Derivative Financial Instruments

12 Months Ended

Dec. 31, 2012

Derivative Financial Instruments Disclosure [Abstract]

DERIVATIVE FINANCIAL INSTRUMENTS

7.  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 Wyoming natural gas production. Historically, prices received for natural gas production have been volatile and unpredictable. Pricing volatility is expected to continue.

Historically, the Company has entered into various types of derivative instrument transactions 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. Because forward natural gas prices for 2013 production were low in 2012, the Company did not hedge any of its forecast 2013 natural gas production. As a result of the Company not having hedged any of its 2013 production, its earnings and cash flows may be more volatile during 2013 than in prior years.

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

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 expense or income 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.

The following table summarizes the pre-tax realized and unrealized gains and losses the Company recognized related to its natural gas derivative instruments in the Consolidated Statements of Operations for the years ended December 31, 2012, 2011 and 2010:

		For the Year Ended December 31,
Natural Gas Commodity Derivatives:		2012		2011		2010
Realized gain on commodity derivatives (1)	$	303,966	$	213,349	$	116,827
Unrealized (loss) gain on commodity derivatives (1)		(230,385)		100,383		208,625
Total gain on commodity derivatives	$	73,581	$	313,732	$	325,452
(1) Included in gain on commodity derivatives in the Consolidated Statements of Operations.