Thanks for the explanations guys. This sure as hell is confusing, but the Connacher team seems to know what they're doing:

"Additionally, in order to mitigate foreign exchange exposure to commodity pricing, Connacher entered into a foreign exchange revenue collar which throughout 2009 sets a floor of CAD$1.1925 per U.S.$1.00 and a ceiling of CAD$1.30 per U.S.$1.00 on a notional amount of U.S.$10 million of monthly production revenue. For clarity, this contract provides the company a benefit from a strengthening Canadian dollar. As at June 30, 2009, based on the forward foreign exchange rate curve, the foreign exchange revenue collar had a value of $3.1 million; at December 31, 2008 it had a value of $1.8 million. The change in these values resulted in an unrealized non-cash foreign exchange gain of $1.3 million in the first half of 2009. Additionally, in the first half of 2009, Connacher realized a hedging gain (and received cash) in the amount of $1.1 million on this contract. These gains are included in foreign exchange gains/losses."

The "Skew Plus Leptokurtosis" chart from Booster's link suggested some possibility to miss out on gains, but in our position right now I think the conservative approach is merited. Also not everything is hedged/collared, only what management deems necessary and of which I don't believe the thinking has been discussed. It would be interesting to hear the reasons flushed out, but I'm not sure I'd understand them.

Thanks again Booster / Spiderman.

-bbq