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Derivative Financial Instruments
 6 Months Ended
Jun. 30, 2013
Derivative Instruments Not Designated as Hedging Instruments [Abstract]  
Derivative Instruments and Hedging Activities Disclosure [Text Block]
DERIVATIVE FINANCIAL INSTRUMENTS

Our results of operations and operating cash flows are affected by changes in market prices for crude oil, natural gas and NGLs. To manage a portion of our exposure to price volatility from producing crude oil and natural gas, we utilize the following economic hedging strategies for each of our business segments.

•
For crude oil and natural gas sales, we enter into derivative contracts to protect against price declines in future periods. While we structure these derivatives to reduce our exposure to changes in price associated with the derivative commodity, they also limit the benefit we might otherwise have received from price increases in the physical market.
 
•
For natural gas marketing, we enter into fixed-price physical purchase and sale agreements that qualify as derivative contracts. In order to offset the fixed-price physical derivatives in our natural gas marketing, we enter into financial derivative instruments that have the effect of locking in the prices we will receive or pay for the same volumes and period, offsetting the physical derivative.

We believe our derivative instruments continue to be effective in achieving the risk management objectives for which they were intended. As of June 30, 2013, we had derivative instruments, which were comprised of commodity floors, collars and swaps, basis protection swaps and physical sales and purchases, in place for a portion of our anticipated production through 2017 for a total of 47,679 BBtu of natural gas and 5,392 MBbls of crude oil.

We have elected not to designate any of our derivative instruments as hedges and therefore do not qualify for use of hedge accounting. Accordingly, changes in the fair value of our derivative instruments are recorded in the statements of operations, with the exception of changes in fair value related to those derivatives we designated to our affiliated partnerships. Changes in the fair value of derivative instruments related to our Oil and Gas Exploration and Production segment are recorded in commodity price risk management, net. Changes in the fair value of derivative instruments related to our Gas Marketing segment are recorded in sales from and cost of natural gas marketing. Changes in the fair value of the derivative instruments designated to our affiliated partnerships are recorded on the balance sheets in accounts payable affiliates and accounts receivable affiliates. As positions designated to our affiliated partnerships settle, the realized gains and losses are netted for distribution. Net realized gains are paid to the partnerships and net realized losses are deducted from the partnerships’ cash distributions from production. The affiliated partnerships bear their designated share of counterparty risk.


The following table presents the location and fair value amounts of our derivative instruments on the balance sheets as of June 30, 2013 and December 31, 2012:
 
 
 
 
 
Fair Value
Derivatives instruments:
 
Balance sheet line item
 
June 30, 2013
 
December 31, 2012
 
 
 
 
 
(in thousands)
Derivative assets:
Current
 
 
 
 
 
 
 
Commodity contracts
 
 
 
 
 
 
 
Related to crude oil and natural gas sales
 
Fair value of derivatives
 
$
15,099

 
$
47,016

 
Related to affiliated partnerships (1) (3)
 
Fair value of derivatives
 
—

 
4,707

 
Related to natural gas marketing
 
Fair value of derivatives
 
661

 
302

 
Basis protection contracts
 
 
 
 
 
 
 
Related to crude oil and natural gas sales
 
Fair value of derivatives
 
506

 
—

 
Related to natural gas marketing
 
Fair value of derivatives
 
21

 
17

 
 
 
 
 
16,287

 
52,042

 
Non Current
 
 
 
 
 
 
 
Commodity contracts
 
 
 
 
 
 
 
Related to crude oil and natural gas sales
 
Fair value of derivatives
 
10,197

 
6,671

 
Related to natural gas marketing
 
Fair value of derivatives
 
92

 
203

 
Basis protection contracts
 
 
 
 
 
 
 
Related to crude oil and natural gas sales
 
Fair value of derivatives
 
129

 
—

 
Related to natural gas marketing
 
Fair value of derivatives
 
3

 
9

 
 
 
 
 
10,421

 
6,883

Total derivative assets
 
 
 
 
$
26,708

 
$
58,925

 
 
 
 
 
 
 
 
Derivative liabilities:
Current
 
 
 
 
 
 
 
Commodity contracts
 
 
 
 
 
 
 
Related to crude oil and natural gas sales
 
Fair value of derivatives
 
$
2,968

 
$
1,744

 
Related to natural gas marketing
 
Fair value of derivatives
 
507

 
226

 
Basis protection contracts
 
 
 
 
 
 
 
Related to crude oil and natural gas sales
 
Fair value of derivatives
 
2,224

 
14,329

 
Related to affiliated partnerships (2) (3)
 
Fair value of derivatives
 
—

 
2,140

 
Related to natural gas marketing
 
Fair value of derivatives
 
3

 
—

 
 
 
 
 
5,702

 
18,439

 
Non Current
 
 
 
 
 
 
 
Commodity contracts
 
 
 
 
 
 
 
Related to crude oil and natural gas sales
 
Fair value of derivatives
 
4,437

 
9,969

 
Related to natural gas marketing
 
Fair value of derivatives
 
36

 
168

 
Basis protection contracts
 
 
 
 
 
 
 
Related to natural gas marketing
 
Fair value of derivatives
 
2

 
—

 
 
 
 
 
4,475

 
10,137

Total derivative liabilities
 
 
 
 
$
10,177

 
$
28,576

__________
(1)
Represents derivative positions designated to our affiliated partnerships. Accordingly, our accompanying balance sheets include a corresponding payable to our affiliated partnerships representing their proportionate share of the derivative assets.
(2)
Represents derivative positions designated to our affiliated partnerships. Accordingly, our accompanying balance sheets include a corresponding receivable from our affiliated partnerships representing their proportionate share of the derivative liabilities.
(3)
In June 2013, all remaining derivative positions designated to our affiliated partnerships were liquidated prior to settlement. The net proceeds are included in the balance sheet line item accounts payable affiliates.
    
The following table presents the impact of our derivative instruments on our statements of operations:

 
 
2013
 
2012
Statement of operations line item
 
Reclassification
of Realized
Gains (Losses)
Included in Prior Periods
Unrealized
 
Realized and Unrealized
Gains
(Losses) For
the
Current
Period
 
Total
 
Reclassification
of Realized
Gains (Losses)
Included in Prior Periods
Unrealized
 
Realized and Unrealized
Gains
(Losses) For
the
Current
Period
 
Total
 
 
(in thousands)
Three Months Ended June 30,
 
 
 
 
 
 
 
 
 
 
 
 
Commodity price risk management gain, net
 
 
 
 
 
 
 
 
 
 
 
 
Realized gains
 
$
3,210

 
$
693

 
$
3,903

 
$
13,503

 
$
2,676

 
$
16,179

Unrealized gains (losses)
 
(3,210
)
 
24,031

 
20,821

 
(13,503
)
 
36,053

 
22,550

Total commodity price risk management gain, net
 
$
—

 
$
24,724

 
$
24,724

 
$
—

 
$
38,729

 
$
38,729

Sales from natural gas marketing
 
 
 
 
 
 
 
 
 
 
 
 
Realized gains (losses)
 
$
(149
)
 
$
(24
)
 
$
(173
)
 
$
749

 
$
3

 
$
752

Unrealized gains (losses)
 
149

 
1,472

 
1,621

 
(749
)
 
(322
)
 
(1,071
)
Total sales from natural gas marketing
 
$
—

 
$
1,448

 
$
1,448

 
$
—

 
$
(319
)
 
$
(319
)
Cost of natural gas marketing
 
 
 
 
 
 
 
 
 
 
 
 
Realized gains (losses)
 
$
191

 
$
34

 
$
225

 
$
(692
)
 
$
(26
)
 
$
(718
)
Unrealized gains (losses)
 
(191
)
 
(1,445
)
 
(1,636
)
 
692

 
375

 
1,067

Total cost of natural gas marketing
 
$
—

 
$
(1,411
)
 
$
(1,411
)
 
$
—

 
$
349

 
$
349

 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30,
 
 
 
 
 
 
 
 
 
 
 
 
Commodity price risk management gain, net
 
 
 
 
 
 
 
 
 
 
 
 
Realized gains (losses)
 
$
17,771

 
$
(5,397
)
 
$
12,374

 
$
16,046

 
$
10,060

 
$
26,106

Unrealized gains (losses)
 
(17,771
)
 
7,766

 
(10,005
)
 
(16,046
)
 
40,170

 
24,124

Total commodity price risk management gain, net
 
$
—

 
$
2,369

 
$
2,369

 
$
—

 
$
50,230

 
$
50,230

Sales from natural gas marketing
 
 
 
 
 
 
 
 
 
 
 
 
Realized gains (losses)
 
$
209

 
$
(181
)
 
$
28

 
$
1,110

 
$
435

 
$
1,545

Unrealized gains (losses)
 
(209
)
 
860

 
651

 
(1,110
)
 
114

 
(996
)
Total sales from natural gas marketing
 
$
—

 
$
679

 
$
679

 
$
—

 
$
549

 
$
549

Cost of natural gas marketing
 
 
 
 
 
 
 
 
 
 
 
 
Realized gains (losses)
 
$
(153
)
 
$
216

 
$
63

 
$
(970
)
 
$
(493
)
 
$
(1,463
)
Unrealized gains (losses)
 
153

 
(712
)
 
(559
)
 
970

 
(19
)
 
951

Total cost of natural gas marketing
 
$
—

 
$
(496
)
 
$
(496
)
 
$
—

 
$
(512
)
 
$
(512
)
 
 
 
 
 
 
 
 
 
 
 
 
 

All of our financial derivative agreements contain master netting provisions that provide for the net settlement of all contracts through a single payment in the event of early termination. Our fixed-price physical purchase and sale agreements that qualify as derivative contracts are not subject to master netting provisions and are not significant. We have elected not to offset the fair value positions recorded on our condensed consolidated balance sheets.

The following table reflects the impact of netting agreements on gross derivative assets and liabilities as of June 30, 2013 and December 31, 2012:
As of June 30, 2013
 
Derivatives instruments, recorded in condensed consolidated balance sheet, gross
 
Effect of master netting agreements
 
Derivative instruments, net
 
 
 
 
 
 
 
Asset derivatives:
 
 
 
 
 
 
Derivative instruments, at fair value
 
$
26,708

 
$
(7,508
)
 
$
19,200

 
 
 
 
 
 
 
Liability derivatives:
 
 
 
 
 
 
Derivative instruments, at fair value
 
$
10,177

 
$
(7,508
)
 
$
2,669

 
 
 
 
 
 
 

As of December 31, 2012
 
Derivatives instruments, recorded in condensed consolidated balance sheet, gross
 
Effect of master netting agreements
 
Derivative instruments, net
 
 
 
 
 
 
 
Asset derivatives:
 
 
 
 
 
 
Derivative instruments, at fair value
 
$
58,925

 
$
(11,437
)
 
$
47,488

 
 
 
 
 
 
 
Liability derivatives:
 
 
 
 
 
 
Derivative instruments, at fair value
 
$
28,576

 
$
(11,437
)
 
$
17,139