Derivative Instruments

3 Months Ended

Mar. 31, 2016

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 income statement as derivative income (expense). At March 31, 2016, all of the Company's derivative instruments were designated as effective cash flow hedges.

Oil and gas sales include additions related to the settlement of gas hedges of $1,032,000 and $2,324,000, oil hedges of $0 and $27,000 and Ngl hedges of $0 and $21,000 for the three months endedMarch 31, 2016 and 2015, respectively.

As of March 31, 2016, the Company had entered into the following commodity derivative instruments:

Production Period	Instrument Type	Daily Volumes	Weighted Average Price
Natural Gas:
April 2016 - June 2016	Swap	10,000 Mmbtu	$3.22
July 2016 - December 2016	Swap	5,000 Mmbtu	$2.50

At March 31, 2016, the Company had recognized accumulated other comprehensive income of approximately $0.8 million related to the estimated fair value of its effective cash flow hedges. Based on estimated future commodity prices as of March 31, 2016, the Company would reclassify approximately $0.8 million, net of taxes, of accumulated other comprehensive income into earnings during the next nine months. These gains are expected to be reclassified to oil and gas sales based on the schedule of gas volumes stipulated in the derivative contracts.

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 March 31, 2016 and December 31, 2015:

	Commodity Derivatives
Period	Balance Sheet Location	Fair Value
March 31, 2016	Derivative asset	$	1,277
December 31, 2015	Derivative asset	$	1,508

Effect of Cash Flow Hedges on the Consolidated Statement of Operations for the three months ended March 31, 2016 and 2015:

Instrument	Amount of Gain Recognized in Other Comprehensive Income		Location of Gain Reclassified into Income	Amount of Gain Reclassified into Income
Commodity Derivatives at March 31, 2016	$	801	Oil and gas sales	$	1,032
Commodity Derivatives at March 31, 2015	$	4,917	Oil and gas sales	$	2,372