Derivative Financial Instruments

9 Months Ended

Sep. 30, 2011

Derivative Financial Instruments [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

6.  DERIVATIVE FINANCIAL INSTRUMENTS:

Objectives and Strategy: The Company's major market risk exposure is in the pricing applicable to its natural gas and oil production. Realized pricing is currently driven primarily by the prevailing price for the Company's natural gas production. Historically, prices received for natural gas production have been volatile and unpredictable. Pricing volatility is expected to continue. As a result of its hedging activities, the Company may realize prices that are less than or greater than the spot prices that it would have received otherwise.

The Company relies on various types of derivative instruments to manage its exposure to commodity price risk and to provide a level of certainty in the Company's forward cash flows supporting the Company's capital investment program.

The Company's hedging policy limits the amounts of resources hedged to not more than 50% of its forecast production without Board approval. The Board has approved hedging greater than 50% of the Company's forecast 2011 production.

Fair Value of Commodity Derivatives:FASB ASC 815 requires that all derivatives be recognized on the balance sheet as either an asset or liability and be measured at fair value. Changes in the derivative's fair value are recognized currently in earnings unless specific hedge accounting criteria are met. The Company does not apply hedge accounting to any of its derivative instruments.

Derivative contracts that do not qualify for hedge accounting treatment are recorded as derivative assets and liabilities at fair value on the balance sheet and the associated unrealized gains and losses are recorded as current income or expense in the income statement. Unrealized gains or losses on commodity derivatives represent the non-cash change in the fair value of these derivative instruments and do not impact operating cash flows on the cash flow statement. See Note 7 for the detail of the fair value of the following derivatives.

Commodity Derivative Contracts:At September 30, 2011, the Company had the following open commodity derivative contracts to manage price risk on a portion of its natural gas production whereby the Company receives the fixed price and pays the variable price. The natural gas reference prices of these commodity derivative contracts are typically referenced to natural gas index prices as published by independent third parties.

Type	Commodity Reference Price	Remaining Contract Period	Volume - MMBTU/Day	Average Price/MMBTU		Fair Value - September 30, 2011
						Asset
Swap	NW Rockies	Calendar 2011	170,000	$5.08	$	21,611
Swap	NYMEX	October 2011	230,000	$4.58	$	5,875
Swap	NYMEX	Calendar 2012	300,000	$5.03	$	86,311
Swap	NYMEX	April - October 2012	90,000	$5.00	$	15,557
Swap	Northeast	Calendar 2011	195,000	$5.81	$	34,305

The following table summarizes the pre-tax realized and unrealized gains the Company recognized related to its natural gas derivative instruments in the Consolidated Statements of Income for the three and nine monthsended September 30, 2011 and 2010:

		For the Three Months				For the Nine Months
		Ended September 30,				Ended September 30,
Natural Gas Commodity Derivatives:		2011		2010		2011		2010
Realized gain on commodity derivatives (1)	$	53,630	$	40,583	$	143,749	$	77,568
Unrealized gain on commodity derivatives (1)		60,536		109,603		33,658		268,535
Total gain on commodity derivatives	$	114,166	$	150,186	$	177,407	$	346,103
(1) Included in gain on commodity derivatives in the Consolidated Statements of Income.