A Bit Of Insight Into Those Derivative Losses -- CLR -- The Bakken, North Dakota, USA

Link here to Motley Fool.

Regarding CLR and its derivative losses:

In the latest earnings release, net losses stood at $112 million, thanks to a $402.5 million loss on derivative instruments. Digging deeper, I see that over $399 million of these losses are actually unrealized, which means it's just an accounting entry -- in other words, the company suffers no actual cash outflows. On a comparative basis, the fourth quarter of 2010 saw net loss clock in at $45 million, which includes a $188 million derivatives loss.

I'm not too concerned about these paper losses and agree with Motley Fool community member badbernanke's comments:

Derivative "losses" from hedging commodity production are better than derivative gains for companies with rapidly growing production profiles.

"Gains" normally means that prices for the commodity are dropping and that marginal, unhedged production is receiving prices lower than the hedge price.

"Losses" mean that the commodity prices are rising (actually, have risen) above the hedge price. So marginal, unhedged production will benefit from higher market prices.