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Derivative Financial Instruments and Hedging Activities
 12 Months Ended
Dec. 31, 2016
Derivative Instruments And Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments and Hedging Activities

(10) Derivative Financial Instruments and Hedging Activities

Comstock periodically uses swaps, floors and collars to hedge oil and natural gas prices and interest rates. Swaps are settled monthly based on differences between the prices specified in the instruments and the settlement prices of futures contracts. Generally, when the applicable settlement price is less than the price specified in the contract, Comstock receives a settlement from the counterparty based on the difference multiplied by the volume or amounts hedged. Similarly, when the applicable settlement price exceeds the price specified in the contract, Comstock pays the counterparty based on the difference. Comstock generally receives a settlement from the counterparty for floors when the applicable settlement price is less than the price specified in the contract, which is based on the difference multiplied by the volumes hedged. For collars, generally Comstock receives a settlement from the counterparty when the settlement price is below the floor and pays a settlement to the counterparty when the settlement price exceeds the cap. No settlement occurs when the settlement price falls between the floor and cap.

All of the Company's derivative financial instruments are used for risk management purposes and by policy none are held for trading or speculative purposes. Comstock minimizes credit risk to counterparties of its derivative financial instruments through formal credit policies, monitoring procedures, and diversification.  The Company is not required to provide any credit support to its counterparties other than cross collateralization with the assets securing its bank credit facility.  None of the Company's derivative financial instruments involve payment or receipt of premiums.

During 2014, the Company hedged 2,438,000 barrels of its oil production at an average NYMEX West Texas Intermediate oil price of $96.56 per barrel. The Company hedged 1,800,000 MMBtus of its natural gas production in each of 2015 and 2016 at an average NYMEX Henry Hub natural gas price of $3.20 per MMBtu.

The Company had the following outstanding derivative financial instruments used for oil and natural gas price risk management:

 

Commodity and Derivative Type

  

Weighted-Average
Contract Price

 

  

Contract Volume
(MMBtu)

  

Contract Period

 

December 31, 2015:

 

 

 

 

 

 

 

 

Natural Gas Swap Agreements

  

$3.20 per MMBtu

  

  

1,800,000

  

2016

 

December 31, 2016:

 

 

 

 

 

 

 

 

Natural Gas Swap Agreements

  

$3.37 per MMBtu

  

  

23,400,000

  

2017

  

  

  

  

 

In 2017, through February 24, 2017, the Company has entered into additional natural gas price swap agreements which increased the 2017 natural gas volumes hedged to 25,875,000 MMBtus at an average fixed NYMEX price at $3.38 per MMBtu.

None of the derivative contracts were designated as cash flow hedges. The Company recognizes cash settlements and changes in the fair value of its derivative financial instruments as a single component of other income (expenses).

The Company recognized a loss of $8.2 million, a gain of $2.7 million and a loss of $5.4 million from its derivative financial instruments for the years ended December 31, 2014, 2015 and 2016, respectively.  Cash settlements received on derivative financial instruments were $9.1 million, $1.2 million and $2.1 million for the years ended December 31, 2014, 2015 and 2016, respectively. The estimated fair value and carrying value of the Company's derivative financial instruments, was a current asset of $1.4 million as of December 31, 2015 and was a current liability of $6.0 million as of December 31, 2016.