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Derivative Activities | 3 Months Ended
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Mar. 31, 2016
Derivative Instruments And Hedging Activities Disclosure [Abstract] |
Derivative Activities | (11) DERIVATIVE ACTIVITIES We use commodity-based derivative contracts to manage exposure to commodity price fluctuations. We do not enter into these arrangements for speculative or trading purposes. We do not utilize complex derivatives, as we typically utilize commodity swaps or collars to (1) reduce the effect of price volatility of the commodities we produce and sell and (2) support our annual capital budget and expenditure plans. The fair value of our derivative contracts, represented by the estimated amount that would be realized upon termination, based on a comparison of the contract price and a reference price, generally the New York Mercantile Exchange (“NYMEX”) for natural gas and crude oil or Mont Belvieu for NGLs, approximated a net asset of $262.0 million at March 31, 2016. These contracts expire monthly through December 2018. The following table sets forth our commodity-based derivative volumes by year as of March 31, 2016, excluding our basis and freight swaps which are discussed separately below:
Period |  | Contract Type |  | Volume Hedged |  | Weighted Average Hedge Price
Natural Gas |  |  |  |  |  |
2016 |  | Swaps |  | 760,000 Mmbtu/day |  | $ 3.22
2017 |  | Swaps |  | 155,000 Mmbtu/day |  | $ 2.82
2018 |  | Swaps |  | 27,500 Mmbtu/day |  | $ 2.84
Crude Oil |  |  |  |  |  |
2016 |  | Swaps |  | 5,498 bbls/day |  | $ 59.74
2017 |  | Swaps |  | 1,000 bbls/day |  | $ 50.13
NGLs (C3-Propane) |  |  |  |  |  |
2016 |  | Swaps |  | 5,500 bbls/day |  | $ 0.60/gallon
NGLs (NC4-Normal Butane) |  |  |  |  |  |
2016 |  | Swaps |  | 3,750 bbls/day |  | $ 0.66/gallon
NGLs (C5-Natural Gasoline) |  |  |  |  |  |
2016 |  | Swaps |  | 3,417 bbls/day |  | $ 1.12/gallon
2017 |  | Swaps |  | 750 bbls/day |  | $ 0.91/gallon
Every derivative instrument is required to be recorded on the balance sheet as either an asset or a liability measured at its fair value. If the derivative does not qualify as a hedge or is not designated as a hedge, changes in fair value of these non-hedge derivatives are recognized in earnings as derivative fair value income or loss. Basis Swap Contracts In addition to the collars and swaps above, at March 31, 2016, we had natural gas basis swap contracts which lock in the differential between NYMEX and certain of our physical pricing indices primarily in Appalachia. These contracts settle monthly through March 2017 and include a total volume of 52,360,000 Mmbtu. The fair value of these contracts was a gain of $640,000 on March 31, 2016. At March 31, 2016, we also had propane spread swap contracts which lock in the differential between Mont Belvieu and international propane indices. The contracts settle monthly through December 2017 and include a total volume of 1,675,000 barrels in 2016 and 750,000 barrels in 2017. The fair value of these contracts was a gain of $2.5 million on March 31, 2016. Freight Swap Contracts In connection with our international propane spread swaps, at March 31, 2016, we had freight swap contracts which lock in the freight rate for a specific trade route on the Baltic Exchange. These contracts settle monthly in fourth quarter 2016. These contracts cover 5,000 metric tons per month and have a fair value of a loss of $11,000 on March 31, 2016. These contracts use observable third-party pricing inputs that we consider to be a level 2 fair value classification. Derivative Assets and Liabilities The combined fair value of derivatives included in the accompanying consolidated balance sheets as of March 31, 2016 and December 31, 2015 is summarized below. The assets and liabilities are netted where derivatives with both gain and loss positions are held by a single counterparty and we have master netting arrangements. The tables below provide additional information relating to our master netting arrangements with our derivative counterparties (in thousands):
|  |  | March 31, 2016 |
|  |  | Gross Amounts of Recognized Assets |  |  | Gross Amounts Offset in the Balance Sheet |  |  | Net Amounts of Assets Presented in the Balance Sheet |
Derivative assets: |  |  |  |  |  |  |  |  |  |  |  |  |
Natural gas | –swaps |  | $ | 214,389 |  |  | $ | (1,943 | ) |  | $ | 212,446 |
| –basis swaps |  |  | 3,327 |  |  |  | (2,648 | ) |  |  | 679 |
Crude oil | –swaps |  |  | 29,273 |  |  |  | (183 | ) |  |  | 29,090 |
NGLs | –C3 propane swaps |  |  | 8,380 |  |  |  | ¾ |  |  |  | 8,380 |
| –C3 propane spread swaps |  |  | 7,373 |  |  |  | (4,916 | ) |  |  | 2,457 |
| –NC4 butane swaps |  |  | 4,972 |  |  |  | (199 | ) |  |  | 4,773 |
| –C5 natural gasoline swaps |  |  | 9,457 |  |  |  | (762 | ) |  |  | 8,695 |
Freight | –swaps |  |  | ¾ |  |  |  | (11 | ) |  |  | (11 | )
|  |  | $ | 277,171 |  |  | $ | (10,662 | ) |  | $ | 266,509 |
|  |  | March 31, 2016 |
|  |  | Gross Amount of Recognized (Liabilities) |  |  | Gross Amounts Offset in the Balance Sheet |  |  | Net Amounts of (Liabilities) Presented in the Balance Sheet |
Derivative (liabilities): |  |  |  |  |  |  |  |  |  |  |  |  |
Natural gas | –swaps |  | $ | (3,399 | ) |  | $ | 1,943 |  |  | $ | (1,456 | )
| –basis swaps |  |  | (2,686 | ) |  |  | 2,648 |  |  |  | (38 | )
Crude oil | –swaps |  |  | (81 | ) |  |  | 183 |  |  |  | 102 |
NGLs | –C3 propane spread swaps |  |  | (4,916 | ) |  |  | 4,916 |  |  |  | ¾ |
| –NC4 butane swaps |  |  | (199 | ) |  |  | 199 |  |  |  | ¾ |
| –C5 natural gasoline swaps |  |  | (832 | ) |  |  | 762 |  |  |  | (70 | )
Freight | –swaps |  |  | (11 | ) |  |  | 11 |  |  |  | ¾ |
|  |  | $ | (12,124 | ) |  | $ | 10,662 |  |  | $ | (1,462 | )
|  | December 31, 2015 |
|  | Gross Amounts of Recognized Assets |  |  | Gross Amounts Offset in the Balance Sheet |  |  | Net Amounts of Assets Presented in the Balance Sheet |
Derivative assets: |  |  |  |  |  |  |  |  |  |  |  |
Natural gas | –swaps | $ | 219,357 |  |  | $ | (10,245 | ) |  | $ | 209,112 |
| –basis swaps |  | 8,251 |  |  |  | (2,765 | ) |  |  | 5,486 |
Crude oil | –swaps |  | 38,699 |  |  |  | ¾ |  |  |  | 38,699 |
NGLs | –C3 propane swaps |  | 15,884 |  |  |  | ¾ |  |  |  | 15,884 |
| –C3 propane spread swaps |  | 2,497 |  |  |  | (2,497 | ) |  |  | ¾ |
| –NC4 butane swaps |  | 6,968 |  |  |  | ¾ |  |  |  | 6,968 |
| –C5 natural gasoline swaps |  | 12,694 |  |  |  | (81 | ) |  |  | 12,613 |
|  | $ | 304,350 |  |  | $ | (15,588 | ) |  | $ | 288,762 |
|  | December 31, 2015 |
|  | Gross Amounts of Recognized (Liabilities) |  |  | Gross Amounts Offset in the Balance Sheet |  |  | Net Amounts of (Liabilities) Presented in the Balance Sheet |
Derivative (liabilities): |  |  |  |  |  |  |  |  |  |  |
Natural gas | –swaps | $ | (10,245 | ) |  | $ | 10,245 |  |  | $ | ¾ |
| –basis swaps |  | (2,786 | ) |  |  | 2,765 |  |  |  | (21 | )
NGLs | –C3 propane spread swap |  | (3,633 | ) |  |  | 2,497 |  |  |  | (1,136 | )
| –C5 natural gasoline swaps |  | (81 | ) |  |  | 81 |  |  |  | ¾ |
|  | $ | (16,745 | ) |  | $ | 15,588 |  |  | $ | (1,157 | )
The effects of our non-hedge derivatives (those derivatives that do not qualify for hedge accounting) on our consolidated statements of operations are summarized below (in thousands):
|  | Three Months Ended March 31, |  |
|  | Derivative Fair Value Income (Loss) |  |
| 2016 |  |  |  | 2015 |  |
Commodity swaps | $ | 79,644 |  |  | $ | 125,777 |  |
Collars |  | ¾ |  |  |  | 8,415 |  |
Basis swaps |  | 7,275 |  |  |  | (11,353 | ) |
Freight swaps |  | (11 | ) |  |  | ¾ |  |
Total | $ | 86,908 |  |  | $ | 122,839 |  |

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