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Derivative Instruments | 12 Months Ended
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Dec. 31, 2011
Derivative Instruments [Abstract] |
Derivative Instruments | 4. Derivative Instruments The Company utilizes derivative financial instruments to manage risks related to changes in oil prices. As of December 31, 2011, the Company utilized two-way and three-way collar options and deferred premium puts to reduce the volatility of oil prices on a significant portion of the Company's future expected oil production. A two-way collar is a combination of options: a sold call and a purchased put. The purchased put establishes a minimum price (floor) and the sold call establishes a maximum price (ceiling) we will receive for the volumes under contract. A three-way collar is a combination of options: a sold call, a purchased put and a sold put. The purchased put establishes a minimum price (floor), unless the market price falls below the sold put (sub-floor), at which point the minimum price would be NYMEX West Texas Intermediate ("WTI") crude oil index price plus the difference between the purchased put and the sold put strike price. The sold call establishes a maximum price (ceiling) the Company will receive for the volumes under contract. For the deferred premium puts, the Company agrees to pay a premium to the counterparty at the time of settlement. At settlement, if the WTI price is below the floor price of the put, the Company receives the difference between the floor price and the WTI price multiplied by the contract volumes less the premium. If the WTI price settles at or above the floor price of the put, the Company pays only the premium. All derivative instruments are recorded on the Consolidated Balance Sheet as either assets or liabilities measured at their fair value (see Note 3 — Fair Value Measurements). Derivative assets and liabilities arising from the Company's derivative contracts with the same counterparty are also reported on a net basis, as all counterparty contracts provide for net settlement. The Company has not designated any derivative instruments as hedges for accounting purposes and does not enter into such instruments for speculative trading purposes. If a derivative does not qualify as a hedge or is not designated as a hedge, the changes in the fair value, both realized and unrealized, are recognized in the Other income (expense) section of the Company's Consolidated Statement of Operations as a gain or loss on derivative instruments. The Company's cash flow is only impacted when the actual settlements under the derivative contracts result in making or receiving a payment to or from the counterparty. These cash settlements are reflected as investing activities in the Company's Consolidated Statement of Cash Flows. As of December 31, 2011, the Company had the following outstanding commodity derivative contracts, all of which settle monthly based on the WTI crude oil index price, and none of which were designated as hedges:
|  | September 30, |  |  | September 30, |  |  |  | September 30, |  |  |  | September 30, |  |  |  | September 30, |  |  |  | September 30, |  |  |  | September 30, |
Settlement Period |  | Derivative Instrument |  | Total Notional Amount of Oil (Barrels) |  |  | Average Sub-Floor Price |  |  | Average Floor Price |  |  | Average Ceiling Price |  |  | Average Deferred Premium |  |  | Fair Value Asset (Liability) |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (In thousands) |
2012 |  | Two-Way Collars |  |  | 1,756,718 |  |  |  |  |  |  | $ | 85.49 |  |  | $ | 106.44 |  |  |  |  |  |  | $ | (3,116 | )
2012 |  | Three-Way Collars |  |  | 2,906,500 |  |  | $ | 65.36 |  |  | $ | 89.97 |  |  | $ | 108.24 |  |  |  |  |  |  |  | (2,046 | )
2012 |  | Deferred Puts |  |  | 641,000 |  |  | $ | 72.61 |  |  | $ | 92.61 |  |  |  |  |  |  | $ | 6.10 |  |  |  | (745 | )
2013 |  | Two-Way Collars |  |  | 807,500 |  |  |  |  |  |  | $ | 89.23 |  |  | $ | 111.69 |  |  |  |  |  |  |  | 2,326 |
2013 |  | Three-Way Collars |  |  | 1,887,000 |  |  | $ | 70.19 |  |  | $ | 90.84 |  |  | $ | 112.60 |  |  |  |  |  |  |  | (1,612 | )
2013 |  | Deferred Puts |  |  | 93,000 |  |  | $ | 71.67 |  |  | $ | 91.67 |  |  |  |  |  |  | $ | 6.33 |  |  |  | (33 | )
2014 |  | Two-Way Collars |  |  | 62,000 |  |  |  |  |  |  | $ | 90.00 |  |  | $ | 112.78 |  |  |  |  |  |  |  | 289 |
2014 |  | Three-Way Collars |  |  | 155,000 |  |  | $ | 71.00 |  |  | $ | 91.00 |  |  | $ | 113.04 |  |  |  |  |  |  |  | (113 | )
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | (5,050 | )
The following table summarizes the location and fair value of all outstanding commodity derivative contracts recorded in the balance sheet for the periods presented:
|  | September 30, |  |  | September 30, |  |  |  | September 30, |
Fair Value of Derivative Instrument Assets (Liabilities) |
|  |  |  | Fair Value December 31, |
Instrument Type |  | Balance Sheet Location |  | 2011 |  |  | 2010 |
|  |  |  | (In thousands) |
Crude oil collar |  | Derivative instruments —non-current assets |  | $ | 4,362 |  |  | $ | — |
Crude oil collar |  | Derivative instruments — current liabilities |  |  | (5,907 | ) |  |  | (6,543 | )
Crude oil collar |  | Derivative instruments — non-current liabilities |  |  | (3,505 | ) |  |  | (3,943 | )
Total derivative instruments |  |  |  | $ | (5,050 | ) |  | $ | (10,486 | )
The following table summarizes the location and amounts of realized and unrealized gains and losses from the Company's commodity derivative contracts for the periods presented:
|  | September 30, |  |  | September 30, |  |  |  | September 30, |  |  |  | September 30, |
|  |  |  | December 31, |
|  | Income Statement Location |  | 2011 |  |  | 2010 |  |  | 2009 |
|  |  |  | (In thousands) |
Change in unrealized gain (loss) on derivative instruments |  | Net gain (loss) on derivative instruments |  | $ | 5,436 |  |  | $ | (7,533 | ) |  | $ | (7,043 | )
Realized gain (loss) on derivative instruments |  | Net gain (loss) on derivative instruments |  |  | (3,841 | ) |  |  | (120 | ) |  |  | 2,296 |
Total net gain (loss) on derivative instruments |  |  |  | $ | 1,595 |  |  | $ | (7,653 | ) |  | $ | (4,747 | )

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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 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. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. 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