Derivative Instruments and Hedging Activities

12 Months Ended

Dec. 31, 2013

Derivative Instruments and Hedging Activities

Derivative Instruments and Hedging Activities

6. Derivative Instruments and Hedging Activities

        The Company periodically enters into commodity derivative instruments to hedge its exposure to price fluctuations on natural gas and crude oil production. The Company's credit agreement restricts the ability of the Company to enter into commodity hedges other than to hedge or mitigate risks to which the Company has actual or projected exposure or as permitted under the Company's risk management policies and where such derivatives do not subject the Company to material speculative risks. All of the Company's derivatives are used for risk management purposes and are not held for trading purposes.

        As of December 31, 2013, the Company had the following outstanding commodity derivatives designated as hedging instruments:

				Collars						Swaps
				Floor			Ceiling
Type of Contract	Volume		Contract Period	Range	Weighted- Average		Range	Weighted- Average		Weighted- Average
Natural gas		336.8Bcf	Jan. 2014 - Dec. 2014	$3.60 - $4.37	$	4.13	$4.22 - $4.80	$	4.51
Natural gas		35.5Bcf	Jan. 2014 - Dec. 2014							$	4.12

        In the above table, natural gas prices are stated per Mcf. The change in fair value of derivatives designated as hedges that is effective is recorded in accumulated other comprehensive income in stockholders' equity in the Consolidated Balance Sheet. The ineffective portion of the change in the fair value of derivatives designated as hedges, and the change in fair value of derivatives not designated as hedges, are recorded currently in earnings as a component of natural gas revenue and crude oil and condensate revenue in the Consolidated Statement of Operations.

        The following tables reflect the fair value of derivative instruments on the Company's consolidated financial statements:

Effect of Derivative Instruments on the Consolidated Balance Sheet

		Fair Values of Derivative Instruments
		Derivative Assets				Derivative Liabilities
		December 31,				December 31,
	Balance Sheet Location
(In thousands)		2013		2012		2013		2012
Commodity contracts	Derivative instruments (current assets)	$	3,019	$	50,824	$	—	$	—
Commodity contracts	Derivative instruments (current liabilites)		—		—		13,912		192
		$	3,019	$	50,824	$	13,912	$	192

        At December 31, 2013 and 2012, unrealized losses of $10.9 million ($6.6 million, net of tax) and $50.6 million ($30.7 million, net of tax), respectively, were recorded in accumulated other comprehensive income / (loss) in the Consolidated Balance Sheet. Based upon estimates at December 31, 2013, the Company expects to reclassify $6.6 million in after-tax losses associated with its commodity hedges from accumulated other comprehensive income / (loss) to the Consolidated Statement of Operations over the next 12 months.

Offsetting of Derivative Assets and Liabilities in the Consolidated Balance Sheet

	Year Ended December 31,
(In thousands)	2013			2012
Derivative Assets
Gross amounts of recognized assets	$	13,792		$	54,454
Gross amounts offset in the statement of financial position		(10,773	)		(3,630	)
Net amounts of assets presented in the statement of financial position		3,019			50,824
Gross amounts of financial instruments not offset in the statement of financial position		373			1,892
Net amount	$	3,392		$	52,716
Derivative Liabilities
Gross amounts of recognized liabilities	$	24,685		$	3,822
Gross amounts offset in the statement of financial position		(10,773	)		(3,630	)
Net amounts of liabilities presented in the statement of financial position		13,912			192
Gross amounts of financial instruments not offset in the statement of financial position		—			—
Net amount	$	13,912		$	192

Effect of Derivative Instruments on the Consolidated Statement of Operations

Derivatives Designated as Hedging Instruments

	Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)
	Year Ended December 31,
(In thousands)	2013			2012		2011
Commodity contracts	$	(4,523	)	$	88,705	$	267,667

	Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
	Year Ended December 31,
Location of Gain (Loss) Reclassified from Accumulated OCI into Income (In thousands)
	2013		2012		2011
Natural gas revenues	$	52,733	$	225,108	$	84,937
Crude oil and condensate revenues		4,269		11,218		1,403
	$	57,002	$	236,326	$	86,340

        For the years ended December 31, 2013, 2012 and 2011, respectively, there was no ineffectiveness recorded in the Company's Consolidated Statement of Operations related to its derivative instruments designated as hedges.

Derivatives Not Designated as Hedging Instruments

		Year Ended December 31,
	Location of Gain (Loss) Recognized in Income on Derivative
(In thousands)		2013		2012			2011
Commodity contracts	Natural gas revenues	$	—	$	(494	)	$	(965	)

Additional Disclosures about Derivative Instruments and Hedging Activities

        The use of derivative instruments involves the risk that the counterparties will be unable to meet their obligation under the agreement. The Company enters into derivative contracts with multiple counterparties in order to limit its exposure to individual counterparties. The Company also has netting arrangements with all of its counterparties that allow it to offset assets and liabilities from separate derivative contracts with that counterparty.

        Certain counterparties to the Company's derivative instruments are also lenders under its credit facility. The Company's credit facility and derivative instruments contain certain cross default and acceleration provisions that may require immediate payment of its derivative liabilities in certain situations.