XML 54 R14.htm IDEA: XBRL DOCUMENT v2.4.0.6
Derivative Financial Instruments
3 Months Ended
Mar. 31, 2013
Derivative Financial Instruments  
Derivative Financial Instruments

7. Derivative Financial Instruments

 

We use financial derivative contracts to manage exposures to commodity price and interest rate fluctuations. We do not hold or issue derivative financial instruments for trading purposes. We manage market and counterparty credit risk in accordance with our policies and guidelines. In accordance with these policies and guidelines, our management determines the appropriate timing and extent of derivative transactions.

 

Oil Derivative Contracts

 

The following table sets forth the volumes in barrels underlying the Company’s outstanding oil derivative contracts and the weighted average Dated Brent prices per Bbl for those contracts as of March 31, 2013.

 

 

 

 

 

 

 

Weighted Average Dated Brent Price per Bbl

 

Term

 

Type of Contract

 

MBbl

 

Deferred
Premium

 

Floor

 

Ceiling

 

Calls

 

2013:

 

 

 

 

 

 

 

 

 

 

 

 

 

April - December

 

Three-way collars

 

1,125

 

$

4.82

 

$

95.00

 

$

105.00

 

$

125.00

 

April - December

 

Three-way collars

 

756

 

 

87.50

 

115.00

 

135.00

 

April - December

 

Three-way collars

 

750

 

 

90.00

 

115.39

 

135.00

 

April - December

 

Three-way collars

 

750

 

 

90.08

 

115.00

 

135.00

 

2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

January - December

 

Three-way collars

 

1,500

 

1.22

 

85.00

 

115.00

 

140.00

 

January - December

 

Three-way collars

 

1,000

 

 

85.00

 

115.01

 

140.00

 

 

Provisional Oil Sales

 

At March 31, 2013, we had sales volumes of 995.1 MBbl priced at an average of $110.45 per Bbl, after differentials, which are subject to final pricing over the next month.

 

Interest Rate Swaps Derivative Contracts

 

The following table summarizes our open interest rate swaps as of March 31, 2013, whereby we pay a fixed rate of interest and the counterparty pays a variable LIBOR-based rate:

 

Term

 

Weighted Average
Notional Amount

 

Weighted Average
Fixed Rate

 

Floating Rate

 

 

 

(In thousands)

 

 

 

 

 

April 2013 — December 2013

 

$

227,103

 

2.06

%

6-month LIBOR

 

January 2014 — December 2014

 

133,434

 

1.99

%

6-month LIBOR

 

January 2015 — December 2015

 

45,319

 

2.03

%

6-month LIBOR

 

January 2016 — June 2016

 

12,500

 

2.27

%

6-month LIBOR

 

 

The following tables disclose the Company’s derivative instruments as of March 31, 2013 and December 31, 2012 and gain/(loss) from derivatives during the three months ended March 31, 2013 and 2012, respectively:

 

 

 

 

 

Estimated Fair Value
Asset (Liability)

 

 

 

 

 

March 31,

 

December 31,

 

Type of Contract

 

 

Balance Sheet Location

 

2013

 

2012

 

 

 

 

 

(In thousands)

 

Derivatives not designated as hedging instruments:

 

 

 

 

 

 

 

Derivative asset:

 

 

 

 

 

 

 

Commodity(1)

 

Derivatives assets—current

 

$

3,204

 

$

1,061

 

 

 

 

 

 

 

 

 

Derivative liability:

 

 

 

 

 

 

 

Commodity(2)

 

Derivatives liabilities—current

 

(14,060

)

(17,005

)

Interest rate

 

Derivatives liabilities—current

 

(3,944

)

(3,372

)

Commodity(3)

 

Derivatives liabilities—long-term

 

(1,817

)

(659

)

Interest rate

 

Derivatives liabilities—long-term

 

(1,968

)

(2,567

)

Total derivatives not designated as hedging instruments

 

 

 

$

(18,585

)

$

(22,542

)

 

 

(1)                                 The commodity derivative asset represents our provisional oil sales contract.

 

(2)                                 Includes $1.0 million and $3.4 million, as of March 31, 2013 and December 31, 2012, respectively of cash settlements made on our commodity derivative contracts which were settled in the month subsequent to period end. Also, includes deferred premiums of $6.3 million and $7.6 million related to commodity derivative contracts as of March 31, 2013 and December 31, 2012, respectively.

 

(3)                                 Includes deferred premiums of $1.5 million and $2.4 million related to commodity derivative contracts as of March 31, 2013 and December 31, 2012, respectively. 

 

 

 

 

 

Amount of Gain/(Loss)

 

 

 

 

 

Three Months Ended March 31,

 

Type of Contract

 

 

Location of Gain/(Loss)

 

2013

 

2012

 

 

 

 

 

(In thousands)

 

Derivatives in cash flow hedging relationships:

 

 

 

 

 

 

 

Interest rate(1)

 

Interest expense

 

$

359

 

$

(214

)

Total derivatives in cash flow hedging relationships

 

 

 

$

359

 

$

(214

)

Derivatives not designated as hedging instruments:

 

 

 

 

 

 

 

Commodity(2)

 

Oil and gas revenue

 

$

4,588

 

$

2,740

 

Commodity

 

Derivatives, net

 

(5,508

)

(3,860

)

Interest rate

 

Interest expense

 

27

 

(710

)

Total derivatives not designated as hedging instruments

 

 

 

$

(893

)

$

(1,830

)

 

 

(1)                                 Amounts were reclassified from AOCI into earnings upon settlement.

 

(2)                                 Amounts represent the mark-to-market portion of our provisional oil sales contracts.

 

In accordance with the mark-to-market method of accounting, the Company recognizes changes in fair values of its derivative contracts as gains or losses in earnings during the period in which they occur. The fair value of the effective portion of the interest rate derivative contracts on May 31, 2010, is reflected in AOCI and is being transferred to interest expense over the remaining term of the contracts. The Company expects to reclassify $1.6 million of gains from AOCI to interest expense within the next 12 months. See Note 8—Fair Value Measurements for additional information regarding the Company’s derivative instruments.

 

Offsetting of Derivative Assets and Derivative Liabilities

 

The tables below provide additional information related to derivative instruments on our consolidated balance sheets which have the right of set off only when there is a defaulting party subject to master netting arrangements with our counterparties:

 

 

 

Gross Amounts
of Recognized
Liabilities

 

Gross Amounts
Offset in the
Balance Sheet

 

Net Amounts of
Liabilities

Presented in the
Balance Sheet

 

Gross Amounts
Not Offset in the
Balance Sheet

 

Net Amount

 

 

 

(In thousands)

 

March 31, 2013

 

 

 

 

 

 

 

 

 

 

 

Commodity derivatives

 

$

15,877

 

$

 

$

15,877

 

$

(15,877

)

$

 

Interest rate derivatives

 

5,912

 

 

5,912

 

(5,912

)

 

Total

 

$

21,789

 

$

 

$

21,789

 

$

(21,789

)

$

 

 

 

 

Gross Amounts
of Recognized
Liabilities

 

Gross Amounts
Offset in the
Balance Sheet

 

Net Amounts of
Liabilities

Presented in the
Balance Sheet

 

Gross Amounts
Not Offset in the
Balance Sheet

 

Net Amount

 

 

 

(In thousands)

 

December 31, 2012

 

 

 

 

 

 

 

 

 

 

 

Commodity derivatives

 

$

17,664

 

$

 

$

17,664

 

$

(17,664

)

$

 

Interest rate derivatives

 

5,939

 

 

5,939

 

(5,939

)

 

Total

 

$

23,603

 

$

 

$

23,603

 

$

(23,603

)

$