Commodity Derivatives & Oil and Gas Companies

Based on an analysis of numerous financial reports of U.S. oil and gas companies filed with the SEC and discussions with selected issuers, Standard & Poor’s Ratings Services found that just about all U.S. oil and gas producers and refiners use derivatives to manage risks related to oil and gas commodity prices, albeit at varying degrees, using a variety of financial instruments and hedging practices, according to a report published today by Standard & Poor’s titled, “U.S. Oil And Gas Sector Makes Extensive Use Of Commodity Derivatives.”

“The market for crude oil, natural gas, and certain petroleum products as well as for derivative contracts, whose values are based on these commodities, is well developed and liquid,” said Standard & Poor’s credit analyst Sherman Myers.
Derivatives used in the oil and gas sector include forwards, futures, swaps, and options (including collars).
“Our findings indicate that it is challenging to assess market risk related to derivatives because of the variation and limitations of current financial disclosures,” said Mr. Myers.
In addition, Standard & Poor’s said that the quality of disclosures related to derivatives and risk-management activities in the financial statement footnotes and other required disclosures varies widely among rated issuers.
The report is available to subscribers of RatingsDirect, Standard & Poor’s Web-based credit research and analysis system, at If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-9823 or sending an e-mail to Ratings information can also be found on Standard & Poor’s public Web site at; under Credit Ratings in the left navigation bar, select Find a Rating, then Credit Ratings Search. Members of the media may request a copy of this report by contacting the media representative provided.
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Source: Standard & Poor’s

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