Objectives and Strategy: The Company's major market risk exposure is in the pricing applicable to its natural gas and oil production. Realized pricing is currently driven primarily by the prevailing price for the Company's natural gas production. Historically, prices received for natural gas production have been volatile and unpredictable. Pricing volatility is expected to continue. As a result of its hedging activities, the Company may realize prices that are less than or greater than the spot prices that it would have received otherwise.

The Company relies on various types of derivative instruments to manage its exposure to commodity price risk and to provide a level of certainty in the Company's forward cash flows supporting the Company's capital investment program.

The Company's hedging policy limits the amounts of resources hedged to not more than 50% of its forecast production without Board approval. The Board has approved hedging greater than 50% of the Company's forecast 2011 production.

Fair Value of Commodity Derivatives: FASB ASC 815 requires that all derivatives be recognized on the balance sheet as either an asset or liability and be measured at fair value. Changes in the derivative's fair value are recognized currently in earnings unless specific hedge accounting criteria are met. The Company does not apply hedge accounting to any of its derivative instruments.

Derivative contracts that do not qualify for hedge accounting treatment are recorded as derivative assets and liabilities at fair value on the balance sheet and the associated unrealized gains and losses are recorded as current income or expense in the income statement. Unrealized gains or losses on commodity derivatives represent the non-cash change in the fair value of these derivative instruments and do not impact operating cash flows on the cash flow statement. See Note 7 for the detail of the asset and liability values of the following derivatives.

Commodity Derivative Contracts: At June 30, 2011, the Company had the following open commodity derivative contracts to manage price risk on a portion of its natural gas production whereby the Company receives the fixed price and pays the variable price. The natural gas reference prices of these commodity derivative contracts are typically referenced to natural gas index prices as published by independent third parties.

Type	Commodity Reference Price	Remaining Contract Period	Volume - MMBTU/Day	Average Price/MMBTU		Fair Value - June 30, 2011
						Asset
Swap	NW Rockies	Calendar 2011	170,000	$5.08	$	26,980
Swap	NYMEX	July - October 2011	230,000	$4.58	$	5,538
Swap	NYMEX	Calendar 2012	300,000	$5.03	$	21,644
Swap	NYMEX	April - October 2012	90,000	$5.00	$	4,668
Swap	Northeast	Calendar 2011	195,000	$5.81	$	44,294

The following table summarizes the pre-tax realized and unrealized gains and losses the Company recognized related to its natural gas derivative instruments in the Consolidated Statements of Income for the six months ended June 30, 2011 and 2010:

		For the Three Months				For the Six Months
		Ended June 30,				Ended June 30,
Natural Gas Commodity Derivatives:		2011		2010		2011		2010

Realized gain on commodity derivatives (1)	$	45,080	$	37,654	$	90,120	$	36,985
Unrealized gain (loss) on commodity derivatives (1)		2,526		(23,088)		(26,879)		158,932

Total gain on commodity derivatives	$	47,606	$	14,566	$	63,241	$	195,917

(1) Included in gain on commodity derivatives in the Consolidated Statements of Income.