negotiated with third parties.
Although exact percentages vary daily, as of February 2007,
approximately 75% of our natural gas production was sold under
short-term contracts at variable or market-sensitive prices.
These market-sensitive sales are referred to as “spot
market” sales. Another 23% of our production was committed
under various long-term contracts which dedicate the natural gas
to a purchaser for an extended period of time but still at
market sensitive prices. Our remaining gas production was sold
under long-term fixed price contracts.
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