Commodity Derivative Contracts

12 Months Ended

Dec. 31, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Commodity Derivative Contracts

Note 9. Commodity Derivative Contracts

We do not apply hedge accounting treatment to our oil and natural gas derivative contracts; therefore, the changes in the fair values of these instruments are recognized in income in the period of change.  These fair value changes, along with the cash settlements of expired contracts, are shown under "Commodity derivatives expense (income)" in our Consolidated Statements of Operations.

From time to time, we enter into various oil and natural gas derivative contracts to provide an economic hedge of our exposure to commodity price risk associated with anticipated future oil and natural gas production.  We do not hold or issue derivative financial instruments for trading purposes.  These contracts have consisted of price floors, collars and fixed price swaps.  The production that we hedge has varied from year to year depending on our levels of debt and financial strength and expectation of future commodity prices.  We currently employ a strategy to hedge a portion of our forecasted production approximately 18 months to two years in the future from the current quarter, as we believe it is important to protect our future cash flow to provide a level of assurance for our capital spending in those future periods in light of current worldwide economic uncertainties and commodity price volatility.

We manage and control market and counterparty credit risk through established internal control procedures that are reviewed on an ongoing basis. We attempt to minimize credit risk exposure to counterparties through formal credit policies, monitoring procedures, and diversification, and all of our commodity derivative contracts are with parties that are lenders under our Bank Credit Agreement. As of December 31, 2013, all of our outstanding derivative contracts were subject to enforceable master netting arrangements whereby payables on those contracts can be offset against receivables from separate derivative contracts with the same counterparty. It is our policy to classify derivative assets and liabilities on a gross basis on our balance sheets, even if the contracts are subject to enforceable master netting arrangements.

The following table summarizes our commodity derivative contracts, none of which are classified as hedging instruments:

Year	Months	Type of Contract	Pricing Index	Volume (2)	Contract Prices (1)
					Range				Weighted Average Price
									Swap		Floor		Ceiling
Oil Contracts:
2014	Jan – Mar	Swap	NYMEX	58,000	$	91.67	–	95.95	$	93.53	$	—	$	—
	Apr – June	Swap	NYMEX	58,000		91.67	–	95.95	93.53		—		—
	July – Sept	Swap	NYMEX	58,000		90.00	–	93.50	92.52		—		—
	Oct – Dec	Swap	NYMEX	58,000		90.00	–	93.50	92.52		—		—
2015	Jan – Mar	Collar	NYMEX	38,000	$	80.00	–	100.90	$	—	$	80.00	$	96.96
	Jan – Mar	Collar	LLS	20,000		85.00	–	104.00	—		85.00		101.45
	Apr – June	Collar	NYMEX	38,000		80.00	–	95.25	—		80.00		94.62
	Apr – June	Collar	LLS	20,000		85.00	–	103.00	—		85.00		102.01
	July – Sept	Collar	NYMEX	38,000		80.00	–	95.25	—		80.00		95.04
	July – Sept	Collar	LLS	20,000		85.00	–	102.60	—		85.00		100.69
Natural Gas Contracts:
2014	Jan – Dec	Collar	NYMEX	14,000	$	4.00	–	4.47	$	—	$	4.00	$	4.45

(1) Contract prices are stated in $/Bbl and $/MMBtu for oil and natural gas contracts, respectively.

(2) Contract volumes are stated in Bbl/d and MMBtu/d for oil and natural gas contracts, respectively.