E&P firms typically hold hedge positions to settlement. Few firms have a hedge policy that would allow them to do otherwise. In fact, Financial Accounting Standards Board (FASB) reporting requirements deter adjustments to hedge portfolios. However, producers do make adjustments. Occasionally, a publicly traded firm will report liquidating a hedge and, perhaps, replacing it. For example, Houston-based Mission Resources, which was recently acquired by Petrohawk Energy, modified its hedge portfolio in April 2005, canceling several existing oil collars and acquiring new swaps and collars at a cost of some $3.3 million. Earlier this year, volatile natural gas prices created an attractive opportunity for E&P companies to consider modifying their hedge portfolios. This article examines the criteria under which revising the hedge portfolio will improve its expected value. Following last winter's record $6.88-per-million-Btu average settlement, natural gas started out the 2005 summer season with the Nymex April 2005 contract closing at a record $7.32. This lifted the balance of the summer swaps to new highs. Then, during the next two months, prices softened. For more on this, see the December issue of Oil and Gas Investor. For a subscription, call 713-993-9320, ext. 126.