Hedging  The Company had in place the following hedging arrangements at December 31, 2014:  In the year to December 31, 2014, the Company realized losses from hedges in place during the year in the amount  of $3.2 million compared to $36,000 in 2013. Details by commodity of realized gains and losses are provided on  page 29. The fair market value of hedges in place at December 31, 2014 was $12.9 million.  In January 2015 the Company terminated all of the above crude oil contracts in exchange for $5.1 million. This  amount will be recognized as a realized gain in commodity price contracts in the first quarter of 2015. In February  2015 the Company added an additional fixed contract for 4,000 GJ/day of natural gas at an AECO price of $2.85 per  GJ for the period from April 1, 2015 to September 30, 2015.  For natural gas volumes that have been hedged at AECO monthly index pricing, an equal volume of natural gas is  sold at the same index. All crude oil contracts are based on a WTI price in US$ per barrel which is then converted to Cdn$ using the foreign  exchange rate at the time of execution of the contract. Crude oil contracts do not reflect wellhead prices as quality  adjustments, market differentials and transportation tariffs are not included. Natural gas price hedges are based on  pricing at Storm’ s physical delivery point for natural gas sales and are directly related to wellhead prices.  The Company’ s hedging program is not based on a speculative assessment of the direction of commodity prices. The program’ s purpose is to reduce the effect of commodity price volatility on cash flow to enable the Company to  maintain a disciplined and sustainable development program. This is of particular importance at Umbach, where  exploitation of the resource is at an early stage and capital programs necessary to delineate the scope and scale of a  potentially decades-long project have to be insulated from the effects of near-term price movements.  Royalties paid in 2014 increased by 118% when compared to 2013. Increased production revenue was the primary  driver of increased royalties; however, royalties also increased as a result of the expiry of the 5% new well royalty  incentive on certain horizontal wells in the Grande Prairie area which benefited the first half of 2013, and from the  expiry of a Deep Well Royalty Credit in the HRB during the first quarter of 2014. This was offset by the receipt of  infrastructure royalty credits at Umbach and the HRB which reduced 2014 royalties by a total of $1.9 million. As a  result of a higher natural gas price in 2014, royalties as a percentage of revenue increased from 12% to 14% year  over year. At Umbach, future production will further benefit from British Columbia’ s Infrastructure Royalty Credit Program. During 2012 and 2013, Storm received approval for $4.3 million of royalty credits ($3.4 million net) for three pipeline  projects. In late 2013, $745,000 of this amount was applied in reduction of royalties and the Company received  approximately $1.6 million in the second quarter of 2014. The remaining amount of $1.0 million is expected to be  realized in 2015 as the related pipeline projects are completed and incremental revenue eligible for royalty reduction  is generated. During 2014, approval was received for an additional net amount of $4.7 million of royalty credits for a  facility and related gathering pipelines, with this amount likely being received in 2015 and 2016. The timing of receipt  WTI Crude Oil  AECO Natural Gas  Volume  Average Price  (Cdn$/Bbl)  Volume  Average Price  (Cdn$/GJ)  Fixed Price  Q1 –2015  600 Bbls/day  $101.06  2,000 GJ/day $3.62  Q2 –2015 600 Bbls/day  $ 98.34  21,667 GJ/day  $3.33  Q3 –2015 400 Bbls/day  $ 94.61  30,000 GJ/day  $3.33  Q4 –2015 30,000 GJ/day  $3.47  Collars  Average Range  (Cdn$/Bbl)  Average Range  (Cdn$/GJ)  Q1 –2015  28,000 GJ/day  $3.62 - $4.40  Royalties  Year Ended December 31, 2014 Year Ended  December 31, 2013  Charge for year  $ 13,151 $ 6,035  Percentage of revenue from product sales  13.7% 12.2%  Per Boe  $ 5.16 $ 4.55  24 