8. Derivatives

3 Months Ended

Jun. 30, 2015

Derivatives

Derivatives

8. Derivatives

The Company has used price swap contracts to reduce price volatility associated with certain of its oil sales. With respect to the Company’s fixed price swap contracts, the counterparty is required to make a payment to the Company if the settlement price for any settlement period is less than the swap price, and the Company is required to make a payment to the counterparty if the settlement price for any settlement period is greater than the swap price. The Company’s derivative contracts are based upon reported settlement prices on commodity exchanges, with crude oil derivative settlements based on New York Mercantile Exchange West Texas Intermediate (“NYMEX WTI”) pricing. The counterparty to the Company’s derivative contract is Merrill Lynch Commodities, Inc., which the Company believes is an acceptable credit risk.

All derivative financial instruments are recorded at fair value. The Company has not designated its derivative instruments as hedges for accounting purposes and, as a result, marks its derivative instruments to fair value and recognizes the realized and unrealized changes in fair value in the consolidated statements of operations under the caption “Loss on derivative instruments.” The following summarizes the loss on derivative instruments included in the consolidated statements of operations three months ended June 30, 2015 and 2014:

	2015		2014
Unrealized loss on open non-hedge derivative instruments	$	-	$	(14,139	)
Loss on settlement of non-hedge derivative instruments		-		(19,489	)
Total loss on derivative instruments	$	-	$	(33,628	)

As of June 30, 2015 the Company does not have any open crude oil derivative positions with respect to future production.