As natural gas prices reached astonishing new heights in mid-December, above $9 per thousand cubic feet on the New York Mercantile Exchange, companies reacted quickly to take advantage of the unprecedented good fortune. Mitchell Energy & Development Corp., The Woodlands, Texas, elected to not process natural gas at Exxon Mobil's Katy gas processing plant west of Houston during December. This decision was expected to reduce the company's December natural gas liquids production by 14,000 barrels per day-but the benefits are to outweigh the reduction. "Although NGL prices are at historically high levels, it will be more profitable to sell NGLs as part of the even more valuable natural gas stream, since Katy is an older plant that is not as efficient as Mitchell-owned plants," explained Allen J. Tarbutton, president of Mitchell's gas services division. Southwestern Energy Co. of Fayetteville, Arkansas, announced it increased its hedging position for 2001 to cover 80% of targeted gas production. The company uses swaps and options on both oil and gas to reduce the volatility of earnings and cash flow. "With our current capital structure we felt it prudent to take advantage of the recent price increase and secure a large portion of our cash flow for next year," said Harold M. Korell, president and chief executive officer. The move allows the company to fund its 2001 capital program and continue to reduce debt. It will use a combination of zero-cost collars and fixed-price swaps. As of December 7, Southwestern Energy was using collars on some production, with a floor that varied through 2001 from $2.55 to $6.25 per Mcf and a ceiling from $3 to $7.12 per Mcf.

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