NOTE 8 – FAIR VALUE MEASUREMENTS:

U.S. GAAP establishes 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.

As of December 31, 2014 and 2013, 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 marketable securities. 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 our credit risk and the credit risk of our 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 marketable securities, 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, 2014:


	Fair Value Measurements at December 31, 2014
Assets	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Marketable securities (Other assets)		$8,425		$8,425		$ -		$ -
Derivative contracts		153,512		-		153,512		-

Total		$161,937		$8,425		$153,512		$ -


	Fair Value Measurements at December 31, 2014
Liabilities	Total		Quoted Prices in Active Markets for Identical Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

Derivative contracts		$ -		$ -		$ -		$ -

Total		$ -		$ -		$ -		$ -

The following tables present our assets and liabilities that are measured at fair value on a recurring basis at December 31, 2013:


	Fair Value Measurements at December 31, 2013
Assets	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Marketable securities (Other assets)		$8,248		$8,248		$ -		$ -
Derivative contracts		5,927		-		5,927		-

Total		$14,175		$8,248		$5,927		$ -


	Fair Value Measurements at December 31, 2013
Liabilities	Total		Quoted Prices in Active Markets for Identical Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Derivative contracts		$8,223		$ -		$8,223		$ -

Total		$8,223		$ -		$8,223		$ -

The fair value of cash and cash equivalents approximated book value at December 31, 2014 and 2013. As of December 31, 2014 and 2013, the fair value of the liability component of the 2017 Convertible Notes was approximately $252,587 and $260,377, respectively. As of December 31, 2014 and 2013, the fair value of the 7¹⁄₂% Senior Notes due 2022 (the “2022 Notes”) was approximately $664,563 and $814,719, respectively.

The fair value of the 2022 Notes was determined based on quotes obtained from brokers, which represent Level 1 inputs. We applied fair value concepts in determining the liability component of the 2017 Convertible Notes (seeNote 11 – Long-Term Debt) at inception and at December 31, 2014 and 2013. The fair value of the liability was estimated using an income approach. The significant inputs in these determinations were market interest rates based on quotes obtained from brokers and represent Level 2 inputs.