As markets for futures, swaps, and options have grown and matured in the oil and gas industry, the question of how companies should make use of such financial derivatives naturally arises. The simplest models of risk vs. return in modern finance theory are based on a world in which the costs of external and internal financing are the same and all risk is either systematic or can be diversified by shareholders. In this simplified world, derivatives must be viewed as purely speculative instruments that can add nothing to shareholder value. However, in the teal world of financial distress, imperfect-information, and misaligned management/shareholder risk altitudes, the use of these instruments can add significant value. This paper explores the sources of this potential for value creation, including a look at improving organizational alignment, information consistency, capital structure, and management of real assets.