Derivative Instruments

12 Months Ended

Dec. 31, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

Derivative Instruments

The Company seeks to reduce its exposure to commodity price volatility by hedging a portion of its production through commodity derivative instruments. When the conditions for hedge accounting are met, the Company may designate its commodity derivatives as cash flow hedges. The changes in fair value of derivative instruments that qualify for hedge accounting treatment are recorded in other comprehensive income (loss) until the hedged oil or natural gas quantities are produced. If a derivative does not qualify for hedge accounting treatment, the changes in the fair value of the derivative are recorded in the statement of operations as derivative income (expense). At December 31, 2014 and 2013, all of the Company's outstanding derivative instruments were designated as cash flow hedges. At December 31, 2012, all of the Company's outstanding derivative instruments were designated as cash flow hedges, except its three-way collar discussed below.

Oil and gas sales include additions (reductions) related to the settlement of gas hedges of ($4,237,000), $1,098,000 and $6,846,000, Ngl hedges of $296,000, $61,000 and $722,000, and oil hedges of $897,000, ($232,000) and $1,529,000, for the years ended December 31, 2014, 2013 and 2012, respectively.

As of December 31, 2014, the Company had entered into the following gas hedge contracts:

Production Period	Instrument Type	Daily Volumes	Weighted Average Price
Natural Gas:
2015	Swap	30,000 Mmbtu	$3.82

At December 31, 2014, the Company had recognized an asset of approximately $8.6 million related to the estimated fair value of these derivative contracts. Based on estimated future commodity prices as of December 31, 2014, the Company would realize a $5.4 million gain, net of taxes, during the next 12 months. These gains are expected to be reclassified to oil and gas sales based on the schedule of volumes stipulated in the derivative contracts.

During January and February 2015, the Company entered into the following additional derivative contracts accounted for as a cash flow hedges:

Production Period	Instrument Type	Daily Volumes	Weighted Average Price
Natural Gas:
February - December 2015	Swap	10,000 Mmbtu	$2.93
July 2015 - June 2016	Swap	10,000 Mmbtu	$3.22
March 2015 - December 2015	Swap	15,000 Mmbtu	$2.99
Crude Oil:
February - December 2015	Swap (LLS)	250 Bbls	$54.00
March 2015 - December 2015	Swap (LLS)	250 Bbls	$59.35
Propane:
March 2015 - December 2015	Swap	250 Bbls	$25.62

LLS - Louisiana Light Sweet

Derivatives designated as hedging instruments:

The following tables reflect the fair value of the Company’s effective cash flow hedges in the consolidated financial statements (in thousands):

Effect of Cash Flow Hedges on the Consolidated Balance Sheet at December 31, 2014 and December 31, 2013:

	Commodity Derivatives
Period	Balance Sheet Location	Fair Value
December 31, 2014	Derivative asset	$	8,631
December 31, 2013	Derivative asset	$	521
December 31, 2013	Derivative liability	$	(1,617	)

Effect of Cash Flow Hedges on the Consolidated Statement of Operations for years ended December 31, 2014, 2013 and 2012:

Instrument	Amount of Gain (Loss) Recognized in Other Comprehensive Income			Location of Gain Reclassified into Income	Amount of Gain (Loss) Reclassified into Income
Commodity Derivatives at December 31, 2014	$	6,516		Oil and gas sales	$	(3,044	)
Commodity Derivatives at December 31, 2013	$	(1,617	)	Oil and gas sales	$	927
Commodity Derivatives at December 31, 2012	$	(3,510	)	Oil and gas sales	$	9,097

Derivatives not designated as hedging instruments:

The Company’s three-way collar contract for 2013 gas production was not designated as an effective cash flow hedge and therefore gains and losses on this contract were recorded as derivative expense (income) in the statement of operations. The following table reflects the effect of this contract in the consolidated statements of operations (in thousands):

Effect of Non-designated Derivative Instrument on the Consolidated Statement of Operations for the years ended December 31, 2013 and 2012:

Instrument	Amount of Gain (Loss) Recognized in Derivative Income (Expense)
Commodity Derivatives at December 31, 2013	$	233
Commodity Derivatives at December 31, 2012	$	(233	)