In April 2010, we entered into crude oil put option spread contracts on 31,000 BOPD for 2011 and
40,000 BOPD for 2012. Additionally, during April 2010 we acquired crude oil three-way collars on
9,000 BOPD for 2011. In November 2010, we acquired natural gas three-way collars on 200,000
MMBtu per day for 2011 and natural gas put options on 160,000 MMBtu per day for 2012.
In the first quarter of 2009, we monetized our 2009 and 2010 crude oil put option contracts on
40,000 BOPD with weighted average strike prices of $106.16 per barrel and $111.49 per barrel,
respectively. In addition, we terminated our crude oil swaps on 20,000 BOPD in 2009. As a result of
this monetization, we received approximately $1.1 billion in net proceeds, which we used to reduce the
outstanding balance on our senior revolving credit facility and for other general corporate purposes.
See Note 8 – Fair Value Measurements of Assets and Liabilities, for additional discussion on the
fair value measurement of our derivative contracts.
As of December 31, 2011, we had the following outstanding commodity derivative contracts, all of
which settle monthly:
Period
Instrument
Type
Daily
Volumes
Average
Price
(1)
Average
Deferred
Premium
Index
Sales of Crude Oil Production
2012
Jan - Dec Three-way collars
(2)
40,000 Bbls $100.00 Floor with an $80.00 Limit
-
Brent
$120.00 Ceiling
2013
Jan - Dec Put options
(3)
22,000 Bbls $90.00 Floor with a $70.00 Limit $6.237 per Bbl Brent
Sales of Natural Gas Production
2012
Jan - Dec Put options
(4)
120,000 MMBtu $4.30 Floor with a $3.00 Limit $0.298 per MMBtu Henry Hub
Jan - Dec Three-way collars
(5)
40,000 MMBtu $4.30 Floor with a $3.00 Limit
-
Henry Hub
$4.86 Ceiling
2013
Jan - Dec Swap contracts
(6)
110,000 MMBtu
$4.27
-
Henry Hub
(1) The average strike prices do not reflect any premiums to purchase the put options.
(2) If the index price is less than the $100 per barrel floor, we receive the difference between the $100 per barrel floor and the
index price up to a maximum of $20 per barrel. We pay the difference between the index price and $120 per barrel if the
index price is greater than the $120 per barrel ceiling. If the index price is at or above $100 per barrel but at or below $120
per barrel, no cash settlement is required.
(3) If the index price is less than the $90 per barrel floor, we receive the difference between the $90 per barrel floor and the
index price up to a maximum of $20 per barrel less the option premium. If the index price is at or above $90 per barrel, we
pay only the option premium.
(4) If the index price is less than the $4.30 per MMBtu floor, we receive the difference between the $4.30 per MMBtu floor and
the index price up to a maximum of $1.30 per MMBtu less the option premium. If the index price is at or above $4.30 per
MMBtu, we pay only the option premium.
(5) If the index price is less than the $4.30 per MMBtu floor, we receive the difference between the $4.30 per MMBtu floor and
the index price up to a maximum of $1.30 per MMBtu. We pay the difference between the index price and $4.86 per MMBtu
if the index price is greater than the $4.86 per MMBtu ceiling. If the index price is at or above $4.30 per MMBtu but at or
below $4.86 per MMBtu, no cash settlement is required.
(6) If the index price is less than the $4.27 per MMBtu fixed price, we receive the difference between the $4.27 per MMBtu fixed
price and the index price. We pay the difference between the index price and the fixed price if the index price is greater than
the fixed price.
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