Hedge Contracts

12 Months Ended

Dec. 31, 2011

Notes to Financial Statements [Abstract]

Hedge Contracts

NOTE O - HEDGE CONTRACTS

We are exposed to financial and market risks that affect our businesses. We have currency exchange rate risk exposure related to transactions denominated in a foreign currency as well as to investments in certain of our international operations. As a result of our variable rate bank credit facilities, including the variable rate credit facility of Compressco Partners, to the extent we have debt outstanding, we face market risk exposure related to changes in applicable interest rates. We have concentrations of credit risk as a result of trade receivables owed to us by companies in the energy industry. In addition, we have market risk exposure in the sales prices we receive for the remainder of our oil and gas production. Our financial risk management activities may involve, among other measures, the use of derivative financial instruments, such

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as swap and collar agreements, to hedge the impact of market price risk exposures. Prior to the execution of the purchase and sale agreement in April 2011 pursuant to which we sold substantially all of our remaining Maritech oil and gas properties in May 2011, we utilized cash flow commodity hedge transactions to reduce our exposure related to the volatility of oil and gas prices. As indicated below, these cash flow commodity hedge contracts were liquidated in the second quarter of 2011. For these and other hedge contracts, we formally document all relationships between hedging instruments and hedged items, as well as our risk management objectives, our strategies for undertaking various hedge transactions, and our methods for assessing and testing correlation and hedge ineffectiveness. All hedging instruments are linked to the hedged asset, liability, firm commitment, or forecasted transaction. We also assess, both at the inception of the hedge and on an ongoing basis, whether the derivatives that are used in these hedging transactions are highly effective in offsetting changes in cash flows of the hedged items.

Derivative Hedge Contracts

In April 2011, following the execution of the purchase and sale agreement pursuant to which Maritech agreed to sell approximately 79% of its proved reserves as of December 31, 2010, we liquidated our remaining oil hedge contracts and paid $14.2 million to the counterparty. Therefore, from April 2011 forward, we have no remaining cash flow hedging swap contracts outstanding associated with our Maritech subsidiary's oil or gas production.

Prior to their liquidation during 2011, we believe that our swap agreements were "highly effective cash flow hedges" in managing the volatility of future cash flows associated with Maritech's oil production. The effective portion of the change in the derivative's fair value (i.e., that portion of the change in the derivative's fair value that offsets the corresponding change in the cash flows of the hedged transaction) was initially reported as a component of accumulated other comprehensive income, which was classified within equity. This component of accumulated other comprehensive income associated with cash flow hedge derivative contracts, including any derivative contracts which have been liquidated, was subsequently reclassified into product sales revenues, utilizing the specific identification method, when the hedged exposure affected earnings (i.e., when hedged oil and gas production volumes were reflected in revenues). Any "ineffective" portion of the change in the derivative's fair value was recognized in earnings immediately.

The fair value of hedging instruments reflects our best estimate and is based upon exchange or over-the-counter quotations, whenever they are available. Quoted valuations may not be available. Where quotes are not available, we utilize other valuation techniques or models to estimate fair values. These modeling techniques require us to make estimations of future prices, price correlation, and market volatility and liquidity. The actual results may differ from these estimates, and these differences can be positive or negative. The fair values of our oil and natural gas swap contracts as of December 31, 2010, are as follows:

		Fair Value at
	Balance Sheet	December 31,
Derivatives designated as hedging	Location	2010
instruments		(In Thousands)
Natural gas swap contracts	Current assets	$	2,436
Oil swap contracts	Current liabilities		(5,208	)
Total derivatives designated as hedging
instruments		$	(2,772	)

Oil and natural gas swap assets and liabilities which are classified as current assets or liabilities relate to the portion of the derivative contracts associated with hedged oil and gas production to occur over the next twelve month period. None of the oil and natural gas swap contracts contain credit risk related contingent features that would require us to post assets as collateral for contracts that are classified as liabilities.

As the hedge contracts were highly effective, the effective portion of the gain, net of taxes, from changes in contract fair value, including the gain on the liquidated oil swap contracts, is included in accumulated other comprehensive income within stockholders' equity. Pretax gains and losses associated with oil and gas derivative swap contracts for each of the three years ended December 31, 2011, 2010, and 2009, are summarized below:

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	Year Ended December 31, 2011
	Oil			Natural Gas		Total
	(In Thousands)
Derivative swap contracts
Amount of pretax gain reclassified from accumulated other comprehensive
income into product sales revenue (effective portion)	$	1,177		$	-	$	1,177
Amount of pretax gain (loss) from change in derivative fair value
recognized in other comprehensive income		(7,854	)		-		(7,854	)
Amount of pretax gain (loss) recognized in other income (expense)
(ineffective portion)		(13,947	)		-		(13,947	)

	Year Ended December 31, 2010
	Oil			Natural Gas		Total
	(In Thousands)
Derivative swap contracts
Amount of pretax gain reclassified from accumulated other comprehensive
income into product sales revenue (effective portion)	$	22,725		$	26,214	$	48,939
Amount of pretax gain (loss) from change in derivative fair value
recognized in other comprehensive income		(1,947	)		9,118		7,171
Amount of pretax gain (loss) recognized in other income (expense)
(ineffective portion)		(152	)		-		(152	)

	Year Ended December 31, 2009
	Oil			Natural Gas			Total
	(In Thousands)
Derivative swap contracts
Amount of pretax gain reclassified from accumulated other comprehensive
income into product sales revenue (effective portion)	$	6,978		$	40,054		$	47,032
Amount of pretax gain (loss) from change in derivative fair value
recognized in other comprehensive income		(13,966	)		22,906			8,940
Amount of pretax gain (loss) recognized in other income (expense)
(ineffective portion)		(408	)		(1,321	)		(1,729	)

During the second quarter of 2009, we liquidated certain cash flow hedging swap contracts associated with Maritech's oil production in exchange for cash of approximately $23.1 million. These liquidated cash flow hedging swap contracts met the effectiveness requirements to be accounted for as hedges, and as a result, the gain on the liquidated swap contracts was retained in other comprehensive income and the $23.1 million proceeds were classified as a cash flow from operating activities during 2009 in the accompanying statements of cash flows. These gains were then reclassified into product sales revenue during 2010.

Other Hedge Contracts

Transaction gains and losses attributable to a foreign currency transaction that is designated as, and is effective as, an economic hedge of a net investment in a foreign entity is subject to the same accounting as translation adjustments. As such, the effect of a rate change on a foreign currency hedge is the same as the accounting for the effect of the rate change on the net foreign investment; both are recorded in the cumulative translation account, a component of stockholders' equity, and are partially or fully offsetting. Prior to December 2010, our long-term debt included borrowings which were designated as a hedge of our net investment in our European calcium chloride operations. In December 2010, these euro-denominated borrowings were repaid. During the period these hedge designated euro-denominated borrowings were outstanding, changes in the foreign currency exchange rate resulted in a cumulative change to the cumulative translation adjustment account of $2.6 million, net of taxes, with no ineffectiveness recorded.