Derivative Instruments

3 Months Ended

Mar. 31, 2012

Derivative Instruments [Abstract]

Derivative Instruments

8. DERIVATIVE INSTRUMENTS

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 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 36 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 March 31, 2012, and December 31, 2011 was a net asset of $29.8 million and $37.3 million, respectively. At March 31, 2012, approximately 68% of the net fair value of the Company's derivative instruments were with Credit Suisse, 13% were with BNP Paribas, 10% were with Societe Generale , 4% were with Shell Energy North America (US) LP, 3% were with Credit Agricole, and 2% were with BBVA Compass, and 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, BNP Paribas, Credit Agricole, BBVA Compass, and Societe Generale are lenders in the Company's revolving credit facility, and BNP Paribas and Societe Generale are lenders in the Company's Huntington Facility, the Company is not required to post collateral with respect to derivatives instruments in a net liability position with these counterparties as the contracts are secured by the revolving credit facility or the Huntington Facility.

The following sets forth a summary of the Company's U.S. natural gas derivative positions at average delivery location (WAHA and Houston Ship Channel) prices as of March 31, 2012:

			Weighted		Weighted
			Average		Average
	Volume		Floor Price		Ceiling Price
Period	(in MMbtu)		($/MMbtu)		($/MMbtu)
2012		13,847,000	$	5.32	$	5.45
2013		10,950,000	$	5.07	$	5.07

In connection with the natural gas derivative instruments above, the Company has entered into protective put spreads. For the remainder of 2012, at market prices below the short put price of $4.62, the floor price becomes the market price plus the put spread of $1.20 on 5,661,400 of the 13,847,000 MMBtus and the remaining 8,185,600 MMBtus would have a floor price of $5.32.

			Average		Average
	Volume		Short Put Price		Put Spread
Period	(in MMbtu)		($/MMbtu)		($/MMbtu)
2012		5,661,400	$	4.62	$	1.20

The following sets forth a summary of the Company's U.S. crude oil derivative positions at average NYMEX prices as of March 31, 2012.

			Weighted		Weighted
			Average		Average
	Volume		Floor Price		Ceiling Price
Period	(in Bbls)		($/Bbls)		($/Bbls)
2012		1,320,000	$	86.15	$	105.91
2013		1,679,000	$	87.83	$	106.94
2014		730,000	$	92.63	$	101.33
2015		365,000	$	94.75	$	94.75

For the three months ended March 31, 2012 and 2011, the Company recorded the following related to its oil and gas derivative instruments:

	Three Months
	Ended March 31,
	2012			2011
	(In thousands)
Realized gain (loss) on derivative instruments, net	$	11,133		$	10,007
Unrealized gain (loss) on derivative instruments, net		(8,095	)		(10,194	)
Gain (loss) on derivative instruments, net	$	3,038		$	(187	)