The estimated fair value of our available-for-sale securities, reflected on our Unaudited Condensed Consolidated Balance Sheets as non-current other assets, is based on market quotes. The following is a summary of available-for-sale securities:


	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(In thousands)
Equity Securities:
March 31, 2019	$	830	$	—	$	605	$	225
December 31, 2018	$	830	$	—	$	636	$	194

During the second quarter of 2017, we received available-for-sale securities for early termination fees associated with a long-term drilling contract. We evaluate the marketability of those equity securities to determine if any decline in fair value below cost is other-than-temporary. If a decline in fair value below cost is determined to be other-than-temporary, an

impairment charge will be recorded, and a new cost basis established. We use several factors to determine whether a loss is other-than-temporary. These factors include, but are not limited to, (i) the time a security is in an unrealized loss position, (ii) the extent to which fair value is less than cost, (iii) the financial condition and near-term prospects of the issuer, and (iv) our intent and ability to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value.

Fair value is defined as the amount that would be received from the sale of an asset or paid for transferring a liability in an orderly transaction between market participants (in either case, an exit price). To estimate an exit price, a three-level hierarchy is used prioritizing the valuation techniques used to measure fair value into three levels with the highest priority given to Level 1 and the lowest priority given to Level 3. The levels are summarized as follows:

•Level 2—significant observable pricing inputs other than quoted prices included within level 1 either directly or indirectly observable as of the reporting date. Essentially, inputs (variables used in the pricing models) that are derived principally from or corroborated by observable market data.

•Level 3—generally unobservable inputs developed based on the best information available and may include our own internal data.

The inputs available to us determine the valuation technique we use to measure the fair values of our financial instruments.


	March 31, 2019
	Level 1		Level 2		Level 3		Effect of Netting		Net Amounts Presented
	(In thousands)
Financial assets (liabilities):
Commodity derivatives:
Assets	$	—	$	1,727	$	3,098	$	(1,361)	$	3,464
Liabilities	—		(1,818)		(18)		1,361		(475)
Total commodity derivatives	—		(91)		3,080		—		2,989
Equity securities	225		—		—		—		225
	$	225	$	(91)	$	3,080	$	—	$	3,214


	December 31, 2018
	Level 1		Level 2		Level 3		Effect of Netting		Net Amounts Presented
	(In thousands)
Financial assets (liabilities):
Commodity derivatives:
Assets	$	—	$	3,225	$	10,964	$	(1,319)	$	12,870
Liabilities	—		(1,278)		(334)		1,319		(293)
Total commodity derivatives	—		1,947		10,630		—		12,577
Equity securities	194		—		—		—		194
	$	194	$	1,947	$	10,630	$	—	$	12,771

All our counterparties are subject to master netting arrangements. If a legal right of set-off exists, we net the value of the derivative transactions we have with the same counterparty. We are not required to post cash collateral with our counterparties and no collateral has been posted as of March 31, 2019.

We used the following methods and assumptions to estimate the fair values of the assets and liabilities in the table above. There were no transfers between Level 2 and Level 3 financial assets (liabilities).

Equity Securities. We measure the fair values of our available for sale securities based on market quotes.

Commodity Derivatives. We measure the fair values of our crude oil and natural gas swaps using estimated internal discounted cash flow calculations based on the NYMEX futures index.

Commodity Derivatives. The fair values of our natural gas and crude oil collars and three-way collars are estimated using internal discounted cash flow calculations based on forward price curves, quotes obtained from brokers for contracts with similar terms, or quotes obtained from counterparties to the agreements.


	Net Derivatives
	Three Months Ended
	March 31,
	2019		2018
	(In thousands)
Beginning of period	$	10,630	$	(206)
Total gains or losses (realized and unrealized):
Included in earnings ⁽¹⁾	(5,434)		(3,919)
Settlements	(2,116)		919
End of period	$	3,080	$	(3,206)
Total losses for the period included in earnings attributable to the change in unrealized loss relating to assets still held at end of period	$	(7,550)	$	(3,000)

1.Commodity derivatives are reported in the Unaudited Condensed Consolidated Statements of Operations in gain (loss) on derivatives.

The following table provides quantitative information about our Level 3 unobservable inputs at March 31, 2019:

Commodity ⁽¹⁾

Fair Value

Valuation Technique

Unobservable Input

Range

(In thousands)

Oil three-way collars

3,096

Discounted cash flow

Forward commodity price curve

$0 - $7.93

Natural gas collars

(16)

Discounted cash flow

Forward commodity price curve

$0 - $0.13

1.The commodity contracts detailed in this category include non-exchange-traded crude oil three-way collars and natural gas collars that are valued based on NYMEX. The forward pricing range represents the low and high price expected to be paid or received within the settlement period.

This disclosure of the estimated fair value of financial instruments is made under accounting guidance for financial instruments. We have determined the estimated fair values by using market information and certain valuation methodologies. Considerable judgment is required in interpreting market data to develop the estimates of fair value. Using different market assumptions or valuation methodologies may have a material effect on our estimated fair value amounts.

At March 31, 2019, the carrying values on the Unaudited Condensed Consolidated Balance Sheets for cash and cash equivalents (composed of bank and money market accounts - classified as Level 1), accounts receivable, accounts payable, other current assets, and current liabilities approximate their fair value because of their short-term nature.

Based on the borrowing rates available to us for credit agreement debt with similar terms and maturities and considering the risk of our non-performance, long-term debt under the Unit and Superior credit agreements approximate their fair value and at March 31, 2019 we had $40.0 million of outstanding borrowings under the Unit and none under the Superior credit agreements. We had no borrowing under either the Unit or Superior Credit agreements at December 31, 2018. Borrowings under these agreements are classified as Level 2.

The carrying amounts of long-term debt associated with the Notes, net of unamortized discount and debt issuance costs, reported in the Unaudited Condensed Consolidated Balance Sheets as of March 31, 2019 and December 31, 2018 were $645.0 million and $644.5 million, respectively. We estimate the fair value of the Notes using quoted marked prices at March 31, 2019 and December 31, 2018 was $626.0 million and $600.5 million, respectively. The Notes would be classified as Level 2.

The initial measurement of AROs at fair value is calculated using discounted cash flow techniques and based on internal estimates of future retirement costs associated with property, plant, and equipment. Significant Level 3 inputs used in the calculation of AROs include plugging costs and remaining reserve lives. A reconciliation of the company’s AROs is presented in Note 7 – Asset Retirement Obligations.