NOTE 8 DERIVATIVES

As part of our hedging program, we entered into a number of costless collars during the year which resulted in our hedge positions as of December 31, 2015 as follows:

Brent-based puts for our first half 2016 oil production of 30,500 barrels per day with a weighted-average floor price of $52.38 per barrel and 3,000 barrels for the second half 2016 at $50.00 per barrel.

Brent-based calls for our first half 2016 oil production of 35,500 barrels per day at a weighted-average ceiling price of $66.15 per barrel and 3,000 barrels for the second half 2016 at $74.42 per barrel.

In addition, we entered into a Brent-based swap during the year for 1,000 barrels per day of our July through December 2016 crude oil production at $61.25 per barrel.

Subsequent to December 31, 2015 we executed additional costless collars resulting in our current Brent-based crude oil hedge positions as follows:

	Q1 2016		Q2 2016		Q3 2016		Q4 2016		2017		2018
Calls
Barrels per Day	35,500		35,500		3,000		3,000		30,000		23,300
Wtd Avg Ceiling Price per Barrel	$	66.15	$	66.15	$	74.42	$	74.42	$	55.68	$	57.99

Puts
Barrels per Day	33,800		55,500		28,000		3,000		—		—
Wtd Avg Floor Price per Barrel	$	51.75	$	50.14	$	50.65	$	50.00	$	—	$	—

Swap
Barrels per Day	—		—		1,000		1,000		—		—
Weighted-Average Price per Barrel	$	—	$	—	$	61.25	$	61.25	$	—	$	—

For our third and fourth quarter 2015 natural gas production, we had hedged 40,000 million British thermal units (MMBtu) per day at an average index-based price of $3.01 per MMBtu and 20,000 MMBtu per day at weighted-average floors and ceilings of $2.80 and $3.17 per MMBtu, respectively. The initial value of these hedges was not material.

For our fourth quarter 2015 oil production, we had hedged 40,000 barrels per day at weighted-average Brent-based floors and ceilings of $61.25 and $73.88 per barrel, respectively. For our third quarter 2015 oil production, we had hedged 70,000 barrels per day at weighted-average Brent-based floors of $52.14 per barrel and 30,000 barrels per day at Brent-based ceilings of $72.12 per barrel. The initial value of our third and fourth quarter 2015 oil hedges was not material.

From January through June 2015 we had purchased options for 100,000 barrels of our crude oil production per day, at $50 per barrel Brent and sold options for 30,000 barrels per day for March through June 2015 at $75 per barrel Brent. The initial intrinsic and time values were deferred and subsequent changes were included in the net derivative losses reported in net sales. The initial intrinsic value, which was accounted for as a cash flow hedge, was insignificant.

For the first quarter of 2014 we had hedged 50 MMcf per day of our natural gas production, which qualified as cash-flow hedges. The weighted-average strike price of these swaps was $4.30 per Mcf.

We will continue to be strategic and opportunistic in implementing our hedging program. Our objective is to protect against the cyclical nature of commodity prices to protect our cash flows, margins and capital investment program and improve our ability to comply with our credit facility covenants in case of further price deterioration.

The after-tax gains and losses recognized in, and reclassified to income from, Accumulated Other Comprehensive Income (AOCI), for derivative instruments classified as cash-flow hedges for the years ended December 31, 2015, 2014 and 2013, and the ending AOCI balances for each period were not material. For the year ended December 31, 2015, we recognized approximately $52 million of non-cash derivative gains from marking these contracts to market, which were included in revenues. The amount of the ineffective portion of cash-flow hedges was immaterial for the years ended December 31, 2014 and 2013. Refer to Note 1 for our accounting policy on derivatives.

There were no fair value hedges as of and during the years ended December 31, 2015, 2014 and 2013.

Fair Value of Derivatives

Our commodity derivatives are measured at fair value using industry-standard models with various inputs, including quoted forward prices. The initial gross and net fair value of our 2014 put options was approximately $24 million, which approximated the time value of the instruments, and was included in other current assets as of December 31, 2014.

The following table presents the gross and net fair values of our outstanding derivatives as of December 31, 2015 (in millions):

	Asset Derivatives			Liability Derivatives
December 31, 2015	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Commodity contracts	Other current assets	$	87	Accrued Liabilities	$	(1)


Total gross and net fair value		$	87		$	(1)