Derivative Activities (Tables)

12 Months Ended

Dec. 31, 2013

Derivative Volumes Hedged and Average Hedge Prices

We use commodity-based derivative contracts to manage exposure to commodity price fluctuations. We do not enter into these arrangements for speculative or trading purposes. We do not utilize complex derivatives as we typically utilize commodity swap or collar contracts to (1) reduce the effect of price volatility of the commodities we produce and sell and (2) support our annual capital budget and expenditure plans. Their fair value, represented by the estimated amount that would be realized upon termination, based on a comparison of the contract price and a reference price, generally NYMEX, approximated a net unrealized pre-tax loss of $16.5 million at December 31, 2013. These contracts expire monthly through December 2016. The following table sets forth the derivative volumes by year as of December 31, 2013:

Period	Contract Type	Volume Hedged	Weighted Average Hedge Price
Natural Gas
2014	Collars	447,500 Mmbtu/day	$3.84–$4.48
2015	Collars	145,000 Mmbtu/day	$4.07–$4.56
2014	Swaps	219,397 Mmbtu/day	$4.17
2015	Swaps	154,966 Mmbtu/day	$4.16
2016	Swaps	20,000 Mmbtu/day	$4.16
Crude Oil
2014	Collars	2,000 bbls/day	$85.55–$100.00
2014	Swaps	9,004 bbls/day	$94.43
2015	Swaps	4,000 bbls/day	$89.60
NGLs (C3 - Propane)
2014	Swaps	11,000 bbls/day	$1.01/gallon
NGLs (NC4 - Normal Butane)
2014	Swaps	3,000 bbls/day	$1.33/gallon

Combined Fair Value of Derivatives, by Consolidated Balance Sheets

The combined fair value of derivatives included in the accompanying consolidated balance sheets as of December 31, 2013 and 2012 is summarized below. As of December 31, 2013, we are conducting derivative activities with thirteen financial institutions, of which all but two are secured lenders in our bank credit facility. We believe all of these institutions are acceptable credit risks. At times, such risks may be concentrated with certain counterparties. The credit worthiness of our counterparties is subject to periodic review. The assets and liabilities are netted where derivatives with both gain and loss positions are held by a single counterparty and we have master netting arrangements (in thousands).

		December 31, 2013
		Gross Amounts of Recognized Assets		Gross Amounts Offset in the Balance Sheet			Net Amounts of Assets Presented in the Balance Sheet
Derivative assets:
Natural gas	–swaps	$	4,240	$	(1,218	)	$	3,022
	–collars		16,057		(7,671	)		8,386
	–basis swaps		7,686		(7,686	)		¾
Crude oil	–swaps		3,567		(1,321	)		2,246
NGLs	–C3 swaps		826		(826	)		¾
	–C4 swaps		863		(863	)		¾
	–C5 swaps		121		(121	)		¾
		$	33,360	$	(19,706	)	$	13,654

		December 31, 2013
		Gross Amounts of Recognized (Liabilities)			Gross Amounts Offset in the Balance Sheet		Net Amounts of (Liabilities) Presented in the Balance Sheet
Derivative (liabilities):
Natural gas	–swaps	$	(4,790	)	$	1,218	$	(3,572	)
	–collars		(13,345	)		7,671		(5,674	)
	–basis swaps		(3,756	)		7,686		3,930
Crude oil	–swaps		(4,711	)		1,321		(3,390	)
	–collars		(398	)		¾		(398	)
NGLs	–C3 swaps		(18,172	)		826		(17,346	)
	–C4 swaps		(757	)		863		106
	–C5 swaps		¾			121		121
		$	(45,929	)	$	19,706	$	(26,223	)

		December 31, 2012
		Gross Amounts of Recognized Assets		Gross Amounts Offset in the Balance Sheet			Net Amounts of Assets Presented in the Balance Sheet
Derivative assets:
Natural gas	–swaps	$	10,746	$	(3,242	)	$	7,504
	–collars		128,410		(6,155	)		122,255
	–basis swaps		993		—			993
Crude oil	–swaps		9,650		—			9,650
	–collars		2,222		—			2,222
NGLs	–C5 swaps		13,055		(2,412	)		10,643
		$	165,076	$	(11,809	)	$	153,267

		December 31, 2012
		Gross Amounts of Recognized (Liabilities)			Gross Amounts Offset in the Balance Sheet		Net Amounts of (Liabilities) Presented in the Balance Sheet
Derivative (liabilities):
Natural gas	–swaps	$	(3,242	)	$	3,242	$	¾
	–collars		(9,618	)		6,155		(3,463	)
NGLs	–C3 swaps		(6,746	)		¾		(6,746)
	–C5 swaps		(137	)		2,412		2,275
		$	(19,743	)	$	11,809	$	(7,934	)

Effects of Cash Flow Hedges and Other Hedges on Accumulated Other Comprehensive Income

The effects of our cash flow hedges (or those derivatives that qualified for hedge accounting) on AOCI in the accompanying consolidated balance sheets is summarized below:

	Year Ended December 31,
	Change in Hedge Derivative Fair Value						Realized Gain Reclassified from OCI Into Revenue (a)
	2013			2012			2013			2012
Swaps	$	125		$	46,371		$	15,171		$	78,779
Put options		¾			(1,955	)		¾			(1,955	)
Collars		(7,015	)		74,766			105,272			159,481
Income taxes		2,687			(47,466	)		(46,973	)		(91,871	)
	$	(4,203	)	$	71,716		$	73,470		$	144,434

^(a) For realized gains upon contract settlement, the reduction in AOCI is offset by an increase in natural gas, NGLs and oil sales. For realized losses upon contract settlement, the increase in AOCI is offset by a decrease in natural gas, NGLs and oil sales.

Effects of Non-Hedge Derivatives on Consolidated Statements of Operations

The effects of our non-hedge derivatives (or those derivatives that do not qualify or are not designated for hedge accounting) and the ineffective portion of our hedge derivatives on our consolidated statements of operations are summarized below:

	Year Ended December 31,
	Gain (Loss) Recognized in Income (Non-hedge Derivatives)									Gain (Loss) Recognized in Income (Ineffective Portion)								Derivative Fair Value (Loss) Income
	2013			2012			2011			2013			2012			2011		2013			2012			2011
Swaps	$	(48,492	)	$	11,601		$	24,767		$	(2,034	)	$	(657	)	$	767	$	(50,526	)	$	10,944		$	25,534
Re-purchased swaps		1,323			9,313			—			¾			—			—		1,323			9,313			—
Collars		(15,166	)		5,126			5,266			(896	)		1,782			8,777		(16,062	)		6,908			14,043
Call options		¾			13,178			553			¾			—			—		¾			13,178			553
Put options		¾			(30	)		—			¾			—			—		¾			(30	)		—
Basis swaps		3,440			1,124			(43	)		¾			—			—		3,440			1,124			(43	)
Total	$	(58,895	)	$	40,312		$	30,543		$	(2,930	)	$	1,125		$	9,544	$	(61,825	)	$	41,437		$	40,087