Derivative Instruments

12 Months Ended

Dec. 31, 2012

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

12. Derivative Instruments

The Company uses various types of derivative instruments to manage its exposure to commodity price risk and to provide a level of certainty in its forward cash flows supporting its capital expenditure program. The derivative instruments typically used are fixed-rate swaps, costless collars, puts, calls and basis differential swaps. Under these derivative instruments, payments are received or made based on the differential between a fixed and a variable product price. These agreements are settled in cash at termination, expiration or exchanged for physical delivery contracts. The Company’s current long-term strategy is to manage exposure for a substantial, but varying, portion of forecasted production up to 60 months. The derivative instruments are carried at fair value in the consolidated balance sheets, with changes in fair value recognized as gain (loss) on derivative instruments, net in the consolidated statements of income for the period in which the changes occur.

The fair value of derivative instruments at December 31, 2012 and 2011 was a net asset of $29.2 million and $37.5 million, respectively. The following sets forth a summary of the distribution of the net fair value of the Company’s derivative instruments by counterparty:

Counterparty	December 31, 2012		December 31, 2011
Credit Suisse	40	%	68	%
BNP Paribas	33	%	19	%
Societe Generale	22	%	2	%
BBVA Compass	3	%	—	%
Wells Fargo	2	%	—	%
Shell Energy North America (US) LP	—	%	6	%
Credit Agricole	—	%	5	%
Total	100	%	100	%

Master netting agreements are in place with each of these counterparties. Because the counterparties are either investment grade financial institutions or an investment grade international oil and gas company, the Company believes it has minimal credit risk and accordingly does not currently require its counterparties to post collateral to support the asset positions of its derivative instruments. As such, the Company is exposed to credit risk to the extent of nonperformance by the counterparties to its derivative instruments. Although the Company does not currently anticipate such nonperformance, it continues to monitor the financial viability of its counterparties. Because Credit Suisse, Credit Agricole, BBVA Compass, Wells Fargo and Societe Generale are lenders in the Company’s revolving credit facility, the Company is not required to post collateral with respect to derivative instruments in a net liability position with these counterparties as the contracts are secured by the revolving credit facility.

The following sets forth a summary of the Company’s natural gas derivative positions at average NYMEX prices as of December 31, 2012.

Period	Volume (in MMBtu)	Weighted Average Floor Price ($/MMBtu)		Weighted Average Ceiling Price ($/MMBtu)
2013	18,250,000	$	4.63	$	4.63
2014	3,650,000	$	—	$	5.50

The following sets forth a summary of the Company’s crude oil derivative positions at average NYMEX prices as of December 31, 2012.

Period	Volume (in Bbls)	Weighted Average Floor Price ($/Bbls)		Weighted Average Ceiling Price ($/Bbls)
2013	2,774,000	$	88.91	$	102.43
2014	2,555,000	$	90.06	$	98.51
2015	1,441,750	$	89.54	$	96.49
2016	244,000	$	85.00	$	104.00

In connection with the crude oil derivative instruments above, the Company has entered into protective put spreads. For 2014, at market prices below the short put price of $65.00, the floor price becomes the market price plus the put spread of $20.00 on 182,500 of the 2,555,000 Bbls and the remaining 2,372,500 Bbls would have a floor price of $90.06.

Period	Volumes (in Bbls)	Weighted Average Short Put  Price ($/Bbl)		Weighted Average Put Spread ($/Bbl)
2014	182,500	$	65.00	$	20.00
2015	365,000	$	65.00	$	20.00
2016	244,000	$	65.00	$	20.00

For the years ended December 31, 2012, 2011 and 2010, the Company recorded the following related to its oil and gas derivative instruments:

	Year Ended December 31,
	2012			2011		2010
	(In thousands)
Realized gain (loss) on derivative instruments, net	$	41,122		$	35,452	$	33,218
Unrealized gain (loss) on derivative instruments, net	(9,751		)	12,971		14,564
Gain (loss) on derivative instruments, net	$	31,371		$	48,423	$	47,782