Derivative Instruments And Hedging Activities

3 Months Ended

Mar. 31, 2012

Derivative Instruments And Hedging Activities [Abstract]

Derivative Instruments And Hedging Activities

Note 16 – Derivative Instruments and Hedging Activities

We are currently exposed to market risk in three major areas: commodity prices, interest rates and foreign currency exchange rates. Our risk management activities involve the use of derivative financial instruments to hedge the impact of market price risk exposures primarily related to our oil and gas production, variable interest rate exposure and foreign exchange currency fluctuations. All derivatives are reflected in the accompanying condensed consolidated balance sheets at fair value, unless otherwise noted.

We engage solely in cash flow hedges. Hedges of cash flow exposure are entered into to hedge a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability. Changes in the derivative fair values that are designated as cash flow hedges are deferred to the extent that they are effective and are recorded as a component of accumulated other comprehensive income (loss), a component of shareholders’ equity, until the hedged transactions occur and are recognized in earnings. The ineffective portion of a cash flow hedge’s change in fair value is recognized immediately in earnings. In addition, any change in the fair value of a derivative that does not qualify for hedge accounting is recorded in earnings in the period in which the change occurs.

For additional information regarding our accounting for derivatives see Notes 2 and 20 of our 2011 Form 10-K.

Commodity Price Risks

We currently manage commodity price risk through various financial costless collars and swap instruments covering a portion of our anticipated oil and natural gas production for 2012 and 2013.All of our current commodity derivative contracts qualify for hedge accounting.

As of March 31, 2012, we had the following volumes under derivative contracts related to our oil and gas producing activities totaling approximately 2.9 million barrels of oil and 14.4 Bcf of natural gas:

Production Period	Instrument Type	Average Monthly Volumes	Weighted Average Price a
Crude Oil:			(per barrel)
April 2012 — December 2012................	Collar	75.0 MBbl	$96.67 — $118.57b
April 2012 — December 2012................	Collar	118.6 MBbl	$99.52 — $118.06
April 2012 — December 2012................	Swap	11.4 MBbl	$103.20
January 2013 — December 2013...........	Swap	41.7 MBbl	$99.15
January 2013 — December 2013...........	Collar	50.0 MBbl	$95.83 — $105.50
Natural Gas:			(per Mcf)
April 2012 — December 2012................	Swap	771.1 Mmcf	$4.32
April 2012 — December 2012................	Collar	162.2 Mmcf	$4.75 —$5.09
January 2013 — December 2013...........	Swap	500.0 Mmcf	$4.09

a.The prices quoted in the table above are NYMEX Henry Hub for natural gas.Most of our current contracts are indexed to the Brent crude oil price.

b.This contract is priced using NYMEX West Texas Intermediate for crude oil.

In April 2012, we entered into costless collar financial derivative contracts associated with a total of 1.0 MMBbls of our anticipated crude oil production in 2013, with a floor price of $100.00 per barrel and a ceiling price of $122.06 per barrel as indexed to Brent crude oil prices.

Changes in NYMEX oil and gas and Brent crude oil strip prices would, assuming all other things being equal, cause the fair value of these instruments to increase or decrease inversely to the change in NYMEX or Brent prices, respectively.

Variable Interest Rate Risks

As some of our long-term debt has variable interest rates and is subject to market influences, in January 2010 we entered into various interest rate swaps to stabilize cash flows relating to interest payments for $200 million of our Term Loan debt under our Credit Agreement (Note 7).The last of these monthly contracts matured in January 2012.In August 2011, we entered into additional interest rate swap contracts to fix the interest rate on $200 million of our Term Loan debt.These monthly contracts began in January 2012 and extend through January 2014.Changes in the interest rate swap fair value are deferred to the extent the swap is effective and are recorded as a component of accumulated other comprehensive income (loss) until the anticipated interest payments occur and are recognized in interest expense.  The ineffective portion of the interest rate swap, if any, will be recognized immediately in earnings within the line titled net interest expense. The amount of ineffectiveness associated with our interest swap contracts was immaterial for all periods presented in this Quarterly Report on Form 10-Q.

Foreign Currency Exchange Risks

Because we operate in various regions in the world, we conduct a portion of our business in currencies other than the U.S. dollar.We entered into various foreign currency forwards to stabilize expected cash outflows relating to certain vessel charters denominated in British pounds.We did not designate any of our existing foreign exchange contracts as hedge contracts at their inception.The last of our existing monthly foreign currency swap contracts will settle in June 2012.

Quantitative Disclosures Related to Derivative Instruments

The following tables present the fair value and balance sheet classification of our derivative instruments as of March 31, 2012 and December 31, 2011.

Derivatives designated as hedging instruments are as follows:

	As of March 31, 2012			As of December 31, 2011
	Balance Sheet Location		Fair Value	Balance Sheet Location		Fair Value
Asset Derivatives:
Natural gas contracts...........................	Other current assets	$	16,744	Other current assets	$	12,957
Oil contracts...........................................	Other current assets		931	Other current assets		8,567
Natural gas contracts...........................	Other assets		2,564	Other assets		857
Interest rate swaps...............................	Other assets		83	Other assets		327
		$	20,322		$	22,708
	As of March 31, 2012			As of December 31, 2011
	Balance Sheet Location		Fair Value	Balance Sheet Location		Fair Value
Liability Derivatives:
Oil contracts...........................................	Accrued liabilities	$	14,816	Accrued liabilities	$	886
Interest rate swaps...............................	Accrued liabilities		338	Accrued liabilities		202
Oil contracts...........................................	Other long-term liabilities		8,831	Other long-term liabilities		1,711
		$	23,985		$	2,799

Derivatives that were not designated as hedging instruments (in thousands):

	As of March 31, 2012			As of December 31, 2011
	Balance Sheet Location		Fair Value	Balance Sheet Location		Fair Value
Asset Derivatives:
Foreign exchange forwards.........	Other current assets	$	110	Other current assets	$	55
		$	110		$	55
	As of March 31, 2012			As of December 31, 2011
	Balance Sheet Location		Fair Value	Balance Sheet Location		Fair Value
Liability Derivatives:
Foreign exchange forwards.........	Accrued liabilities	$	13	Accrued liabilities	$	159
		$	13		$	159

The following tables present the impact that derivative instruments designated as cash flow hedges had on our accumulated comprehensive income (loss) and our consolidated condensed statements of operations and comprehensive income for the three-month periods ended March 31, 2012 and 2011.The ineffectiveness related to some of our crude oil contracts totaled $2.3 million for the three-month period ended March 31, 2012 and is reflected as a separate line item titled “Loss on oil and gas derivative commodity contracts” in the accompanying condensed consolidated statements of operations and comprehensive income.Ineffectiveness associated with our interest swaps was immaterial for all periods presented in this report. All unrealized gains (losses) related to our derivative contracts are expected to be reclassified to earnings by no later than December 31, 2013.The last of our interest rate swaps will be settled in January 2014.At March 31, 2012, most of our remaining unrealized gains (losses) related to our derivative contracts are expected to be reclassified into earnings in 2012, including $2.8 million for our oil and natural gas contracts and $(0.2) million related to our interest swap contracts.

		Gain (Loss) Recognized in Accumulated OCI on Derivatives
		2012			2011
		(in thousands)
Oil and natural gas commodity contracts........	$	(13,555	)	$	(10,778	)
Interest rate swaps.........................................		(247	)		211
	$	(13,802	)	$	(10,567	)

	Location of Gain (Loss) Reclassified from Accumulated OCI into Income		Gain (Loss) Recognized from Accumulated OCI into Income
			2012			2011
			(in thousands)
Oil and natural gas commodity contracts..................................................	Oil and gas revenue	$	109		$	(6,325	)
Interest rate swaps.................................	Net interest expense		(193	)		(480	)
		$	(84	)	$	(6,805	)

The following tables present the impact that derivative instruments not designated as hedges had on our condensed consolidated statement of operations for the three months ended March 31, 2012 and 2011:

	Location of Gain (Loss) Recognized in Income on Derivatives		Gain (Loss) Recognized in Income on Derivatives
			2012		2011
			(in thousands)
Foreign exchange forwards.........	Other expense		233		608
		$	233	$	608