Furthermore, we may enter into collars where we pay the counterparty if the market price is above the ceiling price and the counterparty pays us if the market price is below the floor on a notional quantity. We receive a payment from the counterparty or make a payment to the counterparty for the difference between the settled price differential and amounts stated under the terms of the contract. ![]() We also enter into basis swap contracts which guarantee a price differential between the NYMEX prices and our physical pricing points. As each monthly contract settles, we receive the excess, if any, of the fixed floor over the floating rate. Additionally, we may acquire put options for which we pay the counterparty an option premium, equal to the fair value of the option at the purchase date. These transactions may include price swaps whereby we will receive a fixed-price for our production and pay a variable market price to the contract counterparty. We enter into derivative contracts with respect to a portion of our projected oil and natural gas production through various transactions that mitigate the volatility of future prices received. For the year ended December 31, 2011, our average realized natural gas prices in Appalachia (before hedging), represented a $0.64 per Mcfe premium to NYMEX natural gas prices, which accounts for both the basis differential and the Btu adjustments. In addition, most of our natural gas production has historically had a high Btu content, resulting in an additional premium to NYMEX natural gas prices. For the year ended December 31, 2011, the average premium over NYMEX for natural gas delivered to our primary delivery points in the Appalachian Basin on the Columbia Gas Transmission system was $0.11 per MMBtu. Natural gas produced in the Appalachian Basin typically sells for a premium to NYMEX natural gas prices due to the proximity to major consuming markets in the northeastern United States. Wells in the Appalachian Basin generally produce little or no water, contributing to a low cost of operation. As a result, the cumulative amount of total proved reserves tends to increase as development progresses. Specifically, as development progresses, reserves from newly completed wells are reclassified from the proved undeveloped to the proved developed category, and additional adjacent locations are added to proved undeveloped reserves. Reserves in the Appalachian Basin typically have a high degree of step-out development success. The Appalachian Basin is a mature, producing region with well known geologic characteristics. Risk Factors” and those described elsewhere in this Annual Report. Known material factors and other factors that could cause our actual results to differ from those in the forward-looking statements are those described in “Item 1A. Our forward-looking statements involve significant risks and uncertainties (some of which are beyond our control) and assumptions that could cause actual results to differ materially from our historical experience and our present expectations or projections. All comments concerning our expectations for future revenues and operating results are based on our forecasts for our existing operations and do not include the potential impact of any future acquisitions. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate. These forward-looking statements are based on our current expectations and beliefs concerning future developments and their potential effect on us. ![]() Certain statements and information in this Annual Report may constitute “forward-looking statements.” The words “may,” “will,” estimate,” “predict,” “potential,” “believe,” “expect,” “anticipate,” “plan,” “intend,” “foresee,” “should,” “would,” “could” or other similar expressions are intended to identify forward-looking statements, which are generally not historical in nature.
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