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The Company's average natural gas sales price was $3.16 per Mcf for the three months ended December 31, 2012, 41% higher than the third quarter of 2012 price of $2.24 per Mcf and 1% lower than the fourth quarter of 2011 price of $3.20 per Mcf. For the year ended December 31, 2012, the Company's average natural gas sales price was $2.21 per Mcf compared to $3.60 per Mcf for 2011. The natural gas price for the year ended 2012 includes a gain of $0.1 million on the Company's fixed price natural gas contracts, compared to a gain of $1.2 million for 2011.
Commodity contracts. At December 31, 2012, the following derivative contracts were outstanding and recorded at estimated fair value:
Weighted Weighted average WTI \average CanadianPeriod volume (bpd) ($/bbl)January 1, 2013 to March 31, 2013 1,200 89.73April 1, 2013 to June 30, 2013 1,100 89.81July 1, 2013 to September 30, 2013 900 90.54October 1, 2013 to December 31, 2013 800 90.56----------------------------------------------------------------------------
By comparison, WTI Canadian averaged $103.04 per bbl in the first quarter of 2012, $94.29 per bbl in the second quarter of 2012, $91.70 per bbl in the third quarter and $87.39 per bbl in the fourth quarter of 2012.
Derivative contracts had the following impact on the consolidated statements of operations:
Three months ended Year ended December December 31 31(thousands of dollars) 2012 2011 2012 2011Realized gain (loss) on derivative contracts $ 2,231 $ (271) $ 5,429 $ (624)Unrealized gain (loss) on derivative contracts (2,828) (7,864) (2,481) 3,302 --------------------------------------Total gain (loss) on derivative contracts $ (597) $ (8,135) $ 2,948 $ 2,678----------------------------------------------------------------------------
In October 2012, 500 bpd of derivative contracts for the months of November and December 2012 were settled for a gain of $0.4 million which was reflected in the financial results for the fourth quarter of 2012.
Fixed price contracts. The Company entered into physical contracts to sell 7,000 GJs per day of natural gas for August and September 2012 at an average AECO price of $2.45 per GJ. The Company realized a gain on fixed price natural gas contracts of $0.1 million for the year ended December 31, 2012 as compared to a gain of $1.2 million for the year ended December 31, 2011.
Royalties. For the year ended December 31, 2012, the average rate for royalties was 10.3% of revenue (December 31, 2011 - 11.8%). For the fourth quarter of 2012, the average rate for royalties was 9.7% of revenue compared to 10.2% of revenue in the third quarter of 2012 and 12.8% of revenue in the fourth quarter of 2011. The decrease in the average royalty rate for the year and quarter ended December 31, 2012 is due to reduced royalty rates at lower commodity prices. Oil wells drilled on Crown lands during 2011 and 2012 qualified for royalty incentives that reduce average Crown royalties for periods of up to 30 months from initial production, after which Crown royalties are expected to increase from current levels.
