Derivative Instruments

9 Months Ended

Sep. 30, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

8. 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 plan. 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 commodity price. These agreements are settled in cash at termination or expiration. The Company's current 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 operations for the period in which the changes occur.

The fair value of derivative instruments at September 30, 2013 and December 31, 2012 was a net asset of $3.9 million and $29.2 million, respectively. The following sets forth a summary of the distribution of net fair value of the Company’s derivative instruments for each counterparty in a net asset position:

Counterparty	September 30, 2013		December 31, 2012
Credit Suisse	57	%	40	%
Societe Generale	27	%	22	%
BNP Paribas	13	%	33	%
Regions	2	%	—	%
BBVA Compass	1	%	3	%
Wells Fargo	—	%	2	%
Total	100	%	100	%

Master netting agreements are in place with each of these counterparties. Because the counterparties are investment grade financial institutions, the Company believes it has minimal credit risk and accordingly does not currently require its counterparties to post collateral to support the net 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, Societe Generale, Regions, BBVA Compass and Wells Fargo 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 crude oil derivative positions at average NYMEX prices as of September 30, 2013:

Period	Type of Contract	Volumes (in Bbls/d)	Weighted Average Floor  Price ($/Bbl)		Weighted Average Ceiling  Price ($/Bbl)		Weighted Average Short Put  Price ($/Bbl)		Weighted Average Put Spread ($/Bbl)
Q4 2013	Swaps	4,000	$	94.15
	Collars	6,100	$	87.75	$	105.68
FY 2014	Swaps	5,996	$	92.36
	Collars	3,000	$	88.33	$	104.26
	Three-way collars	500	$	85.00	$	107.75	$	65.00	$	20.00
FY 2015	Swaps	3,250	$	90.64
	Collars	700	$	90.00	$	100.65
	Three-way collars	1,000	$	85.00	$	105.00	$	65.00	$	20.00
FY 2016	Three-way collars	667	$	85.00	$	104.00	$	65.00	$	20.00

The following sets forth a summary of the Company’s natural gas derivative positions at average NYMEX prices as of September 30, 2013:

Period	Type of Contract	Volumes (in MMBtu/d)	Weighted Average Floor Price ($/MMBtu)		Weighted Average Ceiling Price ($/MMBtu)
Q4 2013	Swaps	55,000	$	4.58
FY 2014	Swaps	40,000	$	4.07
	Calls	10,000			$	5.50
FY 2015	Swaps	10,000	$	4.33

For the three and nine months ended September 30,2013 and 2012, the Company recorded the following related to its oil and gas derivative instruments:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
	(In thousands)
Realized gain on derivative instruments, net	$	1,313		$	9,450		$	9,320		$	30,544
Unrealized loss on derivative instruments, net	(28,971		)	(24,168		)	(25,806		)	(3,569		)
Gain (loss) on derivative instruments, net	$	(27,658	)	$	(14,718	)	$	(16,486	)	$	26,975