|6 Months Ended|
Jun. 30, 2014
(7) Derivative Instruments
(a) Commodity Derivatives
The Company periodically enters into oil and natural gas derivative contracts with counterparties to hedge the price risk associated with a portion of its production. These derivatives are not held for trading purposes. To the extent that changes occur in the market prices of natural gas, the Company is exposed to market risk on these open contracts. This market risk exposure is generally offset by the change in market prices of natural gas recognized upon the ultimate sale of the oil and natural gas produced.
For the six months ended June 30, 2013 and 2014, the Company was party to natural gas and oil fixed price swaps. When actual commodity prices exceed the fixed price provided by the swap contracts, the Company pays the excess to the counterparty, and when actual commodity prices are below the contractually provided fixed price the Company receives the difference from the counterparty. The Company’s natural gas and oil swaps have not been designated as hedges for accounting purposes; therefore, all gains and losses were recognized in income currently.
As of June 30, 2014, the Company’s fixed price natural gas and oil swaps positions from July 1, 2014 through December 31, 2019 are summarized in the following table.
In addition, the Company has entered into natural gas basis differential positions which settle on the pricing index to basis differential of Columbia Gas (TCO) to the NYMEX Henry Hub natural gas price as follows:
The following is a summary of the fair values of derivative instruments not designated as hedges for accounting purposes and where such values are recorded in the consolidated balance sheets as of December 31, 2013 and June 30, 2014. None of the Company’s derivative instruments are designated as hedges for accounting purposes.
The following tables present the gross amounts of recognized derivative assets and liabilities, the amounts offset under netting arrangements with counterparties, and the resulting net amounts presented in the condensed consolidated balance sheets for the periods presented, all at fair value (in thousands):
The following is a summary of derivative fair value gains (losses) and where such values are recorded in the consolidated statements of operations for the three and six months ended June 30, 2013 and 2014 (in thousands):
The fair value of commodity derivative instruments was determined using Level 2 inputs.
The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts.
Reference 1: http://www.xbrl.org/2003/role/presentationRef