Earnings Per Share (Policies)

9 Months Ended

Sep. 30, 2014

Earnings Per Share [Abstract]

Earning Per Share

Because it is management’s stated intention to redeem the principal amount of our 1 ³⁄₄% Senior Convertible Notes due 2017 (the “2017 Convertible Notes”) (see Note 5 – Long-Term Debt) in cash, we have used the treasury method for determining dilution in the diluted earnings per share computation. Since the average price of our common stock was less than the effective conversion price for such notes during the three months ended September 30, 2014, and because we had a net loss for such period, the 2017 Convertible Notes were not dilutive for such period. During the three months ended June 30, 2014, the average price of our common stock exceeded the effective conversion price of the 2017 Convertible Notes and had a dilutive impact on the diluted earnings per share computation for the nine months ended September 30, 2014. For the prior year periods presented, the average price of our common stock was less than the effective conversion price for such notes, resulting in no dilutive effect on the diluted earnings per share computation for such periods. For all periods presented, the average price of our common stock was less than the strike price of the Sold Warrants (as defined in Note 5 – Long-Term Debt) and therefore, such warrants were not dilutive for such periods. Based on the terms of the Purchased Call Options (as defined in Note 5 – Long-Term Debt), such call options are antidilutive and therefore, were not included in the calculation of diluted earnings per share.

Derivative Instruments and Hedging Activities

The nature of a derivative instrument must be evaluated to determine if it qualifies as a hedging instrument. If the instrument qualifies as a hedging instrument, it is recorded as either an asset or liability measured at fair value and subsequent changes in the derivative’s fair value are recognized in stockholders’ equity through other comprehensive income (loss), net of related taxes, to the extent the hedge is considered effective. Monthly settlements of effective hedges are reflected in revenue from oil and gas production and cash flows from operating activities. Instruments not qualifying as hedging instruments are recorded in our balance sheet at fair value, and changes in fair value are recognized in earnings through derivative expense (income). Monthly settlements of ineffective hedges and derivative instruments not qualifying as hedging instruments are recognized in earnings through derivative expense (income) and cash flows from operating activities.

Fair Value of Financial Instruments

U.S. Generally Accepted Accounting Principles (“GAAP”) establish a fair value hierarchy that 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.