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Derivative Instruments and Hedging Activities | 12 Months Ended
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Dec. 31, 2012
Derivative Instruments and Hedging Activities |
Derivative Instruments and Hedging Activities | 13. Derivative Instruments and Hedging Activities The Company periodically enters into commodity derivative instruments to hedge its exposure to price fluctuations on natural gas and crude oil production. The Company's credit agreement restricts the ability of the Company to enter into commodity hedges other than to hedge or mitigate risks to which the Company has actual or projected exposure or as permitted under the Company's risk management policies and not subjecting the Company to material speculative risks. All of the Company's derivatives are used for risk management purposes and are not held for trading purposes. As of December 31, 2012, the Company had the following outstanding commodity derivatives designated as hedging instruments:
Commodity and Derivative Type |  | Weighted-Average Contract Price |  | Volume |  | Contract Period
--- | --- | --- | --- | --- | --- | ---
Natural gas collars |  | $3.09 Floor / $4.12 Ceiling |  | per Mcf |  |  | 35.5 |  | Bcf |  | Jan. 2013 - Dec. 2013
Natural gas collars |  | $3.35 Floor / $4.01 Ceiling |  | per Mcf |  |  | 35.5 |  | Bcf |  | Jan. 2013 - Dec. 2013
Natural gas collars |  | $3.40 Floor / $4.12 Ceiling |  | per Mcf |  |  | 17.7 |  | Bcf |  | Jan. 2013 - Dec. 2013
Natural gas collars |  | $3.60 Floor / $4.17 Ceiling |  | per Mcf |  |  | 17.7 |  | Bcf |  | Jan. 2013 - Dec. 2013
Natural gas collars |  | $3.76 Floor / $4.16 Ceiling |  | per Mcf |  |  | 17.7 |  | Bcf |  | Jan. 2013 - Dec. 2013
Natural gas collars |  | $3.86 Floor / $4.34 Ceiling |  | per Mcf |  |  | 17.7 |  | Bcf |  | Jan. 2013 - Dec. 2013
Natural gas collars |  | $5.15 Floor / $6.20 Ceiling |  | per Mcf |  |  | 17.7 |  | Bcf |  | Jan. 2013 - Dec. 2013
Crude oil swaps |  | $101.90 |  | per Bbl |  |  | 1,095 |  | Mbbl |  | Jan. 2013 - Dec. 2013
The change in fair value of derivatives designated as hedges that is effective is recorded to Accumulated other comprehensive income in Stockholders' equity in the Consolidated Balance Sheet. The ineffective portion of the change in the fair value of derivatives designated as hedges, and the change in fair value of derivatives not designated as hedges, are recorded currently in earnings as a component of Natural gas revenue and Crude oil and condensate revenue in the Consolidated Statement of Operations. The following tables reflect the fair value of derivative instruments on the Company's consolidated financial statements: Effect of Derivative Instruments on the Consolidated Balance Sheet
|  | Fair Values of Derivative Instruments |
--- | --- | --- | ---
|  | Asset Derivatives |  |  |  | Liability Derivatives |
|  |  |  | December 31, |  |  |  |  |  | December 31, |
|  | Balance Sheet Location |  | 2012 |  | 2011 |  |  |  | Balance Sheet Location |  | 2012 |  | 2011 |
(In thousands) |  |  |
Derivatives Designated as Hedging Instruments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commodity contracts |  | Derivative instruments (current assets) |  | $ | 50,824 |  | $ | 177,389 |  |  |  | Derivative instruments (current assets) |  | $ | — |  | $ | — |
Commodity contracts |  | Accrued liabilities |  |  | — |  |  | — |  |  |  | Accrued liabilities |  |  | (192 | ) |  | (385 | )
Commodity contracts |  | Derivative instruments (non-current assets) |  |  | — |  |  | 21,249 |  |  |  | Derivative instruments (non-current assets) |  |  | — |  |  | — |
Commodity contracts |  | Other liabilities |  |  | — |  |  | — |  |  |  | Other liabilities |  |  | — |  |  | — |
|  |  |  |  | 50,824 |  |  | 198,638 |  |  |  |  |  |  | (192 | ) |  | (385 | )
Derivatives Not Designated as Hedging Instruments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commodity contracts |  | Derivative instruments (current assets) |  |  | — |  |  | — |  |  |  | Derivative instruments (current assets) |  |  | — |  |  | (3,126 | )
|  |  |  | $ | 50,824 |  | $ | 198,638 |  |  |  |  |  | $ | (192 | ) | $ | (3,511 | )
At December 31, 2012 and 2011, unrealized gains of $50.6 million ($30.7 million, net of tax) and $198.3 million ($121.3 million, net of tax), respectively, were recorded in Accumulated other comprehensive income in the Consolidated Balance Sheet. Based upon estimates at December 31, 2012, the Company expects to reclassify $30.7 million in after-tax income associated with its commodity hedges from Accumulated other comprehensive income to the Consolidated Statement of Operations over the next 12 months. Effect of Derivative Instruments on the Consolidated Statement of Operations
|  | Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion) |  |  |  | Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) |
--- | --- | --- | --- | --- | --- | --- | ---
|  | Year Ended December 31, |  | Location of Gain (Loss) Reclassified from Accumulated OCI into Income (In thousands) |  | Year Ended December 31, |
Derivatives Designated as Hedging Instruments (In thousands) |
| 2012 |  | 2011 |  | 2010 |  | 2012 |  | 2011 |  | 2010 |
Commodity Contracts |  | $ | 88,705 |  | $ | 267,667 |  | $ | 75,655 |  | Natural gas revenues |  | $ | 225,108 |  | $ | 84,937 |  | $ | 154,960 |
|  |  |  |  |  |  |  |  |  |  | Crude oil and condensate revenues |  |  | 11,218 |  |  | 1,403 |  |  | 18,030 |
|  |  |  |  |  |  |  |  |  |  |  |  | $ | 236,326 |  | $ | 86,340 |  | $ | 172,990 |
For the years ended December 31, 2012, 2011 and 2010, respectively, there was no ineffectiveness recorded in our Consolidated Statement of Operations related to our derivative instruments.
|  |  |  | Year Ended December 31, |
--- | --- | --- | --- | --- | ---
Derivatives Not Designated as Hedging Instruments (In thousands) |  | Location of Gain (Loss) Recognized in Income on Derivative |
| 2012 |  | 2011 |  | 2010 |
Commodity Contracts |  | Natural gas revenues |  | $ | (494 | ) | $ | (965 | ) | $ | (226 | )
Additional Disclosures about Derivative Instruments and Hedging Activities The use of derivative instruments involves the risk that the counterparties will be unable to meet their obligation under the agreement. The Company enters into derivative contracts with multiple counterparties in order to limit its exposure to individual counterparties. The Company also has netting arrangements with all of its counterparties that allow it to offset payables against receivables from separate derivative contracts with that counterparty. The counterparties to the Company's derivative instruments are also lenders under its credit facility. The Company's credit facility and derivative instruments contain certain cross default and acceleration provisions that may require immediate payment of its derivative liability in certain situations.

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- Definition The entire disclosure for the entity's entire derivative instruments and hedging activities. Describes an entity's risk management strategies, derivatives in hedging activities and non-hedging derivative instruments, the assets, obligations, liabilities, revenues and expenses arising therefrom, and the amounts of and methodologies and assumptions used in determining the amounts of such items. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=7668309&loc=d3e80784-113994 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4C -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624171-113959 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4E -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624181-113959 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4K -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5708775-113959 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1A -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5579245-113959 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(n)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41641-113959 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5579240-113959 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 45 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6441202&loc=d3e80720-113993 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41638-113959 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41635-113959 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 133 -Paragraph 44 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. 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