Derivative Instruments

9 Months Ended

Sep. 30, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

Derivative Instruments

The Company utilizes derivative financial instruments to manage risks related to changes in oil prices. As of September 30, 2015, the Company utilized two-way costless collar options and swaps to reduce the volatility of oil prices on a significant portion of its future expected oil production. A two-way collar is a combination of options: a sold call and a purchased put. The purchased put establishes a minimum price (floor) and the sold call establishes a maximum price (ceiling) the Company will receive for the volumes under contract. A swap is a sold call and a purchased put established at the same price (both ceiling and floor).

All derivative instruments are recorded on the Company’s Condensed Consolidated Balance Sheet as either assets or liabilities measured at fair value (see Note 5 – Fair Value Measurements). The Company has not designated any derivative instruments as hedges for accounting purposes and does not enter into such instruments for speculative trading purposes. If a derivative does not qualify as a hedge or is not designated as a hedge, the changes in fair value are recognized in the other income (expense) section of the Company’s Condensed Consolidated Statement of Operations as a net gain or loss on derivative instruments. The Company’s cash flow is only impacted when the actual settlements under the derivative contracts result in making a payment to or receiving a payment from the counterparty. These cash settlements represent the cumulative gains and losses on the Company’s derivative instruments and do not include a recovery of costs that were paid to acquire or modify the derivative instruments that were settled. Cash settlements are reflected as investing activities in the Company’s Condensed Consolidated Statement of Cash Flows.

As of September 30, 2015, the Company had the following outstanding commodity derivative instruments, all of which settle monthly based on the average WTI:

Settlement Period	Derivative Instrument	Total Notional Amount of Oil	Weighted Average Prices						Fair Value
			Swap		Floor		Ceiling
		(Barrels)	($/Barrel)						(In thousands)
2015	Two-way collars	455,000			$	86.00	$	103.42	$	18,790
2015	Swaps	2,093,000	$	73.35					57,933
2016	Two-way collars	155,000			$	86.00	$	103.42	6,133
2016	Swaps	5,643,000	$	57.75					51,499
2017	Swaps	372,000	$	53.84					1,001
									$	135,356

The following table summarizes the location and fair value of all outstanding commodity derivative instruments recorded in the Company’s Condensed Consolidated Balance Sheet for the periods presented:

		Fair Value Asset (Liability)
Commodity	Balance Sheet Location	September 30, 2015			December 31, 2014
		(In thousands)
Crude oil	Derivative instruments — current assets	$	130,747		$	302,159
Crude oil	Derivative instruments — non-current assets	4,699			13,348
Crude oil	Derivative instruments — non-current liabilities	(90		)	—
Total derivative instruments		$	135,356		$	315,507

The following table summarizes the location and amounts of gains and losses from the Company’s commodity derivative instruments recorded in the Company’s Condensed Consolidated Statement of Operations for the periods presented:

	Three Months Ended September 30,				Nine Months Ended September 30,
Statement of Operations Location	2015		2014		2015		2014
	(In thousands)
Net gain on derivative instruments	$	103,637	$	103,426	$	111,285	$	20,253

In accordance with the FASB’s authoritative guidance on disclosures about offsetting assets and liabilities, the Company is required to disclose both gross and net information about instruments and transactions eligible for offset in the statement of financial position as well as instruments and transactions subject to an agreement similar to a master netting agreement. The Company’s derivative instruments are presented as assets and liabilities on a net basis by counterparty, as all counterparty contracts provide for net settlement. No margin or collateral balances are deposited with counterparties, and as such, gross amounts are offset to determine the net amounts presented in the Company’s Condensed Consolidated Balance Sheet.

The following tables summarize gross and net information about the Company’s commodity derivative instruments for the periods presented:

Offsetting of Derivative Assets	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Balance Sheet			Net Amounts of Assets Presented in the Balance Sheet
	(In thousands)
As of September 30, 2015	$	153,394	$	(17,948	)	$	135,446
As of December 31, 2014	331,121		(15,614		)	315,507

Offsetting of Derivative Liabilities	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Balance Sheet			Net Amounts of Liabilities Presented in the Balance Sheet
	(In thousands)
As of September 30, 2015	$	18,038	$	(17,948	)	$	90
As of December 31, 2014	15,614		(15,614		)	—