Crew's fourth quarter was highlighted by the strengthening of the Company's balance sheet through the sale of the Company's 23 sections of Montney lands in the Kobes, British Columbia area for proceeds of $108 million. The sale included the disposition of 625 boe per day of production and 11.9 mboe of proved plus probable reserves. A portion of the proceeds, $22 million, were used to replace the disposed Montney acreage with 56 net sections of Montney lands proximal to the Company's operations in the Septimus/Groundbirch area. With these transactions completed before year end, the Company ended 2012 with total net debt of $291 million representing 1.55 times net debt to annualized fourth quarter funds from operations.
The Company's fourth quarter funds from operations increased, as compared to the third quarter of 2012, to $47.1 million or $0.39 per share. This increase resulted from a 3% quarter over quarter production increase from successful drilling at Lloydminster and Kakwa, Alberta. The increased production was enhanced by a 13% quarter over quarter increase in operating netbacks driven by increased pricing. The Company's price received (excluding hedging gains) for its production increased 8% while total cash costs per boe including royalties, operating costs, transportation, general and administrative and interest costs were consistent with third quarter levels. The Company's net income increased to $21.8 million during the quarter for total net income in 2012 of $21.5 million primarily due to a gain of $70.8 million on the disposition of the Kobes property.
Prices received for the Company's liquids production including conventional oil, heavy oil and natural gas liquids were consistent with those received for third quarter production as the price for West Texas Intermediate ("WTI") oil denominated in Canadian dollars decreased 5% during the quarter compared to the third quarter of 2012. The prices received for the Company's conventional and heavy oil sales correlate closely to the price of Western Canadian Select ("WCS"), which traditionally trades at a discount to WTI. During the fourth quarter the differential between WTI and WCS decreased to 21% from 24% in the third quarter partially offsetting the decline in WTI pricing. Finally, the Company's overall liquids pricing was positively impacted by a 5% increase in the price for the Company's natural gas liquids production. This increase was driven by an increase in prices received for condensate, ethane and propane.
Crew's revenue from natural gas continued to be positively impacted by pricing that outperformed market expectation as above average temperatures experienced in the highly populated eastern regions of Canada and the U.S. resulted in above average power generation demand for natural gas through the summer. This resulted in a smaller than expected inventory build during the summer and drove a positive market sentiment into the early winter heating season. The price for natural gas delivered at the Canadian AECO hub during the fourth quarter averaged $3.26 per mcf, an increase of 41% over the third quarter of 2012. The average price received for Crew's natural gas sales during the fourth quarter was $3.48 per mcf, a 39% increase over the third quarter.
The Company actively protects its cash flow by hedging a portion of its future production. Crew currently has hedged approximately 38.8 mmcf per day of natural gas for 2013 at a price of approximately $3.19 per mcf. The Company also has hedges to protect from a significant decline in oil prices with an average of 5,500 barrels per day of WTI oil hedged at an average floor price of approximately $92.00 per barrel for 2013. In addition, the Company currently has hedges that fix the differential between WTI and WCS pricing on an average of 500 barrels per day for 2013 at a differential of $25 per barrel. Crew has also begun building its hedge position to protect cash flow for 2014. The Company currently has hedged approximately 11.7 mmcf per day of natural gas for 2014 at a price of approximately $3.76 per mcf and 1,750 barrels per day of WTI oil hedged at an average floor price of approximately $96.00 per barrel with additional hedges fixing the differential between WTI and WCS pricing on an average of 1,000 barrels per day for 2014 at an average differential of $22.75 per barrel.
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