NOTE 7DERIVATIVES

General

From time to time, we use a variety of derivative instruments intended to improve the effective realized prices for oil and gas and protect our capital program in case of price deterioration. Derivatives are carried at fair value and on a net basis when a legal right of offset exists with the same counterparty. We apply hedge accounting when transactions meet specified criteria for cash-flow hedge treatment and management elects and documents such treatment. Otherwise, we recognize any fair value gains or losses, over the remaining term of the hedge instrument, in earnings in the current period. For the three months ended March 31, 2016 and 2015, we recognized approximately $81 million and $3 million, respectively, of non-cash derivative losses from marking these contracts to market, which were included in revenues.

As of March 31, 2016, we did not have any derivatives designated as hedges. Unless otherwise indicated, we use the term “hedge” to describe derivative instruments that are designed to achieve our hedging program goals, even though they are not necessarily accounted for as cash flow or fair value hedges. As part of our hedging program, we entered into a number of costless collars and swaps that resulted in the following hedge positions as of March 31, 2016:

	2016						2017		2018
	Q2		Q3		Q4		Q1 - Q4		Q1 - Q4
Calls:
Barrels per day	35,500		4,000		4,000		30,000		23,300
Weighted-average price per barrel	$	66.15	$	71.13	$	71.13	$	55.68	$	57.99

Puts:
Barrels per day	55,500		28,000		3,000		—		—
Weighted-average price per barrel	$	50.14	$	50.65	$	50.00	$	—	$	—

Swaps:
Barrels per day	—		1,000		6,000		—		—
Weighted-average price per barrel	$	—	$	61.25	$	46.27	$	—	$	—

For our first quarter 2016 oil production, on a weighted-average basis, we had hedged 33,800 barrels per day at Brent-based floors of $51.75 per barrel, with a corresponding 35,500 barrels per day at Brent-based ceilings of $66.15 per barrel. For our first quarter 2015 oil production, on a weighted-average basis, we hedged 100,000 barrels per day at Brent-based floors of $50.00 per barrel, with a corresponding 10,000 barrels per day at Brent-based ceilings of $75.00 per barrel. During the first quarter of 2016 and 2015, we generated cash from our hedging program of $56 million and $1 million, respectively.

Subsequent to March 31, 2016, we entered into additional hedges for our fourth quarter 2016 crude oil production, bringing our fourth quarter 2016 hedging program to a total of 28,000 barrels per day with a weighted average floor of $49.20 per barrel and offset by 23,000 barrels per day with a ceiling of $53.67 per barrel.

We will continue to be strategic and opportunistic in implementing our hedging program as market conditions permit. 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.

Fair Value of Derivatives

Our commodity derivatives are measured at fair value using industry-standard models with various inputs, including quoted forward prices, and are all classified as Level 2 in the required fair value hierarchy for the periods presented. The following table presents the fair values (at gross and net) of our outstanding derivatives as of March 31, 2016 and December 31, 2015 (in millions):

Type of Contract	Balance Sheet Classification	March 31, 2016			December 31, 2015
Commodity contracts	Other current assets	$	79		$	87

Total Assets at Fair Value		$	79		$	87


Commodity contracts	Accrued liabilities	$	(7	)	$	(1	)
Commodity contracts	Other long-term liabilities	(67		)	—

Total Liabilities at Fair Value		$	(74	)	$	(1	)