Derivative and Other Hedging Instruments

9 Months Ended

Sep. 30, 2011

Derivative and Other Hedging Instruments [Abstract]

DERIVATIVE AND OTHER HEDGING INSTRUMENTS

NOTE 7 – DERIVATIVE AND OTHER HEDGING INSTRUMENTS

Trans Energy entered into derivative commodity price contracts to provide a measure of stability in the cash flows associated with Trans Energy’s oil and gas production and to manage exposure to commodity price fluctuations. Trans Energy does not designate its derivative financial instruments as hedging instruments for financial accounting purposes, and as a result, recognizes the change in the respective instruments’ fair value in earnings.

On July 13, 2007, as required by the CIT Credit Agreement, Trans Energy purchased a commodity put option on natural gas. In addition, on May 22, 2008, Trans Energy entered into a participating commodity put and call option on oil as a costless collar.

Natural Gas Derivatives

Trans Energy entered into participating commodity put options on natural gas whereby Trans Energy receives a floor price. The natural gas commodity put options are indexed to NYMEX Henry Hub prices. The following table shows the monthly volumes and the floor price.

Start Month	End Month		Volume MMBTU/Month		Average Floor $MMBTU
Oct. ‘11		Dec. ‘11		5,244	$	7.350

As of Sept 30, 2011 and December 31, 2010 the natural gas derivative had a total fair value of $37,073 and $152,087, respectively, all of which was current.

Oil Derivatives

Trans Energy entered into participating commodity put and call options on crude oil as a costless collar. The oil costless collar is indexed to NYMEX WTI Oil prices. The following table shows the monthly volumes, the floor and ceiling prices.

Start Month	End Month		Volume BBL/Month		Floor $/BBL		Ceiling $/BBL
Oct. ‘11		Dec. ‘11		449	$	100	$	172

As of September 30, 2011 and December 31, 2010 the oil derivative had a fair value of $18,869 and $35,303, respectively, all of which was current.

For the nine months ended September 30, 2011, Trans Energy had total gains on the derivative contracts of $50,299, of which $181,947 was a realized gain and $131,648 was an unrealized loss. During the nine months ended September 30, 2010, Trans Energy had a total gain on the derivative contracts of $175,796, of which $246,030 was a realized gain and $70,234 was an unrealized loss.

Gas Purchase Agreements

Trans Energy has various agreements with Dominion Field Services, Inc. for fixed prices for gas transported through its pipeline. The monthly volume ranges from 10,000 to 20,000 decatherm (“Dth”) per month, and fixed prices vary from $10.57/Dth to $10.81/Dth through April 2012. A decatherm is equal to one MMBTU.