Fair Value Measurements

9 Months Ended

Sep. 30, 2012

Fair Value Measurements [Abstract]

Fair Value Measurements

Note 15 – Fair Value Measurements

Certain of our financial assets and liabilities are measured and reported at fair value on a recurring basis as required under applicable accounting requirements.These requirements establish a hierarchy for inputs used in measuring fair value. The fair value is to be calculated based on assumptions that market participants would use in pricing assets and liabilities and not on assumptions specific to the entity. The statement requires that each asset and liability carried at fair value be classified into one of the following categories:

• Level 1.  Observable inputs such as quoted prices in active markets;

• Level 2.  Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

• Level 3. Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions.

Assets and liabilities measured at fair value are based on one or more of three valuation techniques as follows:

(a) Market Approach.  Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. 

(b) Cost Approach.  Amount that would be required to replace the service capacity of an asset (replacement cost). 

(c) Income Approach.  Techniques to convert expected future cash flows to a single present amount based on market expectations (including present value techniques, option-pricing and excess earnings models). 

The following table provides additional information related to assets and liabilities measured at fair value on a recurring basis at September 30, 2012 (in thousands):

		Level 1		Level 2 (1)		Level 3		Total	Valuation Technique
Assets:
Natural gas contracts...................	$	–	$	4,325	$	–	$	4,325	(c)
Oil contracts......................................		–		4,411		–		4,411	(c)
Foreign currency forwards.........		–		116		–		116	(c)
Liabilities:
Oil contracts ....................................		–		23,074		–		23,074	(c)
Fair value of long term debt (2)		1,139,814		122,397		–		1,262,211	(a)
Interest rate swaps........................		–		634		–		634	(c)
Total net liability............................	$	1,139,814	$	137,253	$	–	$	1,277,067

(1) Unless otherwise indicated, the fair value of our Level 2 derivative 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 due to location differences or terms that extend beyond the period for which quotations are available.  Where quotes are not available, we utilize other valuation techniques or models to estimate market values.  These modeling techniques require us to make estimations of future prices, price correlation and market volatility and liquidity.  Our actual results may differ from our estimates, and these differences could be positive or negative. 

(2) See Note 7 for additional information regarding our long-term debt.  The fair value of our long-term debt at September 30, 2012 is as follows: 

		Fair Value		Carrying Value
Term Loans (mature July 2015).....................................................................................................	$	370,157	$	369,165
Revolving Credit Facility (matures July 2015)......................................................................		100,000		100,000
2025 Notes (mature March 2025)..................................................................................................		159,408		157,830	(a)
2032 Notes (mature March 2032)		222,228		200,000	(b)
Senior Unsecured Notes (mature January 2016)..................................................................		288,021		274,960
MARAD Debt (matures February 2027) (c)..............................................................................		122,397		105,288
Total..........................................................................................................................................................	$	1,262,211	$	1,207,243

(a) Amount excludes the related unamortized debt discount of $1.2 million.

(b) Amount excludes the related unamortized debt discount of $32.9 million.

(c)The estimated fair value of all debt, other than the MARAD debt, was determined using Level 1 inputs using the market approach.  The fair value of the MARAD debt was determined using a third party evaluation of the remaining average life and outstanding principal balance of the MARAD indebtedness as compared to other governmental obligations in the marketplace with similar terms.  The fair value of the MARAD Debt was estimated using Level 2 fair value inputs using the market approach.