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Derivative Instruments
 3 Months Ended
Mar. 31, 2012
Derivative Instruments [Abstract]  
Derivative Instruments

6. Derivative Instruments

The Company utilizes derivative financial instruments to manage risks related to changes in oil prices. As of March 31, 2012, the Company utilized two-way and three-way collar options to reduce the volatility of oil prices on a significant portion of the Company's future expected oil production. All derivative instruments are recorded on the balance sheet as either assets or liabilities measured at fair value (see Note 5 — 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 fair value, both realized and unrealized, are recognized in the Other Income (Expense) section of the Condensed 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 Condensed Consolidated Statement of Cash Flows.

 

As of March 31, 2012, the Company had the following outstanding commodity derivative instruments, all of which settle monthly based on the average West Texas Intermediate crude oil index price:

 

Settlement Period

   

Derivative
Instrument

    Total
Notional
Amount of
Oil (Barrels)		      Average
Sub-Floor
Price		      Average
Floor Price		      Average
Ceiling Price		      Fair Value
Asset
(Liability)		  
                                      (In thousands)  
2012    Two-Way Collars      1,237,500          $ 85.56       $ 106.50       $ (5,427 ) 
2012    Three-Way Collars      2,872,000       $ 66.62       $ 90.45       $ 109.14         (7,471 ) 
2013    Two-Way Collars      807,500          $ 89.23       $ 111.69         (1,646 ) 
2013    Three-Way Collars      2,404,500       $ 69.33       $ 91.61       $ 113.25         (7,338 ) 
2014    Two-Way Collars      62,000          $ 90.00       $ 112.78         1   
2014    Three-Way Collars      186,000       $ 70.00       $ 91.67       $ 113.58         (464 ) 
                 

 

 

  
                  $ (22,345 ) 
                 

 

 

  

The following table summarizes the location and fair value of all outstanding commodity derivative instruments recorded in the balance sheet for the periods presented:

 

Fair Value of Derivative Instrument Assets (Liabilities)

  
          Fair Value  

Instrument Type

   

Balance Sheet Location

    March 31,
2012		     December 31,
2011		  
          (In thousands)  

Crude oil collar

    Other current assets — current assets    $ 72      $ —     

Crude oil collar

    Derivative instruments — non-current assets      486        4,362   

Crude oil collar

    Derivative instruments — current liabilities      (16,469 )      (5,907 ) 

Crude oil collar

    Derivative instruments — non-current liabilities      (6,434 )      (3,505 ) 
     

 

 

    

 

 

  

Total derivative instruments

       $ (22,345 )    $ (5,050 ) 
     

 

 

    

 

 

  

The following table summarizes the location and amounts of realized and unrealized gains and losses from the Company's commodity derivative instruments for the periods presented:

 

          Three Months Ended March 31,  
    

Income Statement Location

        2012             2011      
          (In thousands)  

Change in unrealized loss on derivative instruments

    Net loss on derivative instruments    $ (17,295 )    $ (31,154 ) 

Realized loss on derivative instruments

    Net loss on derivative instruments      (1,291 )      (512 ) 
     

 

 

    

 

 

  

Total net loss on derivative instruments

       $ (18,586 )    $ (31,666 )