Derivative Financial Instruments

12 Months Ended

Dec. 31, 2013

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. 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.

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.

Commodity Derivative Contracts: At December 31, 2013, the Company had the following open commodity derivative contracts to manage price risk on a portion of its production whereby the Company receives the fixed price and pays the variable price. The reference prices of these commodity derivative contracts are typically referenced to an index prices as published by independent third parties.

Natural Gas:
Type	Commodity Reference Price	Remaining Contract Period	Volume - MMBTU/Day	Average Price/MMBTU		Fair Value - December 31, 2013
						Asset/(Liability)
Swap	NYMEX	Jan - Mar 2014	50,000	$4.38	$	458
Swap	NYMEX	Apr - Oct 2014	480,000	$3.90	$	(24,383)
Swap	NYMEX	Dec 2014	50,000	$4.39	$	121
Crude Oil:
Type	Commodity Reference Price	Remaining Contract Period	Volume - Bbls/Day	Average Price/Bbl		Fair Value - December 31, 2013
						(Liability)
Swap	NYMEX - WTI	Jan - Dec 2014	2,458	$93.23	$	(2,072)

Subsequent to December 31, 2013 and through February 11, 2014, the Company has entered into the following open commodity derivative contracts to manage price risk on a portion of its production whereby the Company receives the fixed price and pays the variable price:

Natural Gas:
Type	Commodity Reference Price	Remaining Contract Period	Volume - MMBTU/Day	Average Price/MMBTU
Swap	NYMEX	Feb - Mar 2014	100,000	$4.39
Swap	NYMEX	Nov - Dec 2014	60,164	$4.34
Crude Oil:
Type	Commodity Reference Price	Remaining Contract Period	Volume - Bbls/Day	Average Price/Bbl
Swap	NYMEX - WTI	Feb - Dec 2014	1,000	$90.03

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 31,2013, 2012 and 2011:

		For the Year Ended December 31,
Commodity Derivatives:		2013		2012		2011
Realized (loss) gain on commodity derivatives-natural gas (1)	$	(20,552)	$	303,966	$	213,349
Realized (loss) on commodity derivatives-crude oil (1)		(326)		-		-
Unrealized (loss) on commodity derivatives (1)		(25,876)		(230,385)		100,383
Total (loss) gain on commodity derivatives	$	(46,754)	$	73,581	$	313,732
(1) Included in (loss) gain on commodity derivatives in the Consolidated Statements of Operations.