Fair Value Measurements (Tables)

The following table reflects the activity for the Company's Net Profits Plan liability measured at fair value using Level 3 inputs:



	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2012			2011			2012			2011
	(in thousands)
Beginning balance	$	89,591		$	133,419		$	107,731		$	135,850
Net increase (decrease) in liability ⁽¹⁾	5,558			(20,194		)	(1,753		)	(2,001		)
Net settlements ^(1)(2)(3)	(4,760		)	(4,736		)	(15,589		)	(25,360		)
Transfers in (out) of Level 3	—			—			—			—
Ending balance	$	90,389		$	108,489		$	90,389		$	108,489

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⁽¹⁾	Net changes in the Company's Net Profits Plan liability are shown in the Change in Net Profits Plan liability line item of the accompanying statements of operations.

⁽²⁾

Settlements represent cash payments made or accrued under the Net Profits Plan. The Company accrued or made cash payments under the Net Profits Plan relating to divestiture proceeds of $274,000 for the three months ended September 30, 2012, and $2.0 million and $6.3 million for the nine months ended September 30, 2012, and 2011, respectively. There were no cash payments made or accrued relating to divestiture proceeds for the three months ended September 30, 2011.

⁽³⁾

During the first quarter of 2011, the Company elected to settle several Net Profits Plan pools associated with the acquisition of Nance Petroleum Corporation in 1999, through an aggregate $2.6 million cash payment. As a result, the Company reduced its Net Profits Plan liability by that amount. There was no impact on the accompanying statements of operations for the three-month or nine-month periods ended September 30, 2012, or 2011, related to these settlements.

The following is a listing of the Company’s assets and liabilities that are measured at fair value and where they are classified within the fair value hierarchy as of September 30, 2012:



	Level 1		Level 2		Level 3
	(in thousands)
Assets:
Derivatives ⁽¹⁾	$	—	$	64,248	$	—
Proved oil and gas properties ⁽²⁾	$	—	$	—	$	2,057
Unproved oil and gas properties ⁽²⁾	$	—	$	—	$	9,225
Liabilities:
Derivatives ⁽¹⁾	$	—	$	28,154	$	—
Net Profits Plan ⁽¹⁾	$	—	$	—	$	90,389

⁽¹⁾ This represents a financial asset or liability that is measured at fair value on a recurring basis.

⁽²⁾ This represents a non-financial asset or liability that is measured at fair value on a nonrecurring basis.

The following is a listing of the Company’s assets and liabilities that are measured at fair value and where they were classified within the fair value hierarchy as of December 31, 2011:



	Level 1		Level 2		Level 3
	(in thousands)
Assets:
Derivatives ⁽¹⁾	$	—	$	86,875	$	—
Proved oil and gas properties ⁽²⁾	$	—	$	—	$	139,992
Unproved oil and gas properties ⁽²⁾	$	—	$	—	$	15,809
Liabilities:
Derivatives ⁽¹⁾	$	—	$	55,681	$	—
Net Profits Plan ⁽¹⁾	$	—	$	—	$	107,731

⁽¹⁾ This represents a financial asset or liability that is measured at fair value on a recurring basis.

⁽²⁾ This represents a non-financial asset or liability that is measured at fair value on a nonrecurring basis.

- Definition

Tabular disclosure of assets, including [financial] instruments measured at fair value that are classified in stockholders' equity, if any, by class that are measured at fair value on a recurring and/or nonrecurring basis. The disclosures contemplated herein include the fair value measurements at the reporting date by the level within the fair value hierarchy in which the fair value measurements in their entirety fall, segregating fair value measurements using quoted prices in active markets for identical assets (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3).

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- Definition

Tabular disclosure of the fair value measurement of liabilities using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets), and gains or losses recognized in other comprehensive income and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issuances, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs) by class of liability.

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