Fair Value Measurements

9 Months Ended

Sep. 30, 2013

Fair Value Disclosures [Abstract]

Fair Value Measurements

9. Fair Value Measurements

Accounting guidelines for measuring fair value establish a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy categorizes assets and liabilities measured at fair value into one of three different levels depending on the observability of the inputs employed in the measurement. The three levels are defined as follows:

Level 1 – Observable inputs such as quoted prices in active markets at the measurement date for identical, unrestricted assets or liabilities.

Level 2 – Other inputs that are observable directly or indirectly such as quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3 – Unobservable inputs for which there is little or no market data and which the Company makes its own assumptions about how market participants would price the assets and liabilities.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables present the Company’s assets and liabilities measured at fair value on a recurring basis as of September 30, 2013 and December 31, 2012. All items included in the tables below are Level 2 inputs within the fair value hierarchy:

	September 30, 2013
Description	Gross Amounts Recognized			Gross Amounts Offset in the Consolidated Balance Sheets			Net Amounts Presented in the Consolidated Balance Sheets
	(In thousands)
Assets:
Derivative instruments	$	17,679		$	(10,269	)	$	7,410
Liabilities:
Derivative instruments	(13,793		)	10,269			(3,524		)
Total	$	3,886		$	—		$	3,886

	December 31, 2012
Description	Gross Amounts Recognized			Gross Amounts Offset in the Consolidated Balance Sheets			Net Amounts Presented in the Consolidated Balance Sheets
	(In thousands)
Assets:
Derivative instruments	$	36,452		$	(7,291	)	$	29,161
Liabilities:
Derivative instruments	(7,291		)	7,291			—
Total	$	29,161		$	—		$	29,161

The fair values of the Company’s derivative instruments are based on a third-party pricing model that uses market data obtained from third-party sources, including (a) quoted forward prices for oil and gas, (b) discount rates and (c) volatility factors. The estimates of fair value are also compared to the values provided by the counterparty for reasonableness and are adjusted for the counterparties’ credit quality for derivative assets and the Company’s credit quality for derivative liabilities. To date, adjustments for credit quality have not had a material impact on the fair values.

The fair values reported in the consolidated balance sheets are as of a particular point in time and subsequently change as these estimates are revised to reflect actual results, changes in market conditions and other factors. The assets and liabilities for derivative instruments included in the consolidated balance sheets are presented on a net basis when such amounts are with the same counterparty and subject to master netting agreements. The derivative instruments assets are classified in fair value of derivative instruments and the derivative instruments liabilities are classified in other accrued liabilities on the consolidated balance sheets. The Company had no transfers in or out of Levels 1 or 2 for the nine months ended September 30,2013 or 2012.

Fair Value of Other Financial Instruments

The Company’s other financial instruments consist of cash and cash equivalents, receivables, payables and long-term debt which are classified as Level 1 under the fair value hierarchy. The carrying amounts of cash and cash equivalents, receivables, and payables approximate fair value due to the highly liquid or short-term nature of these instruments. The following table presents the carrying amounts and fair values of the Company’s senior notes and convertible senior notes, based on quoted market prices, as of September 30, 2013 and December 31, 2012.

	September 30, 2013				December 31, 2012
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(In thousands)
8.625% Senior Notes	$	595,649	$	647,768	$	595,151	$	645,000
7.50% Senior Notes	300,000		316,500		300,000		308,250
4.375% Convertible Senior Notes	4,425		4,436		72,657		73,842