Swift Energy, a Houston-based oil and gas producer, has purchased collars and floors as a means of hedging price risk in its oil and gas operations and is planning further purchases. Scott Espenshade, director in investor relations, said the energy company regularly enters derivatives transactions as a means of protecting its capital with maturities normally extending to a year.
For July the corporate has entered collars on 90,000 barrels of oil with a floor of USD23 per barrel and a ceiling of USD28.50, said Espenshade. If oil prices rise above the ceiling Swift still gets 60% of the upside. Floors were also taken on for an additional 60,000 barrels of oil with a strike of USD25, he added. Also, Swift took on floors for 225,000 million Btu of its natural gas at a price of USD4.75 per million Btu, he said. Swift works with several counterparties for its derivatives trades, which are selected according to their relationship with the corporate as well as price and service, Espenshade said, declining to give names.
