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Derivative Instruments | 9 Months Ended
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Sep. 30, 2012
Derivative Instruments | 6. Derivative Instruments The Company utilizes derivative financial instruments to manage risks related to changes in oil prices. As of September 30, 2012, the Company utilized two-way and three-way collar options, swaps and put spreads 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 September 30, 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 Swap Price |  |  | Average Sub-Floor Price |  |  | Average Floor Price |  |  | Average Ceiling Price |  |  | Fair Value Asset (Liability) |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (In thousands) |
2012 |  | Two-Way Collars |  |  | 819,000 |  |  |  |  |  |  |  |  |  |  | $ | 88.61 |  |  | $ | 105.59 |  |  | $ | 975 |
2012 |  | Three-Way Collars |  |  | 910,000 |  |  |  |  |  |  | $ | 66.25 |  |  | $ | 90.25 |  |  | $ | 110.04 |  |  |  | 841 |
2012 |  | Swaps |  |  | 91,000 |  |  | $ | 94.61 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 130 |
2013 |  | Two-Way Collars |  |  | 1,782,000 |  |  |  |  |  |  |  |  |  |  | $ | 86.50 |  |  | $ | 98.93 |  |  |  | (1,164 | )
2013 |  | Three-Way Collars |  |  | 2,023,420 |  |  |  |  |  |  | $ | 65.30 |  |  | $ | 92.51 |  |  | $ | 112.63 |  |  |  | 8,561 |
2013 |  | Put Spreads |  |  | 1,717,080 |  |  |  |  |  |  | $ | 70.71 |  |  | $ | 91.24 |  |  |  |  |  |  |  | 9,931 |
2013 |  | Swaps |  |  | 699,000 |  |  | $ | 96.41 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 1,850 |
2014 |  | Two-Way Collars |  |  | 139,500 |  |  |  |  |  |  |  |  |  |  | $ | 86.11 |  |  | $ | 97.69 |  |  |  | (84 | )
2014 |  | Three-Way Collars |  |  | 1,495,030 |  |  |  |  |  |  | $ | 70.60 |  |  | $ | 91.43 |  |  | $ | 110.30 |  |  |  | 3,229 |
2014 |  | Put Spreads |  |  | 150,970 |  |  |  |  |  |  | $ | 71.03 |  |  | $ | 91.03 |  |  |  |  |  |  |  | 1,019 |
2014 |  | Swaps |  |  | 62,000 |  |  | $ | 96.49 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 215 |
2015 |  | Three-Way Collars |  |  | 124,000 |  |  |  |  |  |  | $ | 71.25 |  |  | $ | 91.25 |  |  | $ | 109.96 |  |  |  | 231 |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 25,734 |
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 |
Commodity |  | Balance Sheet Location |  | September 30, 2012 |  |  | December 31, 2011 |
|  |  |  | (In thousands) |
Crude oil |  | Derivative instruments — current assets |  | $ | 17,320 |  |  | $ | — |
Crude oil |  | Derivative instruments — non-current assets |  |  | 10,047 |  |  |  | 4,362 |
Crude oil |  | Derivative instruments — current liabilities |  |  | (1,273 | ) |  |  | (5,907 | )
Crude oil |  | Derivative instruments — non-current liabilities |  |  | (360 | ) |  |  | (3,505 | )
Total derivative instruments |  |  |  | $ | 25,734 |  |  | $ | (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 September 30, |  |  | Nine Months Ended September 30, |
|  | Income Statement Location |  | 2012 |  |  | 2011 |  |  | 2012 |  |  | 2011 |
|  |  |  | (In thousands) |  |  | (In thousands) |
Change in unrealized gain (loss) on derivative instruments |  | Net gain (loss) on derivative instruments |  | $ | (27,690 | ) |  | $ | 71,403 |  |  | $ | 30,784 |  |  | $ | 71,936 |
Realized gain (loss) on derivative instruments |  | Net gain (loss) on derivative instruments |  |  | 5,249 |  |  |  | (179 | ) |  |  | 2,784 |  |  |  | (4,831 | )
Total net gain (loss) on derivative instruments |  |  |  | $ | (22,441 | ) |  | $ | 71,224 |  |  | $ | 33,568 |  |  | $ | 67,105 |

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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 Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=7668309&loc=d3e80784-113994 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4C -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624171-113959 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4E -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624181-113959 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4K -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5708775-113959 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1A -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5579245-113959 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(n)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41641-113959 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5579240-113959 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 45 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6441202&loc=d3e80720-113993 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41638-113959 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41635-113959 Reference 12: 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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