Derivative Instruments

6 Months Ended

Jun. 30, 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 June 30, 2016, the Company's derivative instrument was designated as an effective cash flow hedge.

Oil and gas sales include additions (reductions) related to the settlement of gas hedges of $1,155,000 and $4,181,000, oil hedges of $0 and ($288,000) and Ngl hedges of $0 and $136,000 for the three months endedJune 30, 2016 and 2015, respectively. Oil and gas sales include additions (reductions) related to the settlement of gas hedges of $2,187,000 and $6,505,000, oil hedges of $0 and ($261,000) and Ngl hedges of $0 and $157,000 for the six months ended June 30, 2016 and 2015, respectively.

As of June 30, 2016, the Company had entered into the following commodity derivative instrument:

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

At June 30, 2016, the Company had recognized an accumulated other comprehensive loss of approximately $0.5 million related to the estimated fair value of its effective cash flow hedges. Based on estimated future commodity prices as of June 30, 2016, the Company would reclassify approximately $0.3 million, net of taxes, of accumulated other comprehensive loss into earnings during the next six months. These losses 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 hedge in the consolidated financial statements (in thousands):

Effect of Cash Flow Hedges on the Consolidated Balance Sheet at June 30, 2016 and December 31, 2015:

	Commodity Derivatives
Period	Balance Sheet Location	Fair Value
June 30, 2016	Derivative liability	$	(473	)
December 31, 2015	Derivative asset	$	1,508

Effect of Cash Flow Hedges on the Consolidated Statement of Operations for the three months ended June 30, 2016 and 2015:

Instrument	Amount of Loss Recognized in Other Comprehensive Income			Location of Gain Reclassified into Income	Amount of Gain Reclassified into Income
Commodity Derivatives at June 30, 2016	$	(595	)	Oil and gas sales	$	1,155
Commodity Derivatives at June 30, 2015	$	(1,471	)	Oil and gas sales	$	4,029

Effect of Cash Flow Hedges on the Consolidated Statement of Operations for the six months ended June 30, 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 June 30, 2016	$	206	Oil and gas sales	$	2,187
Commodity Derivatives at June 30, 2015	$	3,446	Oil and gas sales	$	6,401