Derivative Commodity Instruments (Tables)

3 Months Ended

Mar. 31, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Fair Values of Commodity Contracts by business Segment on Balance Sheet

The following tables detail the fair values of derivative commodity instruments on the balance sheets:

(in thousands)	March 31, 2014
Derivative assets or (liabilities) not designated as hedging instruments
Accounts receivable	$	17,522
Long-term asset derivative instruments	4,989
Total derivative assets	22,511
Accounts receivable	(14,165		)	*
Long-term asset derivative instruments	(2,351		)	*
Accounts payable	(52,602		)
Long-term liability derivative instruments	(802		)
Total derivative liabilities	(69,920		)
Total derivatives not designated	$	(47,409	)

(in thousands)	December 31, 2013
Derivative assets or (liabilities) not designated as hedging instruments
Accounts receivable	$	36,224
Long-term asset derivative instruments	7,992
Total derivative assets	44,216
Accounts receivable	(18,761		)	*
Long-term asset derivative instruments	(2,553		)	*
Accounts payable	(30,302		)
Total derivative liabilities	(51,616		)
Total derivatives not designated	$	(7,400	)

*Amounts classified in accordance with accounting guidance which permits offsetting fair value amounts recognized for multiple derivative instruments executed with the same counterparty under a master netting arrangement.

Schedule of Cash Flow Hedging Relationships on Financial Statements

The following table details 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		Three months ended March 31, 2013
Net gain (loss) recognized in other comprehensive income on derivatives (effective portion), net of tax of $1 and ($16,424)	—	$	2	$	(26,798	)
Gain reclassified from accumulated other comprehensive income into income (effective portion)	Operating revenues	$	4,054	$	17,824
Loss recognized in income on derivatives (ineffective portion and amount excluded from effectiveness testing)	Operating revenues	$	—	$	(534	)

Schedule of Derivatives Not Designated as Hedging Instruments on Income Statements

The following table details 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, 2014			Three months ended March 31, 2013
Loss recognized in income on derivatives	Operating revenues	$	(57,446	)	$	(31,501	)

Schedule of Hedging Transactions

nergen Resources entered into the following transactions for the remainder of 2014 and subsequent years:

Production Period	Total Hedged Volumes		Average Contract Price	Description
Oil
2014	7,392	MBbl	$92.65 Bbl	NYMEX Swaps
2015	7,260	MBbl	$89.07 Bbl	NYMEX Swaps
Natural Gas
2014	7.9	Bcf	$4.55 Mcf	NYMEX Swaps
2014	23.5	Bcf	$4.60 Mcf	Basin Specific Swaps - San Juan
2014	7.4	Bcf	$3.81 Mcf	Basin Specific Swaps - Permian
2015	12.0	Bcf	$4.05 Mcf	Basin Specific Swaps - San Juan
Natural Gas Basis Differential
2014	4.6	Bcf	$(0.09) Mcf	San Juan Basis Swaps
2014	1.5	Bcf	$(0.17) Mcf	Permian Basis Swaps

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

The following sets forth derivative assets and liabilities that were measured at fair value on a recurring basis:

	March 31, 2014
(in thousands)	Level 2*			Level 3*			Total
Current assets	$	(6,646	)	$	10,003		$	3,357
Noncurrent assets	1,192			1,446			2,638
Current liabilities	(42,531		)	(10,071		)	(52,602		)
Noncurrent liabilities	(802		)	—			(802		)
Net derivative asset (liability)	$	(48,787	)	$	1,378		$	(47,409	)

	December 31, 2013
(in thousands)	Level 2*			Level 3*			Total
Current assets	$	(1,658	)	$	19,121		$	17,463
Noncurrent assets	4,383			1,056			5,439
Current liabilities	(28,414		)	(1,888		)	(30,302		)
Net derivative asset (liability)	$	(25,689	)	$	18,289		$	(7,400	)

*Amounts classified in accordance with accounting guidance which permits offsetting fair value amounts recognized for multiple derivative instruments executed with the same counterparty under a master netting arrangement.

Schedule of Changes in Fair Value of Derivative Instruments Classified as Level 3

The tables below set forth a summary of changes in the fair value of the Company’s Level 3 derivative commodity instruments as follows:

	Three months ended			Three months ended
(in thousands)	March 31, 2014			March 31, 2013
Balance at beginning of period	$	18,289		$	89,019
Realized gains (losses)	(3,019		)	27,107
Unrealized losses relating to instruments held at the reporting date*	(16,835		)	(63,482		)
Settlements during period	2,943			(26,185		)
Balance at end of period	$	1,378		$	26,459

Schedule of Fair Value Inputs, Derivatives, Quantitative Information

The tables below set forth quantitative information about the Company’s Level 3 fair value measurements of derivative commodity instruments as follows:

(in thousands)	Fair Value as of March 31, 2014			Valuation Technique*	Unobservable Input*	Range
Natural Gas Basis - San Juan
2014	$	5,326		Discounted Cash Flow	Forward Basis	($0.06 - $0.09) Mcf
2015	$	(129	)	Discounted Cash Flow	Forward Basis	($0.14) Mcf
Natural Gas Basis - Permian
2014	$	(3,819	)	Discounted Cash Flow	Forward Basis	($0.12 - $0.13) Mcf

*Discounted cash flow represents an income approach in calculating fair value including the referenced unobservable input and a discount reflecting credit quality of the counterparty.

Offsetting Assets and Liabilities

The tables below set forth information about the offsetting of derivative assets and liabilities as follows:

	March 31, 2014
								Gross Amounts Not Offset in the Balance Sheets
(in thousands)	Gross Amounts Recognized		Gross Amounts Offset in the Balance Sheets			Net Amount Presented in the Balance Sheets		Financial Instruments		Cash Collateral Received		Net Amount
Derivative assets	$	22,511	$	(16,516	)	$	5,995	$	—	$	—	$	5,995
Derivative liabilities	$	69,920	$	(16,516	)	$	53,404	$	—	$	—	$	53,404

	December 31, 2013
								Gross Amounts Not Offset in the Balance Sheets
(in thousands)	Gross Amounts Recognized		Gross Amounts Offset in the Balance Sheets			Net Amount Presented in the Balance Sheets		Financial Instruments		Cash Collateral Received		Net Amount
Derivative assets	$	44,215	$	(21,313	)	$	22,902	$	—	$	—	$	22,902
Derivative liabilities	$	51,615	$	(21,313	)	$	30,302	$	—	$	—	$	30,302