Fair Value Measurements

12 Months Ended

Dec. 31, 2011

Fair Value Measurements [Abstract]

FAIR VALUE MEASUREMENTS:

NOTE 8 – FAIR VALUE MEASUREMENTS:

U.S. GAAP establishes a fair value hierarchy which has three levels based on the reliability of the inputs used to determine the fair value. These levels include: Level 1, defined as inputs such as unadjusted quoted prices in active markets for identical assets or liabilities; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for use when little or no market data exists, therefore requiring an entity to develop its own assumptions.

As of December 31, 2011 and December 31, 2010, we held certain financial assets and liabilities that are required to be measured at fair value on a recurring basis, including our commodity derivative instruments and our investments in money market funds. We utilize the services of an independent third party to assist us in valuing our derivative instruments. We used the income approach in determining the fair value of our derivative instruments utilizing a proprietary pricing model. The model accounts for the credit risk of Stone and its counterparties in the discount rate applied to estimated future cash inflows and outflows. Our swap contracts are included within the Level 2 fair value hierarchy. For a more detailed description of our derivative instruments, see Note 7 - Derivative Instruments and Hedging Activities. We used the market approach in determining the fair value of our investments in money market funds, which are included within the Level 1 fair value hierarchy.

The following tables present our assets and liabilities that are measured at fair value on a recurring basis at December 31, 2011:

	Fair Value Measurements at December 31, 2011
Assets	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Money market funds	$	5,551	$	5,551	$	—	$	—
Hedging contracts		47,720		—		47,720		—
Total	$	53,271	$	5,551	$	47,720	$	—

	Fair Value Measurements at December 31, 2011
Liabilities	Total			Quoted Prices in Active Markets for Identical Liabilities (Level  1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Hedging contracts	($	11,937	)	$	—	($	11,937	)	$	—
Total	($	11,937	)	$	—	($	11,937	)	$	—

The following tables present our assets and liabilities that are measured at fair value on a recurring basis at December 31, 2010:

	Fair Value Measurements at December 31, 2010
Assets	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Money market funds	$	7,306	$	7,306	$	—	$	—
Hedging contracts		12,955		—		12,955		—
Total	$	20,261	$	7,306	$	12,955	$	—

	Fair Value Measurements at December 31, 2010
Liabilities	Total			Quoted Prices in Active Markets for Identical Liabilities (Level  1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Hedging contracts	($	35,750	)	$	—	($	35,750	)	$	—
Total	($	35,750	)	$	—	($	35,750	)	$	—

The fair value of cash and cash equivalents and our variable-rate bank debt approximated book value at December 31, 2011 and 2010. As of December 31, 2011 and 2010, the fair value of our $375,000 8 ⁵/8% Senior Notes due 2017 was approximately $386,250 and $380,625, respectively. As of December 31, 2011 and 2010, the fair value of our $200,000 6 ³/4% Senior Subordinated Notes due 2014 was approximately $199,000 and $197,000, respectively. The fair value of our outstanding notes was determined based upon quotes obtained from brokers.

We applied fair value concepts in the recording of deep water assets acquired from BP (see Note 5-Acquisitions and Divestitures). The fair value of proved and unevaluated oil and gas properties was estimated using a market approach. Significant inputs were market value comparisons for similar transactions within a one year period. These inputs were considered Level 3 inputs. Asset retirement obligations were determined in accordance with applicable accounting standards.