Fair Value Measurements

In accordance with ASC 820—Fair Value Measurements and Disclosures, fair value measurements are based upon inputs that market participants use in pricing an asset or liability, which are classified into two categories: observable inputs and unobservable inputs. Observable inputs represent market data obtained from independent sources, whereas unobservable inputs reflect a company’s own market assumptions, which are used if observable inputs are not reasonably available without undue cost and effort. We prioritize the inputs used in measuring fair value into the following fair value hierarchy:


•	Level 1—quoted prices for identical assets or liabilities in active markets.


•	Level 2—quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and inputs derived principally from or corroborated by observable market data by correlation or other means.


•	Level 3—unobservable inputs for the asset or liability. The fair value input hierarchy level to which an asset or liability measurement in its entirety falls is determined based on the lowest level input that is significant to the measurement in its entirety.

The following tables present the Company’s assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2018 and 2017, for each fair value hierarchy level:



	Fair Value Measurements Using:
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs			Significant Unobservable Inputs
	(Level 1)		(Level 2)			(Level 3)		Total
	(In thousands)
December 31, 2018
Assets:
Commodity derivatives	$	—	$	53,097		$	—	$	53,097
Liabilities:
Commodity derivatives	—		(22,353		)	—		(22,353		)
Total	$	—	$	30,744		$	—	$	30,744
December 31, 2017
Assets:
Commodity derivatives	$	—	$	704		$	—	$	704
Interest rate derivatives	—		1,017			—		1,017
Liabilities:
Commodity derivatives	—		(97,740		)	—		(97,740		)
Total	$	—	$	(96,019	)	$	—	$	(96,019	)

The book values of cash and cash equivalents and restricted cash approximate fair value based on Level 1 inputs. Joint interest billings, oil sales, related party and other receivables, and accounts payable and accrued liabilities approximate fair value due to the short‑term nature of these instruments. Our long‑term receivables, after any allowances for doubtful accounts, and other long-term assets approximate fair value. The estimates of fair value of these items are based on Level 2 inputs.

Commodity Derivatives

Our commodity derivatives represent crude oil collars, put options, call options and swaps for notional barrels of oil at fixed Dated Brent, NYMEX WTI or Argus LLS oil prices. The values attributable to our oil derivatives are based on (i) the contracted notional volumes, (ii) independent active futures price quotes for the respective index, (iii) a credit‑adjusted yield curve applicable to each counterparty by reference to the credit default swap (“CDS”) market and (iv) an independently sourced estimate of volatility for the respective index. The volatility estimate was provided by certain independent brokers who are active in buying and selling oil options and was corroborated by market‑quoted volatility factors. The deferred premium is included in the fair market value of the commodity derivatives. See Note 9—Derivative Financial Instruments for additional information regarding the Company’s derivative instruments.

Provisional Oil Sales

The value attributable to the provisional oil sales derivative is based on (i) the sales volumes and (ii) the difference in the independent active futures price quotes for the respective index over the term of the pricing period designated in the sales contract and the spot price on the lifting date.

Interest Rate Derivatives

Our interest rate derivatives consisted of interest rate swaps, whereby the Company paid a fixed rate of interest and the counterparty paid a variable LIBOR‑based rate, and capped interest rate swaps, whereby the Company paid a fixed rate of interest if LIBOR is below the cap, and paid the market rate less the spread between the cap and the fixed rate of interest if LIBOR is above the cap. The values attributable to the Company’s interest rate derivative contracts were based on (i) the contracted notional amounts, (ii) LIBOR yield curves provided by independent third parties and corroborated with forward active market‑quoted LIBOR yield curves and (iii) a credit‑adjusted yield curve as applicable to each counterparty by reference to the CDS market.

Debt

The following table presents the carrying values and fair values at December 31, 2018 and 2017:



	December 31, 2018				December 31, 2017
	Carrying Value		Fair Value		Carrying Value		Fair Value
	(In thousands)
Senior Notes	$	511,873	$	525,026	$	507,600	$	542,472
Corporate Revolver	325,000		325,000		—		—
Facility	1,325,000		1,325,000		800,000		800,000
Total	$	2,161,873	$	2,175,026	$	1,307,600	$	1,342,472

The carrying value of our Senior Notes represents the principal amounts outstanding less unamortized discounts. The fair value of our Senior Notes is based on quoted market prices, which results in a Level 1 fair value measurement. The carrying value of the Facility approximates fair value since it is subject to short-term floating interest rates that approximate the rates available to us for those periods.