Financial Times: Gas groups tap derivatives deals for cash

US oil and gas producers are making complex structured derivatives deals with investment banks to bring forward revenue by unlocking the value of their long-term hedging contracts.

Companies are increasingly turning to the agreements to generate cash to fund drilling and land purchases, as low natural gas prices leave the industry facing a cash squeeze this year. Derivative contracts purchased by gas producers nine months or more ago have soared in value as the price of natural gas has halved. Investment banks are offering to purchase those contracts, which can be resold to other gas producers, and in return pay the companies above market value for their output this year.

Analysts say that companies are in effect taking on more risk to avoid cutting back on investment.  MORE (Registration required)