Derivative Instruments

12 Months Ended

Dec. 31, 2015

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, 2015 and 2014, all of the Company's outstanding derivative instruments were designated as cash flow hedges.

Oil and gas sales include additions (reductions) related to the settlement of gas hedges of $15,940,000, ($4,237,000) and $1,098,000, Ngl hedges of $530,000, $296,000 and $61,000, and oil hedges of $644,000, $897,000 and ($232,000), for the years ended December 31, 2015, 2014 and 2013, respectively.

As of December 31, 2015, the Company had entered into the following gas hedge contract:

Production Period	Instrument Type	Daily Volumes	Weighted Average Price
Natural Gas:
January 2016 - June 2016	Swap	10,000 Mmbtu	$3.22

At December 31, 2015, the Company had recognized an asset of approximately $1.5 million related to the estimated fair value of this derivative contract. Based on estimated future commodity prices as of December 31, 2015, the Company would realize a $0.9 million gain, net of taxes, during the next 12 months. This gain is expected to be reclassified to oil and gas sales based on the schedule of volumes stipulated in the derivative contracts.

During January 2016, the Company entered into the following additional derivative contract accounted for as a cash flow hedge:

Production Period	Instrument Type	Daily Volumes	Weighted Average Price
Natural Gas:
July 2016 - December 2016	Swap	5,000 Mmbtu	$2.50

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, 2015 and December 31, 2014:

	Commodity Derivatives
Period	Balance Sheet Location	Fair Value
December 31, 2015	Derivative asset	$	1,508
December 31, 2014	Derivative asset	$	8,631

Effect of Cash Flow Hedges on the Consolidated Statement of Operations for years ended December 31, 2015, 2014 and 2013:

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, 2015	$	9,991		Oil and gas sales	$	17,114
Commodity Derivatives at December 31, 2014	$	6,683		Oil and gas sales	$	(3,044	)
Commodity Derivatives at December 31, 2013	$	(999	)	Oil and gas sales	$	927

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 the gain on this contract was recorded as derivative 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 year ended December 31, 2013:

Instrument	Amount of Gain Recognized in Derivative Income
Commodity Derivatives at December 31, 2013	$	233