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PXD » Topics » Gas Price Sensitivity Derivative Financial Instruments as of December 31, 2005

This excerpt taken from the PXD 10-K filed Feb 17, 2006.
Gas Price Sensitivity
Derivative Financial Instruments as of December 31, 2005
 
                                 
                      Liability
 		 
                      Fair Value at
 		 
    Year Ending December 31,     December 31,
 		 
    2006     2007     2008     2005  
                      (In thousands)  
 
Gas Hedge Derivatives(a):
                               
Average daily notional MMBtu volumes(b):
                               
Swap contracts
    73,842       29,195       5,000     $ (213,543 )
Weighted average fixed price per MMBtu
  $ 4.30     $ 4.28     $ 5.38          
Collar contracts (c)
    183,685       215,000       —     $ (71,866 )
Weighted average ceiling price per MMBtu
  $ 13.76     $ 11.84     $ —          
Weighted average floor price per MMBtu
  $ 6.62     $ 6.57     $ —          
Average forward NYMEX gas prices(d)
  $ 7.81     $ 8.99     $ 8.76          
 
 
(a) To minimize basis risk, the Company enters into basis swaps for a portion of its gas hedges to convert the index price of the hedging instrument from a NYMEX index to an index which reflects the geographic area of production. The Company considers these basis swaps as part of the associated swap and collar contracts and, accordingly, the effects of the basis swaps have been presented together with the associated contracts.
 
(b) See Note J of Notes to Consolidated Financial Statements included in “Item 8. Financial Statements and Supplementary Data” for hedge volumes and weighted average prices by calendar quarter.
 
(c) Subsequent to December 31, 2005, the Company reduced its gas hedge positions by terminating the following gas collar contracts which were included in the table above: 65,000 MMBtu per day of April through December 2006 gas sales at a weighted average floor price per MMBtu of $6.74 and a weighted average ceiling price per MMBtu of $14.01. The aggregate fair value of the terminated gas collar contracts represented an asset of $4.1 million on the dates of termination.
 
(d) The average forward NYMEX gas prices are based on February 15, 2006 market quotes.
 
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