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Derivative Instruments
 12 Months Ended
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 )