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Derivative Instruments | 9 Months Ended
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Sep. 30, 2016
General Discussion of Derivative Instruments and Hedging Activities [Abstract] |
Derivative Instruments | DERIVATIVE INSTRUMENTS Oil, Natural Gas and Natural Gas Liquids Derivative Instruments The Company seeks to reduce its exposure to unfavorable changes in oil, natural gas and natural gas liquids prices, which are subject to significant and often volatile fluctuation, by entering into fixed over-the-counter fixed price swaps, basis swaps and various types of option contracts. These contracts allow the Company to predict with greater certainty the effective oil, natural gas and natural gas liquids prices to be received for hedged production and benefit operating cash flows and earnings when market prices are less than the fixed prices provided in the contracts. However, the Company will not benefit from market prices that are higher than the fixed prices in the contracts for hedged production. Fixed price swaps are settled monthly based on differences between the fixed price specified in the contract and the referenced settlement price. When the referenced settlement price is less than the price specified in the contract, the Company receives an amount from the counterparty based on the price difference multiplied by the volume. Similarly, when the referenced settlement price exceeds the price specified in the contract, the Company pays the counterparty an amount based on the price difference multiplied by the volume. The prices contained in these fixed price swaps are based on Argus Louisiana Light Sweet Crude for oil, the NYMEX Henry Hub for natural gas and Mont Belvieu for propane. Below is a summary of the Company's open fixed price swap positions as of September 30, 2016.
| Location | Daily Volume (Bbls/day) |  | Weighted Average Price
October 2016 - June 2017 | ARGUS LLS | 2,000 |  |  | $ | 51.10 |
| Location | Daily Volume (MMBtu/day) |  | Weighted Average Price
October 2016 | NYMEX Henry Hub | 570,000 |  |  | $ | 3.05 |
November 2016 - December 2016 | NYMEX Henry Hub | 525,000 |  |  | $ | 3.18 |
January 2017 - February 2017 | NYMEX Henry Hub | 442,500 |  |  | $ | 3.14 |
March 2017 | NYMEX Henry Hub | 422,500 |  |  | $ | 3.13 |
April 2017 - June 2017 | NYMEX Henry Hub | 367,500 |  |  | $ | 3.15 |
July 2017 - October 2017 | NYMEX Henry Hub | 305,000 |  |  | $ | 2.99 |
November 2017 - December 2017 | NYMEX Henry Hub | 435,000 |  |  | $ | 3.06 |
January 2018 - March 2018 | NYMEX Henry Hub | 290,000 |  |  | $ | 3.10 |
April 2018 - December 2018 | NYMEX Henry Hub | 160,000 |  |  | $ | 3.01 |
January 2019 - March 2019 | NYMEX Henry Hub | 20,000 |  |  | $ | 3.37 |
| Location | Daily Volume (Bbls/day) |  | Weighted Average Price
October 2016 - December 2016 | Mont Belvieu | 1,500 |  |  | $ | 19.95 |
The Company sold call options and used the associated premiums to enhance the fixed price for a portion of the fixed price natural gas swaps listed above. Each short call option has an established ceiling price. When the referenced settlement price is above the price ceiling established by these short call options, the Company pays its counterparty an amount equal to the difference between the referenced settlement price and the price ceiling multiplied by the hedged contract volume.
| Location | Daily Volume (MMBtu/day) |  | Weighted Average Price
January 2017 - March 2017 | NYMEX Henry Hub | 105,000 |  |  | $ | 3.27 |
April 2017 - December 2017 | NYMEX Henry Hub | 125,000 |  |  | $ | 3.21 |
January 2018 - March 2018 | NYMEX Henry Hub | 20,000 |  |  | $ | 2.91 |
For a portion of the combined natural gas derivative instruments containing fixed price swaps and sold call options, the counterparty has an option to extend the original terms an additional twelve months for the period January 2017 through December 2017. The option to extend the terms expires in December 2016. If executed, the Company would have additional fixed price swaps for 30,000 MMBtu per day at a weighted average price of $3.33 per MMBtu and additional short call options for 30,000 MMBtu per day at a weighted average ceiling price of $3.33 per MMBtu. In addition, the Company has entered into natural gas basis swap positions, which settle on the pricing index to basis differential of MichCon or Tetco M2 to the NYMEX Henry Hub natural gas price. As of September 30, 2016, the Company had the following natural gas basis swap positions for MichCon and Tetco M2, respectively.
| Location | Daily Volume (MMBtu/day) |  | Hedged Differential
October 2016 - December 2016 | MichCon | 40,000 |  |  | $ | 0.02 |
November 2016 - March 2017 | Tetco M2 | 50,000 |  |  | $ | (0.59 | )
Balance Sheet Presentation The Company reports the fair value of derivative instruments on the consolidated balance sheets as derivative instruments under current assets, noncurrent assets, current liabilities and noncurrent liabilities on a gross basis. The Company determines the current and noncurrent classification based on the timing of expected future cash flows of individual trades. The following table presents the fair value of the Company's derivative instruments on a gross basis at September 30, 2016:
| (In thousands)
Short-term derivative instruments - asset | $ | 39,363 |
Long-term derivative instruments - asset | $ | 15,262 |
Short-term derivative instruments - liability | $ | 37,220 |
Long-term derivative instruments - liability | $ | 14,907 |
Gains and Losses For derivatives designated as cash flow hedges and meeting the effectiveness guidelines of FASB ASC 815, changes in fair value are recognized in accumulated other comprehensive income (loss) until the hedged item is recognized in earnings. The Company has no cash flow hedges in place for the three and nine months ended September 30, 2016 and 2015, as all fixed price swaps, swaptions and basis swaps had either been deemed ineffective at their inception or had been accounted for using the mark-to-market accounting method. The following table presents the net gain and loss recognized in gas sales, oil and condensate sales and natural gas liquids sales in the accompanying consolidated statements of operations for the three and nine months ended September 30, 2016 and 2015.
| Net gain (loss) on derivative instruments
| Three months ended September 30, |  | Nine months ended September 30,
| 2016 |  | 2015 |  | 2016 |  | 2015
| (In thousands)
Gas sales | $ | 33,167 |  |  | $ | 79,684 |  |  | $ | (43,454 | ) |  | $ | 118,137 |
Oil and condensate sales | 1,708 |  |  | 12,072 |  |  | 362 |  |  | 13,641 |
Natural gas liquids sales | 406 |  |  | — |  |  | (1,284 | ) |  | — |
Total net gain (loss) | $ | 35,281 |  |  | $ | 91,756 |  |  | $ | (44,376 | ) |  | $ | 131,778 |
Concentration of Credit Risk By using derivative instruments that are not traded on an exchange, the Company is exposed to the credit risk of its counterparties. Credit risk is the risk of loss from counterparties not performing under the terms of the derivative instrument. When the fair value of a derivative instrument is positive, the counterparty is expected to owe the Company, which creates credit risk. To minimize the credit risk in derivative instruments, it is the Company's policy to enter into derivative contracts only with counterparties that are creditworthy financial institutions deemed by management as competent and competitive market makers. The Company's derivative contracts are with multiple counterparties to lessen its exposure to any individual counterparty. Additionally, the Company uses master netting agreements to minimize credit risk exposure. The creditworthiness of the Company's counterparties is subject to periodic review. Other than as provided by the Company's revolving credit facility, the Company is not required to provide credit support or collateral to any of its counterparties under its derivative instruments, nor are the counterparties required to provide credit support to the Company.

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: 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 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=56946850&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 2 -URI http://asc.fasb.org/extlink&oid=56946850&loc=d3e41620-113959 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4B -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5624163-113959 Reference 5: 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=56946850&loc=SL5579240-113959 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4D -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5624177-113959 Reference 7: 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=35736893&loc=d3e80784-113994 Reference 8: 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=56946850&loc=d3e41641-113959 Reference 9: 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=56946850&loc=SL5579245-113959 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4H -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5624258-113959 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35736893&loc=d3e80748-113994 Reference 12: 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=56946850&loc=SL5708775-113959 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4J -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5708773-113959 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4A -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5618551-113959 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1B -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5580258-113959 Reference 16: 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=56946850&loc=SL5624181-113959 Reference 17: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 25 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6886632&loc=d3e76258-113986 Reference 18: 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=56946850&loc=d3e41638-113959 Reference 19: 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=26873400&loc=d3e23780-122690 + Details
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