Derivative Financial Instruments

6 Months Ended

Jun. 30, 2015

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; and

• 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, 2015, we had derivative instruments, which were comprised of collars, fixed-price swaps, basis protection swaps and physical sales and purchases, in place for a portion of our anticipated production through 2017 for a total of 76,328 BBtu of natural gas and 8,127 MBbls of crude oil. The majority of our derivative contracts are entered into at no cost to us as we hedge our anticipated production at the then-prevailing commodity market prices.

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. 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.

The following table presents the balance sheet location and fair value amounts of our derivative instruments on the condensed consolidated balance sheets:

			Fair Value
Derivative instruments:		Balance sheet line item	June 30, 2015		December 31, 2014
			(in thousands)
Derivative assets:	Current
	Commodity contracts
	Related to crude oil and natural gas sales	Fair value of derivatives	$	155,516	$	186,886
	Related to natural gas marketing	Fair value of derivatives	375		590
	Basis protection contracts
	Related to crude oil and natural gas sales	Fair value of derivatives	—		19
			155,891		187,495
	Non-current
	Commodity contracts
	Related to crude oil and natural gas sales	Fair value of derivatives	69,746		112,599
	Related to natural gas marketing	Fair value of derivatives	142		220
			69,888		112,819
Total derivative assets			$	225,779	$	300,314
Derivative liabilities:	Current
	Commodity contracts
	Related to natural gas marketing	Fair value of derivatives	$	348	$	545
	Basis protection contracts
	Related to crude oil and natural gas sales	Fair value of derivatives	1,464		25
			1,812		570
	Non-current
	Commodity contracts
	Related to crude oil and natural gas sales	Fair value of derivatives	700		—
	Related to natural gas marketing	Fair value of derivatives	130		197
	Basis protection contracts
	Related to crude oil and natural gas sales	Fair value of derivatives	459		—
			1,289		197
Total derivative liabilities			$	3,101	$	767

The following table presents the impact of our derivative instruments on our condensed consolidated statements of operations:

	Three Months Ended June 30,						Six Months Ended June 30,
Condensed consolidated statement of operations line item	2015			2014			2015			2014
	(in thousands)
Commodity price risk management gain (loss), net
Net settlements	$	44,049		$	(9,813	)	$	94,461		$	(17,051	)
Net change in fair value of unsettled derivatives	(93,090		)	(42,830		)	(76,840		)	(60,501		)
Total commodity price risk management gain (loss), net	$	(49,041	)	$	(52,643	)	$	17,621		$	(77,552	)
Sales from natural gas marketing
Net settlements	$	165		$	(110	)	$	396		$	(586	)
Net change in fair value of unsettled derivatives	(124		)	265			(293		)	(47		)
Total sales from natural gas marketing	$	41		$	155		$	103		$	(633	)
Cost of natural gas marketing
Net settlements	$	(157	)	$	149		$	(375	)	$	684
Net change in fair value of unsettled derivatives	115			(304		)	264			(8		)
Total cost of natural gas marketing	$	(42	)	$	(155	)	$	(111	)	$	676

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, 2015	Derivative instruments, recorded in condensed consolidated balance sheet, gross		Effect of master netting agreements			Derivative instruments, net
	(in thousands)
Asset derivatives:
Derivative instruments, at fair value	$	225,779	$	(2,409	)	$	223,370
Liability derivatives:
Derivative instruments, at fair value	$	3,101	$	(2,409	)	$	692

As of December 31, 2014	Derivative instruments, recorded in condensed consolidated balance sheet, gross		Effect of master netting agreements			Derivative instruments, net
	(in thousands)
Asset derivatives:
Derivative instruments, at fair value	$	300,314	$	(29	)	$	300,285
Liability derivatives:
Derivative instruments, at fair value	$	767	$	(29	)	$	738