(10) Derivative Financial Instruments and Hedging Activities

Comstock periodically uses swaps, floors and collars to hedge oil and natural gas prices in order to manage oil and natural gas price risk. Swaps are settled monthly based on differences between the prices specified in the instruments and the settlement prices of futures contracts. Generally, when the applicable settlement price is less than the price specified in the contract, Comstock receives a settlement from the counterparty based on the difference multiplied by the volume or amounts hedged. Similarly, when the applicable settlement price exceeds the price specified in the contract, Comstock pays the counterparty based on the difference. Comstock generally receives a settlement from the counterparty for floors when the applicable settlement price is less than the price specified in the contract, which is based on the difference multiplied by the volumes hedged. For collars, generally Comstock receives a settlement from the counterparty when the settlement price is below the floor and pays a settlement to the counterparty when the settlement price exceeds the cap. No settlement occurs when the settlement price falls between the floor and cap.

All of the Company's derivative financial instruments are used for risk management purposes and by policy none are held for trading or speculative purposes. Comstock minimizes credit risk to counterparties of its derivative financial instruments through formal credit policies, monitoring procedures, and diversification. The Company is not required to provide any credit support to its counterparties other than cross collateralization with the assets securing its bank credit facility. None of the Company's derivative financial instruments involve payment or receipt of premiums.

The Company had the following outstanding derivative financial instruments used for oil and natural gas price risk management:

Commodity and Derivative Type	Weighted-Average Contract Price	Contract Volume (MMBtu)	Contract Period
December 31, 2016:
Natural Gas Swap Agreements	$3.37 per MMBtu	23,400,000	2017
December 31, 2017:
Natural Gas Swap Agreements	$3.38 per MMBtu	2,565,000	2018

None of the derivative contracts were designated as cash flow hedges. The Company recognizes cash settlements and changes in the fair value of its derivative financial instruments as a single component of other income (expenses). Since January 1, 2018 Comstock has added 21,600,000 MMBtu of additional natural gas swap agreements at an average contract price of $3.00 per MMBtu. These contracts begin in March and April 2018 and expire in February and March 2019.

The Company recognized a gain of $2.7 million, a loss of $5.4 million and a gain of $16.8 million from its derivative financial instruments for the years ended December 31, 2015, 2016 and 2017, respectively. Cash settlements received on derivative financial instruments were $1.2 million, $2.1 million and $9.4 million for the years ended December 31, 2015, 2016 and 2017, respectively. The estimated fair value and carrying value of the Company's derivative financial instruments, was a current liability of $6.0 million as of December 31, 2016 and was a current asset of $1.3 million as of December 31, 2017.