Description:
With fixed price, a producer can lock in a specific price for natural gas sales. By locking in a price, the producer always knows what price will be paid for production gas. If market prices drop, the customer will not be affected. Additionally, weather or unpredictable demand will not impact fixed gas price.

Advantages:

• Provides a known sales price
• Eliminates concern about falling gas prices

Example:
A small producer in the Powder River wants to have a predictable gas cost for budgeting and to assure positive cash flow. The producer believes gas prices may fall in the future because of the limited transportation out of the area, so he wants to lock in the current market price. With a fixed price, NFM can help producers predict their revenues from gas production. If the producer locks in a fixed price of $3.50, he will not be affected if index prices drop to $2.00. This producer will still receive $3.50 per MMBtu.