11. Derivatives

On July 28, 2009, the Company entered into a two-year agreement on crude oil pricing. This "costless collar" agreement was effective from August 1, 2009 through July 31, 2011 and had a $60.00 per barrel floor and $81.50 per barrel cap on a volume of 9,500 barrels per month during the period from August 1, 2009 through December 31, 2010, and 7,375 barrels per month from January 1, 2011 through July 31, 2011. The prices referenced in this agreement were WTI NYMEX. While the agreement was based on WTI NYMEX prices, the Company receives a price based on Kansas Common plus bonus, which results in a price approximately $7 per barrel less than current WTI NYMEX prices. As of August 1 2011, the "costless collar" agreement had expired.

On June 27, 2011 the Company entered into an agreement with Cargill, Incorporated for the period from August 1, 2011 through December 31, 2012 ("Cargill Agreement"). The agreement provides to the Company a $65 per barrel floor on a stated quantity of 10,000 barrels per month, which is approximately half of the Company's current production of oil. If the average price falls below $65 per barrel, then Cargill will pay to the Company the difference between $65 and the lower average price for 10,000 barrels per month in each month during when such lower average prices occur. However, unlike the "costless collar" arrangement, the Company will not have a price cap on any portion of its production volumes. The cost to the Company was $2.20 per barrel per month or a total of $374,000 for the entire period of the agreement. This cost was paid by the Company on June 27, 2011. These agreements were primarily intended to help maintain and stabilize cash flow from operations if lower oil prices return.

As of December 31, 2011, the Company's open forward positions were as follows (fair value is based on methodology described in footnote 10 Fair Value Measurement):


						Fair Value at
Period	Monthly Volume	Total Volume		Floor/Cap NYMEX		December 31, 2011
	Oil (Bbls)	Oil (Bbls)		$ per Bbl		(in thousands)
1^stQtr 2012	10,000	30,000	$	65.00 -N/A	$	2
2^ndQtr 2012	10,000	30,000	$	65.00 -N/A	$	23
3^rdQtr 2012	10,000	30,000	$	65.00 -N/A	$	48
4^thQtr 2012	10,000	30,000	$	65.00 -N/A	$	69

				Current Asset	$	142

No forward positions remained open as of December 31, 2012.

The Company records changes in the unrealized derivative asset or liability as a "Gain (loss) on derivatives" in the Consolidated Statements of Operations. The Company recorded unrealized gains of $0.14 million, $0.45 million, and $0.63 million during 2012, 2011, and 2010, respectively.

During 2011, the Company made settlement payments related to the "costless collar" of $0.86 million. During 2010, the Company made settlement payments of $0.13 million. These realized losses were recorded as a "Gain (loss) on derivatives" in the Consolidated Statements of Operation. During 2012, the Company made no settlement payments.