Derivative Commodity Instruments

3 Months Ended

Mar. 31, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Commodity Instruments

DERIVATIVE COMMODITY INSTRUMENTS

We periodically enter into derivative commodity instruments to hedge our exposure to price fluctuations on oil, natural gas liquids and natural gas production. Such instruments may include over-the-counter (OTC) swaps and basis swaps typically executed with investment and commercial banks and energy-trading firms. Derivative transactions are pursuant to standing authorizations by the Board of Directors, which do not authorize speculative positions.

The following tables detail the offsetting of derivative assets and liabilities as well as the fair values of derivatives on the balance sheets:

(in thousands)	March 31, 2015
								Gross Amounts Not Offset in the Balance Sheets
	Gross Amounts Recognized at Fair Value		Gross Amounts Offset in the Balance Sheets			Net Amount Presented in the Balance Sheets		Financial Instruments		Cash Collateral Received		Net Fair Value Presented in the Balance Sheets
Derivatives not designated as hedging instruments
Assets
Derivative instruments	$	288,062	$	(15,387	)	$	272,675	$	—	$	—	$	272,675
Noncurrent derivative instruments	9		(9		)	—		—		—		—
Total derivative assets	288,071		(15,396		)	272,675		—		—		272,675
Liabilities
Derivative instruments	28,257		(15,387		)	12,870		—		—		12,870
Noncurrent derivative instruments	982		(9		)	973		—		—		973
Total derivative liabilities	29,239		(15,396		)	13,843		—		—		13,843
Total derivatives	$	258,832	$	—		$	258,832	$	—	$	—	$	258,832

(in thousands)	December 31, 2014
								Gross Amounts Not Offset in the Balance Sheets
	Gross Amounts Recognized at Fair Value		Gross Amounts Offset in the Balance Sheets			Net Amount Presented in the Balance Sheets		Financial Instruments		Cash Collateral Received		Net Fair Value Presented in the Balance Sheets
Derivatives not designated as hedging instruments
Assets
Derivative instruments	$	339,977	$	(17,640	)	$	322,337	$	—	$	—	$	322,337
Noncurrent derivative instruments	—		—			—		—		—		—
Total derivative assets	339,977		(17,640		)	322,337		—		—		322,337
Liabilities
Derivative instruments	18,628		(17,640		)	988		—		—		988
Noncurrent derivative instruments	—		—			—		—		—		—
Total derivative liabilities	18,628		(17,640		)	988		—		—		988
Total derivatives	$	321,349	$	—		$	321,349	$	—	$	—	$	321,349

Due to the volatility of commodity prices, the estimated fair value of our derivative instruments is subject to fluctuation from period to period, which could result in significant differences between the current estimated fair value and the ultimate settlement price. Additionally, Energen is at risk of economic loss based upon the creditworthiness of our counterparties. We were in a net gain position with ten of our active counterparties and in a net loss position with the remaining two at March 31, 2015. The largest counterparty net gain positions at March 31, 2015, J.P. Morgan Ventures Energy Corporation, Merrill Lynch Commodities, Inc., Canadian Imperial Bank of Commerce, Barclay Bank PLC, Bank of Montreal and Morgan Stanley Capital Group Inc., constituted approximately $52.6 million, $43.5 million, $33.3 million, $28.8 million, $28.7 million and $28.5 million, respectively, of Energen’s total gain on fair value of derivatives.

The following tables detail the effect of derivative commodity instruments in cash flow hedging relationships on the financial statements:

(in thousands)	Location on Statements of Income	Three months ended March 31, 2014
Net gain recognized in other comprehensive income on derivatives (effective portion), net of tax of $1	—	$	2
Gain reclassified from accumulated other comprehensive income into income (effective portion)	Gain (loss) on derivative instruments, net	$	4,054

The following tables detail the effect of open and closed derivative commodity instruments not designated as hedging instruments on the income statement:

(in thousands)	Location on Statements of Income	Three months ended March 31, 2015		Three months ended March 31, 2014
Gain (loss) recognized in income on derivatives	Gain (loss) on derivative instruments, net	$	34,036	$	(57,446	)

As of March 31, 2015, Energen had entered into the following transactions for the remainder of 2015 and subsequent years:

Production Period	Total Hedged Volumes		Average Contract Price	Description
Oil
2015	6,210	MBbl	$89.30 Bbl	NYMEX Swaps
Oil Basis Differential
2015	1,620	MBbl	$(4.30) Bbl	WTS/WTI Basis Swaps
2016	720	MBbl	$(2.00) Bbl	WTS/WTI Basis Swaps
2015	5,670	MBbl	$(4.55) Bbl	WTI/WTI Basis Swaps
2016	2,520	MBbl	$(2.27) Bbl	WTI/WTI Basis Swaps
Natural Gas
2015	15.3	Bcf	$4.14 Mcf	Basin Specific Swaps - San Juan
2015	4.5	Bcf	$4.20 Mcf	Basin Specific Swaps - Permian
WTS - West Texas Sour/Midland, WTI - West Texas Intermediate/Cushing
WTI - West Texas Intermediate/Midland, WTI - West Texas Intermediate/Cushing

As of March 31, 2015, the maximum term over which Energen has hedged exposures to the variability of cash flows is through December 31, 2016.